Could Mandated Set-Asides Help Solve Philly's Affordable Housing Crisis?

Philadelphia, like most cities, is in a constant struggle to keep housing affordable while its downtown area fills with new, Class-A developments and its neighborhoods gentrify. But a new bill introduced in the City Council last month could be a big win for those hoping to stem the rising tide.

Introduced by council woman Maria Quiñones-Sánchez, the bill would mandate that in new residential developments, one in every 10 units must be designated as affordable based on the area median income. The bill would also grant substantial bonuses, as much as an additional 50% of building height in buildings zoned CMX-3 or larger, for developers who include affordable housing in their projects.

It is a much stronger step than the current program, which only uses height incentives to encourage affordable set-asides. That program has only produced 15 additional affordable apartments since its inception, according to the Philadelphia Inquirer, and has been made notorious by PMC Property Group’s reversal at its One Water Street project.

Initially given a height bonus based on its promise to include affordable units for its waterfront-adjacent development, PMC waited until construction was all but finished to decide that it would not include affordable housing at all. As for the height bonus it already utilized, PMC paid cash to Philadelphia’s Housing Trust Fund to make up for it.

The cash is useful, and affordable projects are still popping up in underserved neighborhoods, but such projects do nothing to keep longtime residents in gentrifying neighborhoods such as Fishtown and Brewerytown.

Sànchez’s bill was co-sponsored by Council President Darrell Clarke, as well as council members Jannie Blackwell and Kenyatta Johnson. Sànchez claims to have gained the support of developer organization Building Industry Association for the bill, which would be a major coup. The legislation is set to undergo a series of revisions later in the summer. Sànchez, Blackwell and Clarke did not respond to requests for comment, and representatives for Johnson and the BIA declined to comment.

“So many neighborhoods have expressed concern that their residents are being priced out,” Sànchez told the Inquirer. “This [bill] is a tool to help them remain.”

The bill designates affordable rental units as being available to those making 80% of a development’s AMI, which some claim is insufficient for the gentrifying neighborhoods in question.

“Most of the people living in this area are living off of Social Security, so they wouldn’t even qualify for those apartments, meaning they wouldn’t be able to use that as a viable alternative,” Fishtown Neighborhood Association President Ian Wilson said. “I don’t think set-asides really address the problem.”

Encouraging developers to build bigger buildings as a way to keep some units affordable raises a different issue: the scale and character of a neighborhood. If an area filled with older row houses becomes a locus for large-scale apartment buildings, 10% of those new units being affordable would not do much to combat the inundation of scale. It would also drag up the AMI that defines an apartment as affordable.

For neighborhood advocates like Wilson, gentrification seems like an inevitability of capitalism that no realistic legislation can address.

“A more acceptable option would be remodeling existing housing stock,” Wilson said. “Instead of building a big new house, just rehab and sell as an affordable option. But developers aren’t going to do that, because they’re interested in maximizing their income.”

A similar bill to the one Sànchez introduced failed in 2007 after developers criticized it for hampering their ability to profit from their developments. While Philadelphia’s real estate market is considerably stronger than it was then, construction and labor costs have risen concurrently. The BIA’s endorsement aside, to build affordable housing on a meaningful scale looks likely to remain unpalatable for market-rate developers.

“I don’t really see a balance being struck between the interest of the developer and the interest of the community,” Wilson said.