Op-ed: Impact fee on new Philly construction would support affordable housing
The city controller's latest economic report shows many promising signs for the City of Philadelphia's finances, driven largely by the continued boom of the real estate market. Compared to 2012, the city's revenue collection from the realty transfer tax has nearly doubled this year, up from $119 million to now over $236 million. As the controller notes, this is a direct result of strong property sales markets across various sections of the city.
This is positive news for Philadelphia in general, but not all are sharing in the benefits. The city is home to more than 400,000 children, disabled individuals, seniors, and members of working families living below the poverty line. This group accounts for more than a quarter of our total population and would alone rank among the nation's 50 largest cities. These Philadelphians continue to struggle to afford or maintain a decent place to live.
New developments are driving rent prices increasingly higher, and research shows that in North, South, and West Philadelphia, 50 percent of renter households are "housing cost-burdened," meaning they pay more than they can reasonably afford to their landlords each month. Couple that with the Philadelphia Housing Authority's 104,000-person-long waitlist for public housing, which usually takes a family several years to overcome, and the picture of a severe affordable housing crisis becomes clearer.
While the mounting affordable housing shortage presents a difficult challenge, the real estate boom provides an opportunity that city government can leverage toward a significant positive impact. Despite being drastically underfunded over the past decade, the Philadelphia Housing Trust Fund has established itself as a proven tool to address housing inequality. To date, it has provided housing opportunities to more than 14,000 households in need — both renters and homeowners.
Many other U.S. cities are adopting affordable housing impact fees levied on new market-rate residential development as a method of tapping into the real estate boom to invest in tools like the Housing Trust Fund. Based on the current pace of market-rate residential construction in Philadelphia, and assuming a fee structure that the market will bear, researchers estimate that a mid-sized affordable housing impact fee ($2.20 per square foot applied to new market-rate for-sale homes and $2.40 per square foot applied to new market-rate rental units) will generate an estimated $6.8 million in new revenue per year.
This investment in affordable housing will allow the Philadelphia Housing Trust Fund to:
- Create 136 units of newly constructed affordable rental homes.
- Help 85 existing homeowners seeking critical improvements through the Basic Systems Repair Program and 51 home rehabilitations through the Adaptive Modifications Program
- Support 155 households facing homelessness receiving utility and mortgage assistance.
- Provide 136 grants for capital improvements and infrastructure in community gardens and food-producing green spaces.
Philadelphia is in demand. People want to live here and build homes here. We must leverage this activity to help lower-income households remain in their communities. An affordable housing impact fee would provide a great start.
Nora Lichtash is the executive director of the Women's Community Revitalization Project. Tom Earle is the chief executive officer of Liberty Resources. Both are steering committee members of the Philadelphia Coalition for Affordable Communities.
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