Finding cheap housing in Philadelphia might have been an easy task a few years ago, but home prices, as well as rents have rapidly increased during recent years. This made renting or buying in Philly simply unaffordable for many young professionals. However, a recent article from The Wall Street Journal reports that Philadelphia’s City Council is trying to come up with a solution.
Philly’s Fishtown is a heaven for young professionals with old houses being renovated and new restaurants and business pouring in every day. Nevertheless, despite the abundance of art galleries and craft beer pubs, the median value of a home in this neighborhood has increased by 50%, to almost $250,000 over the past three years. Rents in Fishtown are also high, around $1,650 per month, well above the average rent in Philadelphia which is around $1,400 per month.
With the purpose of fixing this affordability issue, members of Philadelphia’s City Council plan on using the inclusionary zoning approach. By passing a law, they would require developers to offer 10% of new projects as below-market units or to invest in a fund for renovating homes. As an incentive, developers would be permitted to build more overall units but there can be downsides as well. Some argue that this approach might lead to an increase in construction costs, despite the possible tax abatements or other compensations.
To benefit from the proposed law, to buy or rent a below-market unit a household of four should earn less than 50% or 80% of the area’s median income, about $41,500 to $66,500 per year.
Lisa Wilcox, a speech-language pathologist has witnessed the soaring prices firsthand. Having chosen Philadelphia as the place to launch her career, when she recently returned to the city she realized that she could no longer afford buying a home in her preferred neighborhood, Fishtown. Earning about $60,000 a year, her income is too low to buy a home and at the same time, too high to benefit from this proposed housing law. For the moment, she decided to rent a home in Kensington for $950 and she plans on saving and continuing her search in a year. However, she confesses being “afraid to think what a year from now it will look like”.
Among the supporters of the bill is Mayor Jim Kenny who believes that despite the benefits, the low rents would not cover the construction costs. At the same time, the new law will “certainly slow down residential development” said Mr. Addimando, vice president of the city’s Building Industry Association and managing partner at the Alterra Property Group. He also added that in his opinion, the proposal would lead to fewer new units and the imbalance between high construction costs and low rents.
If the law passes, Philadelphia will not be the only city to try to combat soaring prices. Both Detroit and Atlanta passed a similar law in 2017, requiring developers to set aside a certain percentage of units for low-income households. Moreover, Pittsburgh is also planning on joining the list with an ordinance for developers to provide affordable housing in return for tax benefits.
Source: The Wall Street Journal