Philadelphia officials on Wednesday announced the launch of a low-interest loan program aimed at providing low- and middle-income homeowners with funds to fix up their aging or deteriorating homes.
The program, called Restore, Repair, Renew, will offer Philadelphia residents with credit scores as low as 580 the ability to borrow as much as $24,999 for 10 years at a fixed interest rate of 3 percent. The loan can be used for a wide range of home repairs, including mold and radon mitigation, window and door replacement, and roofing and siding repairs — all of which must be completed by a city-licensed contractor. The program takes effect immediately.
The program’s launch, which was attended by Mayor Jim Kenney, City Council members, Philadelphia housing officials, and the program’s administrators, comes nearly three years after City Council President Darrell Clarke and Councilwoman Cherelle Parker introduced legislation to pump money into Philadelphia’s existing housing stock. In the spring of 2016, Clarke and Parker announced a proposal to issue a $100 million bond, which they said would be paid down by an increase in the city’s realty transfer tax.
City Council’s local transfer tax change was enacted at the start of 2017 and increased the rate from 3 percent to 3.1 percent. For a $200,000 house, the increase added $200 to the local tax bill, which is typically split by the buyer and seller and is paid when a sale closes. (The city transfer tax was increased again in 2018 to 3.278 percent. An additional 1 percent tax goes to the state, bringing the total transfer tax to 4.278 percent.)
As part of the bond proposal, $60 million of the $100 million package went toward alleviating massive backlogs in pre-existing Philadelphia home-repair programs, such Adaptive Modifications and the Basic Systems Repair, both of which offer grants — not loans — to low-income residents. At the time that his and Parker’s legislation was introduced, Clarke said that nearly 5,500 qualified residents were waiting for assistance from those programs. Dave Thomas, executive vice president of the Philadelphia Housing Development Corporation, said last year that city officials had reached out to half of the wait-listed residents as a result of the cash-infusion.
The remaining $40 million was earmarked for the Restore, Repair, Renew program, which will be housed under the Philadelphia Redevelopment Authority. Residents who are interested in applying for the loans must use the house as their primary residence, have homeowner’s insurance, and have no public liens or violations from the Department of Licenses and Inspections. (However, if homeowners are in a payment plan for their liens or will use the loan to eliminate L&I violations, they are still eligible.)
Applicants must also have a credit score of at least 580 and cannot exceed the maximum income, which is $73,440 for a single person, $84,000 for two, and $104,880 for a household of four.
Loans are available for $2,500 to $24,999.
The launch of the program comes as Philadelphia continues to experience a nearly 26 percent poverty rate and an aging housing stock — a combination that has led to significant deterioration of properties citywide. In recent years, the city has seen an increasing number of buildings become structurally unstable and collapse, in part due to neglected maintenance.
Numerous other properties are still stable but are deteriorating into unsafe or unhealthy condition, leaving entire neighborhoods in decline.
“As we see growth and new development taking place in regions of the city, these neighborhoods, which were the foundation of Philadelphia’s tax base, are on the brink of going in a direction that doesn’t provide the kind of stability that we want,” said Parker, who was elected in 2015 and serves the Ninth District, which includes East Mount Airy and Lawncrest. “We’ve seen infrastructure deteriorate, without the residents having access to disposable income to make improvements.”
Officials say the problem is also exacerbated by private financial institutions that tend to deny home-improvement loans to lower-income residents or those with low credit scores. According to a study released in December by the Federal Reserve Bank of Philadelphia, nearly 75 percent of low- or moderate-income homeowners in the Philadelphia metro division were denied when they sought home-improvement loans between 2015 and 2017. (To be considered low- or moderate-income, a single person must have made less than $48,950. Credit history was not considered in the analysis because financial institutions were not required to report credit scores.)
Greg Heller, executive director of the Philadelphia Redevelopment Authority, said he and city officials hope that if the Restore, Repair, Renew program is successful, it will “nudge the private sector to get into this space more with lesser public intervention.”
At the Wednesday news conference announcing the program, Kenney called it a “good day for working people in Philadelphia.”
Currently, two participating lenders, Finanta, a nonprofit lender, and Univest Bank and Trust Co., a bank, will provide the loans. The Redevelopment Authority will then purchase the loan from the originating lender, Heller said, though the lender will continue to service the loan. The city will receive all principle and interest payments, excluding a service fee that will be paid to the lender.
Before receiving a loan, an applicant will have to meet with one of three program intermediaries, to be staffed by representatives from Clarifi, the Public Health Management Corp., and the Philadelphia Council for Community Advancement. The intermediaries, in addition to determining whether applicants are eligible, will provide financial counseling and assist a homeowner in finding a contractor to complete the repairs.
Loans will be paid directly to the licensed contractor performing the work, Heller said. The city has gathered a list of nearly 90 pre-qualified contractors.
“When we were talking about raising money for home preservation, such as for the Basic Systems Repair Program, we realized that there were a lot of people who made just above the federally mandated” income guidelines, Clarke said. “We continue to say that the most affordable home is the one you live in, so if we can preserve that home, we need to figure out a way to do that.”
Clarke and Parker are both running for reelection and facing challengers this year.
Philadelphia Media Network is one of 21 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city’s push toward economic justice. See all of our reporting at brokeinphilly.org.