A New City Land Policy Could Unlock Affordable, Workforce Housing Development In Philly

A new city law that went into effect at the start of this year has the potential to transform how Philadelphia builds workforce and affordable housing at a critical time.

“From my perspective in land management, it’s not business as usual,” Philadelphia Housing Development Corp. Senior Vice President of Land Services Angel Rodriguez said on Bisnow’s Philly Workforce Housing Webinar Thursday. “Through the new legislation, things have changed.”

Philadelphia City Council bill 190606-AA, signed into law in November, allows for vacant or blighted land owned by the city to be transferred to developers for a nominal fee in exchange for a promise that 51% of the residential units built there are either affordable or workforce housing. Interested developers can now search a municipal database for properties that are available through the new policy and solicit an offer rather than waiting for the city to put them up for sale.

The impediment to building enough housing for those making 120% of an area’s median income or less has seemingly always been the simplest one: the bottom line. As building costs have risen continuously while wages remained stagnant over the past few decades, federal housing programs have lost funding time after time. Those who still wish to build affordably have to get creative and work harder to put financing together. If the price of land is eliminated as an issue, it could make many deals easier to pencil out.

“Land has become so expensive; even market-rate developments are under pressure to be financially rewarded,” Riverwards Group Managing Partner Mo Rushdy said. “We’re buying in Kensington, and the prices we’re seeing are $3M-$5M per acre. So developers [can] use that new bill as an alternative to market-rate housing because it’s such a way around the [price of land] and a way for private developers to get into affordable housing.”

The processes through which Philadelphia disposes of property it owns because of tax delinquency or blight were fraught with issues for years. The Philadelphia Land Bank was formed in 2012 to better organize the city’s holdings, but disposal was left to an arm of city council called the Vacant Property Review Committee. 

Over time, it became apparent that VPRC sometimes served as cover for council members to direct land to friends or as political favors. In October, VPRC was eliminated and PHDC was formed to oversee all residential land disposition for the city in a combination of council legislation and memoranda of understanding.

With PHDC handling disposition as a “one-stop shop,” as Rodriguez described it when announcing the department’s founding, it had the authority to reorganize how it tracked and publicized its portfolio. With a centralized database, PHDC can take a holistic view of neighborhoods and blocks to package nearby lots together for sale — a further enticement for some developers.

“Land is always an issue for us, having enough to develop projects that make economic sense,” Pennrose Senior Developer Harry Moody said. “Affordable housing is a tremendous need, so building as much as we can is always good. So we work with whatever area we work in to get as much land, especially contiguous land, as possible.”

To those who work in that portion of the industry, workforce housing — for those who don’t qualify for public assistance but still have hourly or lower-paying jobs — has been even more scarce than purely affordable housing because the lack of tax credit programs removes a major potential financing source. With the new land disposition process available to workforce housing as well, Philadelphia could have more developers involved in that needed segment than ever.

“You are going to make money developing workforce housing, which has been sort of a taboo compared with carving out 3% or 5% [of a building for] affordable housing,” Rushdy said.

Unlocking such a simplified pathway to land acquisition and financing for developers to build affordable and workforce housing would have been important if it happened at any point in the past 30 years or more, but during the coronavirus pandemic, housing has never been more essential, or more imperiled. In many cases, residents may need more assistance in paying for housing.

“I see the need for affordable housing increasing, just based on the number of people losing jobs,” Moody said. “Much of this [demand] is going to fall more into the 50%-60% AMI range from [people] changing jobs and finding that their new industries don’t have the same financial opportunities.”