Real Estate

Recurrent Crises: Budgets

A new day, and a new way and an old crisis. I am sure we've all noticed that Philadelphia's budget problems reoccur every 10 years or so, no matter who is at the helm. A rethink of what should be taxed and how taxed must be at the heart of any and future current debates and policy.

Every crisis puts the most vulnerable programs and people at risk. Why them? Well, they don't have a constituency and advocates with ideas that move beyond traditional nostrums.

How about this idea. Just for thought then action?

Philadelphia's Budget: Everyone's Right

Mayor Nutter’s announcement of today is understandable, yet also avoidable. Understandable because the traditional reaction to an economic downturn in government is to cut services, lay off workers and rethink taxes. Avoidable because all options should be on the table, but are clearly not.

Governor Rendell and the Hidden Costs of Casinos

Governor Rendell has grown increasingly isolated as a politician still openly advocating for the development of SugarHouse and Foxwoods casinos in Philadelphia. Not only has he dismissed and become increasingly hostile to the residents who oppose these developments but he has also failed to provide a solid cost/benefit analysis to back up his claims of the economic benefits of casinos.

Governor Rendell claims that casinos will bring 7,000 new jobs into the city while an independent study by Temple economics professor, Fred Murphy, shows casinos could create net job loss of 5,900 jobs. Rendell has budget only .001% of casino revenue to deal with gambling addiction when it could cost the city up to 2,000 times more to deal with the impact of those new addicts. Many of the studies done to date give no estimate for costs of things like reduction in property values, medical emergency services and other municipal costs, reduction in taxes from businesses that close due to competition with casinos and the opportunity cost of using the Delaware Riverfront for other projects.

These numbers have led many people to believe that the figures that the Governor has been using to promote casinos as a panacea for the economy are grossly overstated and misleading. For the past few weeks, Casino-Free Philadelphia has been on a campaign to create more accountability to the hidden costs of casinos. On April 10th, Casino-Free Philadelphia will be gathering at the Governor's Philadelphia office for a "debate-in," (like a sit-in) and plan to stay at Rendell's office until he agrees to a debate on the costs/benefits of casinos. Casino-Free is inviting any member of the public who wants to come observe the action to show up on April 10th.

For more information go to or contact Lily Cavanagh at

Inclusionary Housing bill: making shared prosperity a priority in city government

City Council voted 12 – 5 today to approve Inclusionary Housing in Philadelphia.

Councilman Darrell Clarke has been championing the idea that developers need to give back to the city’s working people—-who have been struggling to match their wages with the rapidly rising cost of homes and increased rents on apartments. This is a really important notion and one that Philadelphia’s economic development planning, such as it is, has shied away from in favor of tax cuts and tax incentives.

Legislating the idea of shared prosperity is something new and wonderful for Philadelphia city government. And treating developers and business like partners in building a sustainable city--who must be held accountable as well as feted--is also an important change.

Problem is, that when Clarke first wrote legislation to deal with this issue, he targeted a group of wage-earners who most would argue don’t need help as badly as others.

In a city where there is a need for 60,000 new units of affordable housing, any money or physical units set aside by developers need to be handed out to the people with the most need.

To his credit, bowing to pressure from the Philadelphia Housing Justice coalition, the bill that was voted on today focuses more exclusively on the lower end of Philadelphia’s wage earners (you may remember that Clarke’s original bill would have allowed developers to set aside units to people who earned as much as 150% of area median income which I think is like $100 k for a family of four).

The amended bill requires half of the units to serve families, on average, at 40% of area median income (which is more like $30 k for a family of four), although the upper income level is set at 80% of area median income (as Jennifer already suggested, read WCRP ED Nora Lictash’s op-ed in yesterday’s Inky if you want more details here).

Here’s the catch.

Today’s legislation won’t take effect until “developer incentives”, or cost offsets, are decided. So that requires another bill in the new Council next Spring.

What are "developer incentives?"

Well, for instance, when the bill is passed, a developer could build 12 stories worth of condos, and be required to set aside a certain number of units. Council could decide that the developer has to put the set-aside units on the market at a price that a family of four who earns $32,000 k can afford and just take that loss in return for the privilege of being allowed to build here.

To offset this “loss,” Council could offer developers a variety of things.

Like density bonuses, where the developer is permitted to build more units than the zoning code would normally allow. Or, maybe allow developed to build higher in an apartment building than normal, or allow smaller lot sizes or smaller set-backs.

In short, developer incentives are things that directly increase profit for developers to offset any "loss" they see from contributing to our affordable housing crisis, but doesn’t directly cost the city anything.

From a coalition press release:

“We’ve worked with some of the top experts from the field and talked with key market-rate developers in Philadelphia to understand appropriate developer incentives,” said Nora Lichtash, Executive Director of the Women’s Community Revitalization Project. “We stand ready to work with City Council next year to develop fair and reasonable incentives that will make Philadelphia’s Inclusionary Housing program a model for future policies.”

However, some developers will be lobbying in the spring to have the city subsidize some of their loss on per-unit sales to low income families--with cash money.

There is a rumor that some developers have already asked for 100% subsidization--this of course would defeat the whole purpose of the bill—shared prosperity—and it’s something to keep an eye on. Between city contracts, possible BPT cuts, and a whole new set of priorities from a new Mayor and Council, I doubt we afford to subsidize developer contributions to affordable housing. Especially when the whole point of a bill was to find creative ways to fund an urgent problem.

There is a also a big picture to keep in mind here: the Affordable Housing Trust fund is already up and running, and developers are submitting RFPs to it to get money to build new units of affordable housing, for both sale or rent. Coalition folks tell me that the new stream of money from the Inclusionary Housing bill will double the reach and impact of the trust fund.

What does that mean in real numbers? In total, we're talking about construction of about 14,000 new units of affordable housing and/or repair to existing stock over 10 years.

And the need is at least 60,000 units.

So, I am glad this bill passed, and I hope the discussion of developer incentives is smooth, easy, and fast, as Council and the Mayor have a lot more work cut out for them to create more affordable housing than just this one bill.

In the meantime, let’s savor the victory today not just for affordable housing advocates, but for everyone who believes that our city government can and should so what it can to bring shared prosperity to all Philadelphians.

For the record: Supporting the bill were Clarke, DiCicco, Blackwell, Campbell, Savage, Miller, Tasco, Goode, Reynolds Brown, Kenney, Greenlee and Ramos. Call to thank them!

No votes were Verna, Krajewski, O’Neill, Rizzo and Kelly. Call to express your disappointment with them. Contact info is here.

Too bad some of the "No" votes aren't the people leaving Council next month. And in the meantime, I wonder where those folks are gonna be, and the new Mayor, on passing a reasonable package of incentives for developers.

The City in Between

For those of you who haven't noticed, posted a revised homepage over the weekend. It'll be interesting to see what people think of it. MDC

This will be a tiny post, but I wanted to flag two items: one story and one resource.

First, the Inquirer's pair of articles (here and here) on the real estate picture in the city. Despite a slowdown in year-over-year sales, the residential market seems to be pretty brisk -- and continues to push prices beyond the "old" borders of Center City (e.g. south of Washington west of Broad or north of Girard east of it).

There are all sorts of things you can say about this development, from transfer and property taxes to the changing shape of neighborhoods and the workforce. But I was struck by this assessment (which I neither endorse nor disdain) of the future picture for real estate development in Philly, by Kevin Gillen, an economic forecaster and Wharton fellow:

Philadelphia's housing has less of a high-price problem and more of a "low-income, low-quality and high-cost" problem, he said. The city's low-income population occupies old, depreciated housing stock that's very costly to replace or maintain.

"We are a city with Baltimore houses, St. Louis house prices, and Cleveland incomes, but New York costs, Boston taxes, and San Francisco regulations."

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