As rents rise, Philly trying new avenues to build and preserve affordable housing

Philadelphia is trying to harness the booming real estate business to bankroll affordable housing. And at a time when those same forces are making apartments more expensive, new legislation in City Council wants to ensure affordable units don’t vanish overnight.

One piece of legislation from Councilmember Derek Green would allow commercial property owners to build taller and larger structures if they pay into the city’s Affordable Housing Trust Fund. Another bill from him would require landlords who own apartments where affordability regulations are going to expire to present the city with their plans for the buildings two years in advance. 

This would, in theory, give city officials plenty of time to plan for the mass evictions that come when an affordable building is reformatted to market-rate purposes.

“When you see what’s happening in our city, with the huge increase in the cost of residential units, we need to maintain as many affordable units as we can,” said Green.

Since Ronald Reagan’s presidential administration, most of the new subsidized housing in America has been developed with the Low Income Housing Tax Credit (LIHTC) program. But unlike the traditional public housing, the program’s affordability restrictions have a time limit, expiring after 15 to 30 years.

At that point, the owner can either seek to renew the subsidy or, if the building is in a hot market, exit the program and raise rents.

Many low-income housing complexes are located in poorer neighborhoods, meaning there is little incentive for leaving subsidized housing programs. And many of the nonprofits and housing authorities that own affordable units are mission-driven, and less likely to respond to profit incentives.

A 2012 study from the Department of Housing and Urban Development found that most housing units with expiring affordability restrictions do not get turned into market-rate units. 

A 2016 study from the Philadelphia Federal Reserve found that almost one-quarter of the affordable housing in Philadelphia will see its affordability restrictions expire in the next few years. The Fed researchers found that 1,099 units are especially vulnerable to market rate conversions because they are located in hot market neighborhoods and are owned by for-profit entities.

Green says it’s these exact kind of projects that he had in mind when he introduced the bill.

“We already have a very significant problem in the city of Philadelphia where we don’t have enough affordable housing units,” said Green. “This is a way to preserve the units that are affordable and let them stay affordable.”

The bill requires the owner to give 24 months notice of any changes to affordability to the city’s Department of Planning and Development, the local Councilperson, and the tenants.

The federal government already requires property owners to give advance notice if they are going to take an affordable housing project out of a subsidy program, but they only require one year’s notice.

Green’s bill would also give city officials the right of first refusal to purchase the property.

Landlord groups seemed wary of the idea, arguing that their industry has already faced a substantial amount of new regulation from City Hall in recent years. A new lead remediation law for older rental properties recently went into effect, while bed bug regulations and a right-to-counsel bill for those being evicted are also advancing in City Council.

“From my perspective, as a businessperson, two years advance notice is a long time,” said Victor Pinckney, vice-president of the Homeowners Association of Philadelphia (HAPCO), a landlord advocacy group. “If someone is on the fence about using the tax credit, this would push them away from the program.”

Green’s other legislation would extend the mixed income-housing bonus to non-residential properties. Currently, if a residential developer builds affordable units on-site or pays into the Housing Trust Fund, they can build taller and denser projects.

Green’s legislation would allow those whose projects are non-residential to pay into the Housing Trust Fund in exchange for being allowed greater height and floor area than the underlying zoning would allow.

Green says he wants to make sure any new funding generated by such a law would go to housing for the poorest, and not into a new sub-fund created by Philadelphia City Council that allows local affordable housing dollars to be spent on projects for those up to 120 percent of area median income (or $105,000 for a family of four).

The creation of the sub-fund angered many affordable housing advocates, who argue that all available housing subsidies should be used to support those most at risk of homelessness.

“This is one way to provide some additional dollars in the trust fund for the people who are most in need of resources,” said Green.