Philadelphia city council is currently reviewing a bill (#170678), introduced by Councilwoman Maria Quiñones-Sánchez, to amend the Philadelphia Housing Code, to implement an inclusionary zoning (IZ) program called the “mixed income housing program.”
If this change in the Philadelphia Housing Code goes into effect on July 1, 2018, (per the date listed on the current version of the bill), new multi-unit developments with 10 or more units will be required to reserve one out of every 10 units for occupants who qualify as “moderate income” or “low income,” or pay a fee into the Housing Trust Fund (HTF) (referred to in the bill as “in lieu of payments”). The HTF rehabs currently existing properties in need of repair, or provides financing for new construction affordable housing.
If the bill is passed with its current language, the Philadelphia mixed housing program will apply to all new development projects with 10 or more units, whether they are rentals or owner-occupied, in the following zones: RM-4, RMX-3, CMX-3, CMX-4 or CMX-5. These units must remain open for occupancy by moderate/low income residents for 50 years. Projects with permit applications within the above zoning classifications filed prior to July 1, 2018, would not fall under the new IZ program.
In exchange for reserving units for below market-rate residents, developers will be able to build structures taller and wider than the applicable zoning normally allows, via a loosening of zoning restrictions referred to as “floor area and height bonuses.” The intent is that the cost to developers to reserve units for below market-rate occupants (or pay the “in lieu of payment”) will be financed by the ability to build more units in larger structures. What is referred to as “floor area and height bonuses” in the Philadelphia bill is sometimes referred to as “density bonuses” in other cities.
This IZ program would not apply to development projects already using government funds to provide 51 percent or more of the units in accordance with affordability standards, projects developed by schools to provide housing for its students or employees, or units constructed within a pre-existing building.
Philadelphia already has a voluntary IZ program in place for zones RMX-3, CMX-3, CMX-4 and CMX-5. It grants floor and height bonuses to developers who set aside space in a new project for mixed income housing—as well as public space, public art, public transportation access, underground parking, environment-friendly buildings, and other types of public interest-centric development.
News articles reported that few developers in the applicable zones have actually exercised the voluntary option. The new law, if passed, would expand the applicable zones and make IZ mandatory for mixed income housing.
The current bill defines how to determine: who qualifies as a low or moderate income owner/renter; what the “in lieu of payment” would be based on the number and size of units in your development; what the rent or sale price can be for low and moderate income units; and how to calculate the floor area and height bonuses.
The benchmark to qualify as moderate or low income is based on the area median income (AMI) for Philadelphia, which is promulgated annually by HUD. If a family’s income is at or below a certain percentage of Philadelphia’s AMI, they may qualify to live in one of these affordable housing units. The “in lieu of payment” will vary depending on the occupancy/type of units in the development and will be higher for the moderate-income bonus than the low-income bonus.
Units reserved for low and moderate-income occupants must be interspersed with market-rate units. All affordable units must be of equal design, construction, and quality of market-rate units. All occupants must have equal access to common areas and amenities, regardless of income status. For owner-occupied units, if the current owner desires to sell the unit, Philadelphia’s Department of Planning and Development must be allowed the first opportunity to purchase the affordable unit, with 90 days advance notice.
A shortage of available affordable housing is the motivation for the new proposed law. A January 2017 study by the Federal Reserve Bank of Philadelphia found that since 2000, a decrease in available affordable rental units, coupled with rising rents, an influx of renters, and stagnant wages, have left many Philadelphians spending over 50 percent of their income on rent and utilities.
The study also found that almost 24,000 low-cost rental units were lost between 2000 and 2014—and that most of the losses were in gentrifying neighborhoods. The Philadelphia Housing Authority currently has over 104,000 people on the public housing waiting list, with applications dating back to 2004.
The goals of IZ programs like the mixed income housing program are to help combat the affordable housing shortage, allow lower-income residents to remain in their neighborhoods, and promote mixed-income integration in transitioning areas.
Other IZ programs exist in San Francisco (2002); Chicago (2003); Boston (2000); New York City (1987 for voluntary; 2016 for mandatory); and Washington, D.C. (2006). These programs vary in terms of voluntary vs. mandatory participation, applicable zones, unit percentage requirements, affordability definitions, and affordability term lengths.
An alternative to IZ programs is a “linkage fee,” a citywide tax on new development that funds affordable housing. Another is increased funding for housing choice vouchers, which assist low-income families in affording market-rate rentals. Some cities offer tax abatements in lieu of density bonuses, although Philadelphia’s 10-year abatement has no affordable housing requirements.
—Francis Shannon Sweeney, a third-year student at Temple University Beasley School of Law, who is interning this semester at Nochumson P.C., contributed to this article.
Reprinted with permission from the February 7, 2018 edition of The Legal Intelligencer © 2018 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.