City Council on Thursday approved a bill that would require affordable housing units to be part of new large residential development projects in parts of West, North, and Northeast Philadelphia where Council members said residents are especially vulnerable to being priced out of their neighborhoods.
The mandate or request that developers reserve a certain percentage of housing units for residents with low and moderate incomes is called inclusionary zoning. Cities across the country, including New York and Chicago, have inclusionary zoning programs. Some are voluntary, and some are mandatory. They have varying guidelines and definitions of what affordable means.
Marcia Fudge, secretary of the U.S. Department of Housing and Urban Development, has called inclusionary zoning practices “equitable housing policies” and said the department will seek to advance such local policies. Housing advocates, community organizers, and residents have expressed support for Philadelphia’s legislation.
Mo Rushdy, treasurer of the Building Industry Association of Philadelphia and managing partner at Riverwards Group, has called inclusionary zoning well-intentioned but said it could prevent development if it doesn’t include incentives for developers that offset lost income from affordable units. Members of the building industry also oppose different requirements for different parts of the city.
The sections of the Third and Seventh Council Districts that the bill covers are areas where residents are likely to be displaced because of increased market pressures, Council members said. Council unanimously approved the legislation. Mayor Jim Kenney’s office is reviewing it, a spokesperson said Thursday.
If the mayor signs the Council bill into law, the city would require projects with 10 or more dwelling units to offer 20% of them at reduced prices, with some exceptions. Total monthly costs of the below market-rate rental units — including utilities — could not exceed 30% of monthly income for households making up to 40% of the Philadelphia region’s area median income. That’s up to roughly $850 per month for a two-bedroom apartment for households of three making $34,040.
Households are considered cost burdened if they spend more than 30% of their income on housing, according to HUD.
Under the legislation, affordable units for purchase would have total monthly costs — including mortgage, insurance, and property taxes — of no more than 30% of monthly income for households making up to 60% of the Philadelphia region’s area median income. That’s up to roughly $1,280 for a two-bedroom home.
Councilmember Jamie Gauthier, a cosponsor of the mixed-income neighborhoods bill with Councilmembers Maria Quiñones-Sánchez and Kenyatta Johnson, said at a hearing last month that the legislation is meant to ensure “that Philadelphians of all income levels can continue to access amenity-rich neighborhoods.”
“This legislation aims to preserve affordability in some of Philadelphia’s most rapidly gentrifying neighborhoods,” Gauthier said at the hearing.
The bill allows developers to request a waiver through the city’s Department of Planning and Development that would allow them to fulfill some of the affordable housing requirement through off-site units within a half mile or through higher contributions to the Housing Trust Fund. The bill also allows for additional development rights for property owners, including taller building heights and relaxed parking minimums.
Gauthier said the city’s current mixed-income housing bonus, an optional incentive that allows developers to build taller structures in exchange for including affordable units or paying into the city’s Housing Trust Fund, was a start. “But considering the breakneck pace of development and the pace of displacement in many sections of Philadelphia, the time has come to see where it can be taken even further,” she said last month.
The current bonus doesn’t require that affordable units be built in the same neighborhood as new developments. The bonus also has helped accelerate the pace of demolitions in the city, as developers have chosen to tear down existing properties to build taller.
The Building Industry Association of Philadelphia has advocated for more Council members to transfer vacant public land in their districts to the Philadelphia Land Bank, which can make the land available to individuals, nonprofits, and private developers to build affordable homes. City Council passed legislation in 2019 that streamlines the process for projects in which 51% of units are reserved for residents who meet certain income guidelines.
For developers to create affordable housing, they require public subsidy, which includes inexpensive land, tax benefits, and direct funding, said Lauren Gilchrist, co-chair of the government affairs committee and former president of the greater Philadelphia chapter of the NAIOP commercial real estate development association. At a Council hearing last month, she said the mixed-income neighborhoods legislation could limit the creation of affordable housing and result in fewer jobs and lost economic growth.
She cited the city’s high poverty rate, high construction costs, and relatively low rents when compared to other cities as challenges the real estate industry faces.
“With the combination of these factors, government policy alone will not correct the affordable housing shortage in Philadelphia,” she said last month.
She said members recognize that affordable housing is an important issue that both the public and business communities need to address with comprehensive and holistic solutions. She said targeted zoning in certain areas of the city is not that.
“Zoning is meant to guide in a thoughtful and balanced way the path to development and growth while considering the social policy objectives of the city, which are extremely important,” she said. “A holistic zoning policy can absolutely achieve the policy objectives of growth as well as equity.”
The bill Council passed Thursday would take effect six months after Kenney signs it and would not apply to projects with zoning permit applications filed before then.