REGIONAL REPORT: NORTHEAST

Philadelphia Turns to Housing

BY BENDIX ANDERSON

AFFORDABLE HOUSING FINANCE • JANUARY 2008

PHILADELPHIA - About once a month, Milton Pratt gets an invitation to visit a vacant lot or field of rubble in North Philadelphia.

Neighborhood groups or city council members bring Pratt to these desolate places hoping that together they can plan to build something. Pratt is a senior vice president with Michaels Development Co., an affordable housing developer.

To investigate a promising patch of land, the first step for Pratt is often to type the address of the lot into a city Web site, www.phila.gov/build. Immediately, every bit of information in the public record flashes onto the screen, including what the land is zoned for, as well as when the property was last sold and to whom and for how much. The site even includes satellite photos.

City officials launched the site in 2006 through the Neighborhood Transformation Initiative (NTI), a cityrun program to redevelop Philadelphia’s burned-out buildings and vacant lots. When the NTI started in 2000, Philadelphia had more vacant and abandoned properties per capita than any other large city in the country, according to local officials. They counted 26,000 vacant houses, 31,000 trash-strewn vacant lots, and 2,500 vacant industrial and commercial structures.

Since then, NTI has helped create more than 13,000 units of housing by providing developers with land and infrastructure, or by funding demolition. The new inventory includes 9,000 units of affordable housing and 4,000 units of housing rented or sold at market rates, according to city officials.

So far, with help from NTI, developers have built more than two units of affordable housing for every one marketrate unit. But that mix is changing as Philadelphia’s real estate market picks up. Developers are planning or have begun construction on 9,000 units through the program. Of those, more than 7,500 will sell or rent at market rates, according to NTI.

But affordable developers are still active in NTI. For example, Michaels is building 151 homes for low- and moderate- income homebuyers at the third phase of its Cecil B. Moore Homeownership Zone project in North Philadelphia. NTI provided many lots to the project, helping Michaels create a contiguous community rather than a scattered-site development interrupted by vacant properties. NTI also provided funding to demolish existing, unsafe houses to make way for the new development.

“Our project, simply put, would not have happened without NTI resources,” Pratt said.

NTI has acquired more than 7,000 parcels since the program began. Sometimes it uses its powers of eminent domain to seize properties and pays the owner the appraised value of the property. Other times, a property is owned by another city agency, and NTI helps the developers negotiate with the agency to get control of the land.

“Knowing that the project has the support of NTI goes a long way with those agencies,” Pratt said.

City officials have also shrunk Philadelphia’s stock of vacant buildings by more than a third simply by demolishing, or threatening to demolish, unsafe structures. Since 2000, the city has knocked down more than 8,500 vacant buildings. That includes about 5,400 buildings knocked down using NTI funds. The city has demolished another 3,261 buildings using funds from its general budget.

In cases where private owners had let the buildings decay, the city knocked down the unsafe building and then attached the bill for the demolition to the property as a lien, as part of the process of potentially acquiring the property to pass on to a developer.

Another 2,000 vacant buildings were spared demolition over the last seven years, because when the city initiated the legal process that’s the first step toward demolition, the owners of the buildings scrambled to rehabilitate the structures themselves.

That might have been bad news for developers hoping to build on the land, but it was good news for the city, which could deploy its resources elsewhere, according to Eva Gladstein, NTI’s director.

The city has also cleared trash from thousands of vacant lots and continues to pay to mow the grass on more than 6,000 of them through its Green City Strategy, which attempts to limit the damage these lots can do to their improving neighborhoods.

Many of the empty lots still have private owners, although over the years a few hundred lots have left the program to be redeveloped.

NTI has also worked to keep Philadelphia free of abandoned cars. Over the last seven years, city workers have dragged 279,134 broken-down cars off Philadelphia’s streets.

In December 2006, NTI received $65 million from a bond issue. Officials plan to spend about $34 million to help dress up the commercial districts in poorer neighborhoods through façade improvement grants and infrastructure improvements like new streetlights.

With the remaining $31 million, NTI will continue to acquire vacant properties and demolish unsafe buildings. NTI is now building a database to identify newly vacant properties by tracking utility shut-offs and code violations.

NTI is also helping prevent new properties from being abandoned by reaching out to homeowners to fight property foreclosures. NTI’s $3.7 million Equitable Development Strategy will provide financial counseling to educate homeowners about the dangers of predatory lending.

The program will also create a phone hotline and a home improvement loan fund that offers loans of up to $25,000 as an alternative to predatory financing.

NTI also committed $1 million to guarantee loans through the Pennsylvania Housing Finance Agency’s Homeowner’s Equity Recovery Opportunity (HERO) Loan Program. HERO helps distressed homebuyers, regardless of their credit scores, to refinance predatory loans they can’t afford.

“Sales prices are appreciating rapidly in many areas,” said Gladstein. “But there are homeowners in those neighborhoods that are behind in their taxes or mortgages and need help.”