You could probably fit every unit of affordable housing being built in Philadelphia today inside one of the fancy glass skyscrapers going up in University City, and still have a couple of floors left over. That's not because the new towers are so immense, but because the city produces so little subsidized housing for the poor and working class.
It wasn't always that way. From the 1950s through the Clinton years, the federal government financed thousands of units of affordable housing. Though the results weren't always well-designed, the programs did at least ensure the poor had places to live. But in the last decade, federal money dried up and cities were left to their own devices. It's no accident that wage stagnation has become a hot issue as low-cost housing has become harder to find.
So, as with many urban improvements these days, cities have begun to look to the private sector to pick up the slack. The strategy is called "inclusionary housing," and it involves trading zoning bonuses for apartments.
Developers get to put up taller, denser towers. Cities get a bunch of units in the new buildings that can be rented at below-market rates. Low-wage workers get fabulous apartments with skyline views.
It sounds like a perfect solution for everyone. And it almost is.
The approach is tailor-made for a city like Philadelphia, which is beginning to see its housing prices creep up in gentrifying neighborhoods. When the new zoning code was adopted in 2012, it offered a generous provision for inclusionary housing. The problem was that developers just weren't interested.
But in what may be a sign of larger changes in the city's housing market, two developers have just signed up for the deal, both in Old City. If their high-end projects at One Water Street and 205 Race get built - always a question in Philadelphia - the city stands to gain 40 subsidized apartments, gratis. To put that number in perspective, the Philadelphia Housing Authority is planning 55 duplex houses on Queen Lane in Germantown, one of the few public housing projects that seems to be advancing. Each unit will cost the agency more than $300,000.
But inclusionary housing will never be a replacement for public housing for the very poor. Rather, it targets a different, but growing, demographic: low-wage workers. They're the people who staff the city's restaurants, clean its hotels, and (I suspect) blog at Web start-ups, yet have trouble making ends meet. To qualify, a single person would have to earn less than $32,000 a year.
But the units won't be a free ride by any means. Even with the subsidy, a one-bedroom unit at PMC Property Group's One Water Street, next to the Ben Franklin Bridge, is expected to rent for $942, about half what market-rate tenants will pay in the same building. That's the same as an apartment in a less-expensive neighborhood near Passyunk Avenue or Northern Liberties, so you wonder whom this will help.
Developers may get the better end of the deal. In exchange for providing 25 reduced-price units, PMC was allowed to increase the height of its building by 48 feet, enough to accommodate 55 additional market-rate apartments. A block west at 205 Race, developer Brown Hill won permission to expand its mixed-use apartment house by 33,000 square feet in exchange for setting aside 15 affordable units.
Although both projects have received their zoning bonuses, the city is still figuring out how the programs will work. The zoning code specifies only that developers have to set aside 10 percent of the units in exchange for the extra height and density.
As things now stand, developers will be the ones advertising the affordable units, vetting the low-income applicants, and maintaining the waiting list. Cross your fingers that there is no abuse. In many cities, the government oversees the application process so there's no favoritism or cutting corners. What's more, the subsidized units revert to market rate after 15 years.
The good news is that Philadelphia will require the affordable units to be dispersed throughout the building, so low-income tenants won't be stuck with the worst apartments. Unlike New York, where developers are allowed to have a separate entrance for the low-income renters - dubbed a "poor door" - tenants will all have the same amenities, says Deputy Mayor Alan Greenberg.
Many skeptics didn't think inclusionary housing would ever take off in Philadelphia. Compared with expensive cities like New York and San Francisco, Philadelphia is still a cheap place to live. The average house price remains less than $200,000, and there are thousands of vacant lots. Yet because of the screwy economics here, most new construction targets the upper end of the income spectrum.
Even in New York, where high rents make development easy, it's been difficult to get companies to build for the working class. But since introducing inclusionary housing in 2005, New York has created 5,000 affordable units. The side benefit of living in a high-end building in a prime neighborhood is that tenants get access to better schools, parks, and shopping.
Still, John Kromer, an affordable-housing expert at Penn's Fels Institute of Government, argues that inclusionary housing is an inefficient way to solve the problem of high housing costs.
He would rather see a more targeted approach in which developers contribute to a fund that would be used to acquire affordable housing in less-expensive neighborhoods, such as Mantua or Point Breeze. That way, the city would get more units for the same money. He's also a big proponent of "repair grants" to help low-income homeowners make emergency fixes so they can remain in their neighborhoods.
Cities have always been places of opportunity, for rich and poor alike. It's great that Philadelphia is again becoming a place where the middle class wants to live. But for everyone to benefit from the city's turnaround, the city will need housing for all.