With home prices rising, incomes stagnating, and the mortgage credit market tightening, the nation — and Philadelphia — is increasingly becoming a renter's haven.
But what happens when too many renters, many of them higher-income, flood the market?
In cities such as Philadelphia, lower-income residents feel the squeeze. And it could be getting worse for them, a new local study suggests.
Between 2000 and 2014, Philadelphia lost one-fifth of its low-cost rental-housing stock -- more than 23,000 units renting for $750 a month or less -- according to the study, released Dec. 15 by the Federal Reserve Bank of Philadelphia.
Even more, the study found, the affordable housing that remains in the city is in danger, too. With the federal rent subsidies set to expire on more than 2,300 apartments in gentrifying neighbors within the next five years, the researchers and author of the study caution, these low-cost units could soon be converted to more expensive housing.
The analysis underscores what affordable-housing advocates and experts have long warned: As apartment demand has grown and gentrification revitalizes formerly economically depressed areas, the city's most vulnerable populations have been pressured. But as these households are forced to either take on higher rental costs or leave neighborhoods, the question remains of how far away they will be forced to go — and what that will mean for an already financially segregated Philadelphia.
"For the city as a whole, we saw a considerable loss of low-cost units at a time when [renters'] incomes became relatively stagnant or decreased," the report's researcher, Eileen Divringi, a community-development research analyst with the Philadelphia Fed, said Thursday. "The declining access of these neighborhoods to the city's renters is challenging from an inclusive development perspective."
Considered the poorest big city, and among the most racially segregated, in the United States, Philadelphia now must grapple with what the loss of low-income housing stock and rising rental rates mean for its more than 1.5 million residents. While Philadelphia lost tens of thousands of affordable units during 15 years studied, it also added higher-market units at an astonishing rate: The number of apartments renting for more than $2,000 a month more than doubled, to nearly 11,000 units. And the median gross rent for the city, the study found, jumped to $936 a month in 2014.
More than one-third of all renter households here were classified as severely cost-burdened in 2014, meaning that they spent at least 50 percent of their income on rent and utilities, the study found.
"What we see is people taking on more housing costs than they can afford," Divringi said, leaving less money for other priorities, such as food or education. And if some choose to move, Divringi said, they often must relocate to areas farther from the center of the city and transit hubs.
The only mitigating factor amid the losses, the study found, was Philadelphia's more than 37,000 subsidized rental units. But with 20 percent of those subsidies expiring in the next five years, it is possible, Divringi said, that landlords will choose not to renew, further depleting the amount of affordable rental housing.
"Prior research has found that properties with expiring subsidies are more likely to lose their affordability if they have for-profit ownership" and are located in neighborhoods that have been experiencing higher-rental rates, the study found. More than 1,000 city units with expiring subsidies are owned by for-profit entities, from large corporations to individual property owners.
Even if landlords do renew the rent subsidies, funding — for now — provides only a temporary fix, some local observers believe.
Federal subsidies "ameliorate but don't stop" gentrification, said Kevin Gillen, a senior research fellow at Drexel University's Lindy Institute for Urban Innovation.