Philadelphia will dedicate millions in new funding toward affordable housing initiatives and bank on developers volunteering to construct more of those units in exchange for larger buildings in the coming years.
Philadelphia’s City Council passed a legislative package Thursday that included a guarantee of nearly $71 million for the Housing Trust Fund over the next fives years, with a pledge to commit more.
The funding was a compromise between the City Council and Mayor Jim Kenney that ultimately sank the proposed 1-percent construction impact tax advocated by the City Council. The bulk of the five-year funding package will come from the city’s general fund raised from new real estate tax revenues from those properties coming off their 10-year tax abatement.
The City Council also approved the immediate transfer of more than $19 million as part of the new funding to the Housing Trust Fund for this year, which will later increase to $21 million. The City Council’s goal is to to increase the overall funding for the Housing Trust Fund to $100 million over five years with additional contributions from the general fund.
The Mayor’s Office did not immediately respond to a request for comment about the potential funding increase.
In addition, the City Council passed the Mixed Income Housing Program legislation after more than a year of debate and numerous amendments.
The legislation, proposed by Councilwoman Maria Quiñones Sánchez, will allow developers to add additional height, building units and floor area to projects beyond current zoning limits if they set aside at least 10 percent of those new units as affordable housing, which is typically referred to as inclusionary zoning. The density increases will depend on the zoning districts and number of affordable housing units developers set aside, among other things.
The density bonus is voluntary. Previous calls last year for making inclusionary zoning mandatory were squashed after resistance from developers. And instead of building affordable housing units in new developments, a developer could choose to make a payment to the Philadelphia Housing Trust Fund.
The affordable housing units set aside in these developments will be based on the Area Median Income (AMI).
Leo Addimando, vice president of the Building Industry Association of Philadelphia, said the inclusionary zoning legislation was “a step in the right direction,” but added the City Council could more to encourage developers to build more affordable housing units.
“It does provide some but probably not enough meaningful zoning incentives for developers to want to opt into the program,” said Addimando, who is also a co-founder of Alterra Property Group.
“We believe the single biggest thing the city can do to spur voluntary funding for affordable housing is to relax and, ideally, entirely eliminate parking minimums” in areas of the city, Addimando added.
Overall, Addimando believed that in most cases developers would pay into the Housing Trust Fund rather than include affordable housing units in new developments, but he noted that decision would depend upon a variety of factors.
The City Council also passed legislation establishing two new funds in the city’s Housing Trust Fund. One of the funds, the Non-Recording Fee Sub-Fund, will pay for programs and projects that support equitable neighborhood development, including increasing the production and preservation of affordable housing, and helping with down payments and closing costs for new home buyers.
Council President Darrell Clarke, Quiñones Sánchez, and Councilman Mark Squilla led the effort on the multiple pieces of legislation.
“As I’ve said before, our vision of a fair and equitable City demands that all players, including developers, put skin in the game,” read a released statement from Clarke in part. “This inclusionary housing plan is a great step forward, with many more steps to go ....”
Councilman Derek Green cast the lone no vote against establishing the separate funds in the Housing Trust Fund. He said the legislation failed to provide enough funding for those with disabilities.
“I just thought that more money should be dedicated specifically to people who are low income, and a significant number of those people … are people with disabilities,” Green said.
The Philadelphia Coalition for Affordable Communities also came out against the Housing Trust Fund legislation for not doing enough for low-income residents.
“We are disappointed, however, that the newly created sub-fund provides no guarantee that resources will be used for low-income Philadelphians which was a critical component in the original bill,” the coalition said in a release statement. “We are further discouraged that the sub-fund allows for-profit developers to access the new funds. These changes dilute the purpose and mission of the Housing Trust Fund.”