Philadelphia is now grappling with an issue that would have been unthinkable just a few years ago – maintaining its affordable housing stock. The city is still one of the most affordable big cities in America, as confirmed by a recent article in Forbes magazine. Yet, the inflow of empty-nesters from the suburbs and young professionals is now raising Philadelphia’s housing costs. Indeed, an apartment was just sold in Center City for an eye-popping 17 million dollars. Neighborhood residents are beginning to gripe about houses being torn down and replaced by urban “McMansions” that are out of scale with the city’s row house streetscape. This is making housing advocates increasingly worried about how to maintain a healthy stock of housing for low- and moderate-income residents.
So it’s no surprise that a public outcry erupted over a recent decision by the Zoning Board to allow a waterfront developer to back out of a commitment to provide 25 units of affordable housing in exchange for greater density. The developer wanted to get out of that agreement and City Hall eventually allowed him to do it by paying into the city’s Housing Trust Fund.
In fact, the developer was simply exploiting a loophole in the Philly law. It’s another example of a trend that is emerging all over the country. A recent article in Governing magazine cited Arlington, Virginia as an example of this loophole. Ten years ago, Arlington passed a law requiring developers to either create affordable housing units or pay a fee, and most of them chose to pay the fee. The result has been that Arlington has fallen significantly short of its affordable housing goals. It turns out that the payments by the developers have not been sufficient to cover the cost of building new affordable housing. Other cities such as San Francisco and Chicago have seen similar results.
One solution to the problem is to eliminate the loopholes on these mandatory inclusionary zoning ordinances. Alternatively, if developers are allowed to make a payment instead of adding affordable housing, the amount needs to be sufficient to cover the true cost of building new housing. The Arlington example suggests that developers are being permitted to pay amounts that are too low.
This spring, New York enacted a new city-wide zoning ordinance, championed by Mayor Bill de Blasio, that added strong affordable housing requirements in exchange for more density. Housing advocates were divided over whether the de Blasio plan is ignoring the poorest residents, at the expense of the middle class. Still, this new zoning plan will be worth watching.
In the long run, however, cities will need to figure out how to ramp up affordability at a much larger scale, because every day, buildings are being upgraded for high-income housing. Putting an additional tax on high-value properties could help to affect these larger market trends. In Philadelphia, such a tax would require a change in the state’s uniformity clause, which prohibits different tax rates on the same class of real estate.
It is essential that affordable housing advocates and developers come together on this issue before cities lose a significant part of their middle-class base. Already, San Francisco and Washington are seeing residents who work in schools, hospitals and social services moving out of the city because of the lack of affordable housing. It’s not yet a crisis, but other cities are not far behind.