You Got Priced Out of ... Philadelphia? The Spread of Hot Housing Markets
The gentrification of the Fishtown neighborhood here looks like something city planners dream of, with developers renovating old row houses as young professionals, along with new restaurants and businesses, pile in.
But home prices have shot up so quickly in recent years that the latest wave of young professionals say they are having a hard time making the finances work.
Now several Philadelphia City Council members want to pass a law requiring property developers to set aside 10% of new projects as below-market units, to improve overall affordability in a city that once was among America's biggest bargains.
Soaring housing costs aren't confined to New York or San Francisco. Cities including Pittsburgh, Detroit, Buffalo and Nashville all have explored or adopted policies that, like Philadelphia's, seek to create more cheap housing by an approach known as inclusionary zoning.
Some developers say the approach can backfire by making projects too expensive to build, even with tax abatements or other compensation for the added costs.
"It really underscores the housing-affordability problem is much more widespread than simply a problem in the 10 most expensive coastal cities, " said Stockton Williams, executive director of the Terwilliger Center for Housing at the Urban Land Institute in Washington, D.C.
Detroit in 2017 passed a law requiring developers that receive city subsidies or discounted land to set aside 20% of units for lower-income households, typically those making between about $34,000 and $41,000 for a family of four. Officials say it is an effort to get ahead of affordability woes as parts of the city revitalize.
In November, Atlanta passed a requirement that developers set aside a share of units for low-income families in new projects in certain rapidly gentrifying parts of the city. Pittsburgh may also consider an ordinance this year that could force developers to include affordable housing in new projects, in return for a tax benefit.
Looking back, officials in cities like Washington and Boston have remarked that if they had done more early on to preserve affordable housing, "they might not have as acute of a problem as they have today," said Arthur Jemison, Detroit's director of housing and revitalization.
In Philadelphia, the downtown Center City area has experienced a residential building boom, much of it higher-end properties. In neighborhoods to the north and south, an influx of professionals has pushed up values in historically working-class neighborhoods. Once-gritty Fishtown now brims with art galleries and pubs serving craft beer.
Since 2014, the median home value in Fishtown has jumped more than 50% to around $250,000, according to home-search website Zillow. Parts of nearby Kensington have experienced similar increases.
Yet census figures show that about 400,000 of the city's 1.6 million residents live under the poverty line, the highest rate among the 10 most populous U.S. cities.
Lisa Wilcox had identified Philadelphia as the city where she would launch her new career as a speech-language pathologist. The relatively cheap housing was a big draw -- especially compared with her native Boston as well as Seattle, where she spent her 30s.
But when she arrived in July, graduate degree in hand, Ms. Wilcox found she no longer could afford to buy in Fishtown.
"It was kind of remarkable how much prices had gone up in that short period of time," said Ms. Wilcox, 41 years old. "It's crazy."
Ms. Wilcox, who lives by herself, wouldn't benefit from the proposed new law. With a salary of nearly $60,000, she earns too much. Yet a house in her preferred part of Fishtown seems out of reach for $220,000, the maximum she feels she could afford.
For now, she pays $950 to rent a small house in a "shady" part of Kensington. Her plan is to save and resume her search in a year, despite worries the market will be even further out of reach. "I'm afraid to think what a year from now it will look like," she said.
While swaths of Philadelphia are considered affordable, much of the city's housing stock is in bad shape and located in areas lacking jobs, public transit and amenities such as parks.
"We don't necessarily have an affordable-housing crisis, we have a quality affordable-housing crisis," said Andrew Goodman, community engagement director at the nonprofit New Kensington Community Development Corp., which backs the inclusionary zoning bill.
The measure would require developers to reserve 10% of new rental or for-sale units at below-market price levels, or pay into a city housing fund whose mission includes fixing homes. In return, developers could build more overall units than zoning limits would permit
To qualify for a below-market unit under the bill, a household could earn no more than 50% to 80% of the area's median income, or roughly $41,500 to $66,500 a year for a family of four. The lower range would apply to rentals, the higher range to for-sale units. Monthly housing costs for a family of four would be capped at $1,040 to $1,663, based on income.
The administration of Mayor Jim Kenney, a Democrat, supports the goals but says the bill would set rents too low to cover construction and other developer costs. The council could vote on the bill later this month.
Leo Addimando, managing partner at the Alterra Property Group and vice president of the city's Building Industry Association, said he supports mixed-income housing but thinks the council's proposal would worsen the imbalance between the city's high construction costs and comparatively low rents, yielding fewer new housing units.
"This will certainly slow down residential development," said Mr. Addimando.
Write to Scott Calvert at firstname.lastname@example.org and Laura Kusisto at email@example.com
(END) Dow Jones Newswires
January 03, 2018 05:44 ET (10:44 GMT)