The benefits of urban revival should include all the city’s residents. A world-class city that wants vibrant, diverse neighborhoods needs to keep its housing affordable in popular areas as the market improves. One Pittsburgh neighborhood in the midst of renewal is aiming to do just that, with an “inclusionary zoning” mandate that requires housing developers to include affordable units. Can we do this in Philadelphia?
Pittsburgh’s Lawrenceville neighborhood on the Allegheny River has undergone the kind of gentrification and residential building explosion that’s happening in parts of Philadelphia. A “Robotics Row” blossomed along the waterfront there, and upscale boutiques and espresso shops thrive.
The growth has left some behind. The median home sale price in Lawrenceville more than doubled between 2010 and 2017, from $95,000 to $237,000. Rents have risen similarly. According to Lawrenceville United, a neighborhood group that fought for the inclusionary zoning district, only 10 out of over 700 new multifamily residential units have been affordable for lower-income residents. The neighborhood lost a third of its black population between 2013 and 2016, and the number of longtime homeowners dropped.
The new Lawrenceville inclusionary zoning “overlay district,” signed by Mayor Bill Peduto in July, is designed to preserve the mixed-income character of what has become Pittsburgh’s hottest neighborhood. New developments with more than 20 rental units must make 10 percent of them affordable to households earning 50 percent of the Area Median Income (AMI) (80 percent AMI for for-sale developments). In practice, it will create rentals in Lawrenceville that an individual earning $28,000 can afford and homes that a couple earning $51,000 can buy. The affordable units must be no different in size or amenities than the market-rate ones and must be integrated within the buildings.
The law is already having an impact on developers' plans. The luxury-apartment/retail complex called Arsenal 201 is planning a second building with 343 rental units — 35 of them affordable.
Close to 900 inclusionary zoning programs throughout the country have created more than 170,000 affordable units by tying them to growth in market-rate housing. Developers generally receive offsets, in the form of tax breaks or the right to more add more units than zoning limits would otherwise allow. Lawrenceville’s program — called “incentivized mandatory” — mandates affordability while helping to balance the cost through tax breaks.
Is this the best approach? A 2017 study from the Lincoln Institute found that 61 percent of inclusionary zoning programs have been mandatory and suggested that mandatory programs are more effective than voluntary programs in producing affordable units in strong markets.
Which brings us to Philadelphia. The city’s Mixed Income Housing Program, enacted in October, is a voluntary program. Developers who want to build taller and denser residential projects can include affordable housing to receive those zoning bonuses. Alternatively, they can pay into the Philadelphia Housing Trust Fund, which helps finance affordable housing development and address critical housing needs. Mayor Kenney agreed to add $19 million to the Housing Trust Fund.
The Trust Fund is a valuable asset in fighting housing insecurity. Philadelphia's poverty rate is 26 percent, making it the nation's poorest large city. And in March, City Council introduced five new bills aimed at affordable housing, including restricting evictions.
These efforts are all crucial, but they don’t do what Pittsburgh has done: guarantee affordable housing in the most opportunity-rich neighborhoods. Councilwoman Maria Quiñones-Sánchez introduced a mandatory inclusionary zoning bill, but the developer community lobbied against it and she had to settle for a voluntary program.
Twelve new development projects reportedly are lined up to use Philadelphia’s voluntary incentive. These will create some affordable units, but all the evidence suggests that Philadelphia’s inclusionary zoning policy won’t create as much affordable housing in areas of opportunity as would have been the case under a mandatory policy like Pittsburgh’s. Policymakers concerned about affordable housing, and the future of Philadelphia as a world-class city, should pay attention to this question and be ready to change our approach if it doesn’t achieve its full potential.