As the U.S. housing market revs up for another busy spring season in 2022, the prevailing feeling among many first-time home buyers is an anxious mixture of hope and fatigue.

Difficulty finding an affordable home to buy has been a common experience for people looking to own properties in Philadelphia, the surrounding suburbs and in communities all over the map in the United States. This has been especially true during the COVID-19 pandemic, whose economic backdrop helped turbocharge residential real estate transactions.

U.S. home sales surged to a 15-year high in 2021, fueled by a combination of historically low mortgage rates, voracious demand and a low supply of homes for sale. The housing inventory problem, which preceded the pandemic, became even more critical as a result of delays in new home construction, higher material costs for builders and an avalanche of buyers vying for a shrinking number of existing homes on the market.

Now mortgage rates are quickly rising again, creating an unusual and uncertain market forecast that places the heaviest strains on first-time home buyers. 

In the Philadelphia region, housing inventory has fallen nearly 41% below pre-pandemic levels to a decade low. The supply of homes for sale dropped 9.3% annually in December 2021, even as inventory showed signs of a mild recovery and the housing market appeared to cool a bit last fall.

Historically, in Philadelphia there is an average of about 7,400 homes for sale in the city at any given time. During the pandemic, that figure has hovered between 2,500-3,000 homes.

All of this adds up to a real estate market that has swung heavily to the advantage of home sellers, who in turn face the same issues as they attempt to move to new homes. When current home owners instead refinance at low rates, or otherwise stay put to avoid the headache of the market altogether, this reinforces the fundamental supply problem and contributes further to home-price inflation.

In Philadelphia, home prices increased by roughly 13% in 2020 and climbed another 6.3% by the end of last year, bringing the city's median sales price to about $255,000 in December. It fell to $242,000 in February, typically one of the slowest months on the real estate calendar. 

For the metropolitan area, the median sales price rose to about $319,900 in February, nearly a 10% jump from the previous year. Compared to a decade ago, when the U.S. housing market began recovering from the 2008 crash, the metro area median sales price in Philadelphia is up more than 42% from $220,000 in 2012. During last year's competitive summer months, the median for the region reached about $325,000. 

The Philadelphia area is far from alone. The national average median sales price leaped 16.9% annually to $346,900 in 2021, the highest increase on record, according to the National Association of Realtors, and has risen by about 32% over the last two years. By February, the inventory of existing U.S. homes for sale fell to a record low of 729,000– about a 48% decline from February 2020, according to nationwide listings site Zillow. 

Even with encouraging signs for new home construction this year, analysts don't expect the inventory of U.S. homes for sale to rebound to pre-pandemic levels until late next year or 2024. The nation's share of first-time home buyers, which dropped from 45% in 2019 to 37% in 2021, may take longer to recover. 

It can be an unforgiving market for different generations of buyers and sellers, each with different goals. Millennials are looking for reasonably-priced starter homes, while growing Gen X families want to size up and many Baby Boomers are holding out for the most comfortable retirement landings.

Anyone looking to buy right now may have a hard time finding and affording what they want, where they want it. First-time home buyers who are naive to the process face an understandably daunting predicament. 

Without a mountain of cash, a sterling credit score and a comfortable income, the search for a place to call home can appear ruthless and demoralizing. Even buyers who possess these advantages may find themselves stretching beyond their means, waiving home inspections and other contingencies, or scratching important items from their real estate wish lists to get something done before mortgage rates rise higher.

Perseverance in today's market is not an exercise in futility, but the norm for many buyers is to endure an alternating test of patience and readiness to pounce, keeping fingers crossed that a little luck finds them.

Counting on such luck is not a promising option for people in low- and middle-income ranges. With fewer immediate resources, their outlook and path to home ownership does not seem quite as assured.

As Philadelphia looks for long-term strategies to make homeownership more attainable, could the approaching return of Philly First Home, the city's popular down-payment and closing-cost-assistance program, be a difference maker for the fortunes of priced-out buyers?

There is help for home buyers to cover costs

In a broader context, Philadelphia remains a relatively affordable place to buy a home. The blistering price inflation and bidding wars seen in the suburbs and in hot markets elsewhere in the country haven't yet touched every corner of the city's housing market. There remains a fairly large number of homes available below the median price in good, stable neighborhoods.

Still, the meaning of "affordability" depends greatly on the purchasing power of buyers, specifically when it comes to escalating down payment and closing costs.

As home prices keep climbing – and most market forecasts still project they will this year – these principal costs can quickly balloon from a stretch, to a barrier, to effectively being prohibitive of buying a home at all.

"Making a down payment is definitely the top struggle that a lot of my clients face," said Tia Whitaker, a Realtor with Domain Real Estate Group, a family-owned brokerage in Philadelphia. "I may have a number of (mortgage) pre-approvals for clients, but throughout the pandemic, I've seen that not only are home prices going up, but the fees of the down payment and closing costs increase, too."

Whitaker's division at Domain specializes in guiding first-time home buyers as they navigate the Philadelphia market. She helps these buyers determine where their finances best position them to invest in the city – not just in a home, but in a community as well.

Most of Whitaker's clients are low- and middle-income Black families with household incomes ranging from $45,000 up to $90,000. For these buyers, clearing the hurdle of steep down payments and closing costs often necessitates getting grant money to cover a large portion of the up-front expenses.

"It's an initiative of my business to seek out home buying grants," Whitaker said. "It takes about 10% down to purchase a home in Philly. If you're going after a $250,000 home, your closing cost is going to be around $25,000 with down payment and closing costs combined. Most families just don't have that."

A variety of down-payment assistance programs exist to help out first-time home buyers. The funding may come from sources such as banks, government entities and non-profit organizations. Many of these programs are available not just to low-income buyers, but also people with moderate incomes who do the extra research and apply.

Every grant program for first-time home buyers carries its own set of eligibility criteria, some more difficult to meet than others. They generally look at a buyer's income and credit score, offering them varying percentages of a home's sale price and different terms of forgiveness for the grant amount. That means the buyer must maintain ownership of the property that they purchase for a set period of time before the loan is wiped away.

In June 2019, Whitaker was among the first real estate agents in the city to participate in the Philly First Home Program, an initiative through the city's Division of Housing and Community Development. The program was part of Philadelphia's Housing Action Plan and expanded on previous down-payment assistance options, which had included small grants ranging from $500 to $1,000.

Whitaker had been teaching weekend home-buyer workshops at HUD-approved agencies in Philadelphia and received early notice of Philly First Home. The new program had generous terms offering grants of up to $10,000 – or 6% of the home's purchase price, whichever was less – to help buyers cover the down payment and closing costs on homes in the city of Philadelphia.

Prospective buyers seeking these grants could live outside Philadelphia as long they purchased in the city, and they had to be first-time home buyers or buyers who had not owned a home for at least three years.

The program had no minimum credit score requirement and the income threshold was set at 120% of the Area Median Income based on the size of the buyer's household. The calculation of AMI includes the higher earnings of people who live in the Philadelphia suburbs, meaning the upper income limit for the program opened it to a large population of city residents.

In a two-person household in 2019, for example, 120% of AMI put the maximum income for Philly First Home eligibility at $86,520. For one person, 120% of AMI was $75,720 and for a family of four, it was $108,120. 

Three years ago, the median household income in Philadelphia was $45,927, according to the American Communities Survey of the U.S. Census Bureau.

When Whitaker heard about the program, she was thrilled to be able to help her clients access grants that didn't have the same credit restrictions, loan terms and income limits as other popular programs. Credit, in particular, can be a major snag for grant seekers in other programs.

"Philly First Home wasn't as strenuous with the guidelines," Whitaker said. "Some buyers may have a clean credit report, but their scores aren't as high because of issues that they had five to 10 years ago, so they don't meet criteria for other grants. If you think about the demographics here, many people can purchase a home ideally with a credit score of 620, but if they can't get a grant because the cutoff is higher, it leaves them hanging in the balance."

The only major requirement of Philly First Home's first run was that all participants in the program had to complete a four-hour workshop with a HUD-approved agency in Philadelphia and then attend at least one individual homeownership counseling session. Counseling requirements are not unusual for many grant programs.

"That is extremely important," Whitaker said. "It ensures that the client is educated about what they're going to do, and the road to foreclosure is cut down because they know what they can afford."

After receiving the counseling certification for Philly First Home, a buyer would go search the city for a home. Once an agreement of sale was completed, the buyer would return to the housing counselor, who would submit a final application making the grant money available to the title company.

"It was a very smooth process," said Whitaker, who closed more than 40 deals with clients using Philly First Home grants.

The broad eligibility for Philly First Home grants meant that a significant pool of potential buyers, families who might otherwise have had little shot at homeownership, suddenly had a chance to get assistance with their single biggest roadblock.

Demand for Philly First Home grants surpassed supply

Philly First Home generated instant and insatiable demand in the late spring of 2019, burning through its first $3 million budget in a matter of months.

"We didn't expect that it would catch fire so much," said David Thomas, president and CEO of the Philadelphia Housing Development Corp., the quasi-municipal non-profit that oversaw a portion of Philly First Home. "It caught us all off guard. The demand was much greater than the supply."

The city's initial $3 million commitment and another $2.5 million planned for 2020 was soon supplemented with $8.5 million from Wells Fargo, which had settled with Philadelphia over its predatory mortgage lending practices leading up to the 2008 financial crisis. The settlement was part of a wave of litigation that led to the creation of similar housing assistance programs in other states and cities, including Baltimore.

With a flood of Philly First Home applications and pre-approved buyers out looking for properties, the city created additional dollars for the program by allocating money from the Housing Trust Fund, which has a range of revenue sources intended to funnel resources toward affordable housing.

"We had a huge pool of folks who completed the counseling certification, and while they were off looking for a home, we would not know how many had executed an agreement of sale at any given point," said Melissa Long, director of Philadelphia's Division of Housing and Community Development. "When we knew we were getting low on funds, we had to give a three-month period to allow people to complete that process."

Over an 18-month period ending in October 2020, Philly First Home became a $24.26 million program that helped 2,701 families purchase homes in the city. The average grant amount was $8,983.33 and the average home sale price among buyers who received grants was $174,435.33.

All of the grants provided by Philly First Home became a lien on the property's first mortgage for 15 years. The sum of the grant will be owed back to the city upon the property's sale, if it was sold in less than 15 years, or if the owner refinances within that 15-year-period. Otherwise, the grant is forgiven.

The city ultimately benefits by growing its tax base and generating new revenue on properties that will presumably increase in value during those 15-years and beyond. Purchases made using program funds generated more than $15 million in real estate transfer tax revenue and more than $537,000 in deed recording fees. Some of this revenue was reinvested in Philly First Home.

If a one-time grant helps families overcome what had been preventing them from becoming homeowners, the city views this as money well-spent. The counseling requirement helps ensure that buyers are capable of sustaining their financial obligations. The median debt-to-income ratio for grant recipients was 32%, which falls below a common benchmark of about 36%.

"A lot of times, people are cash-strapped once they get into their property, and there's still some investment necessary for them to move into a house or make some fixes," Thomas said. "We try to make sure that people are not going into a situation over their heads or underwater. This gives them some cushion to make a smooth transition into homeownership."

City officials deemed Philly First Home a great success, but soon recognized that the fiscal crunch of the pandemic would leave its future in question, just as the housing market was getting tighter for buyers.

"There are so many people who may have decent credit, and maybe they can get a mortgage and they can pay it, but they just need a little help," said Jamila Davis, spokesperson for PHDC.

"This was a necessary program for Philly," Whitaker added. "And that's why it ran out so quickly. It didn't price out the people who really needed it."

Down payment grants 'open doors' to new home owners

In the frantic residential real estate market now facing home buyers in 2022, Philadelphia is on the verge of bringing back Philly First Home for a four-year period that will budget $14.5 million annually for down-payment assistance grants.

The funding was approved in 2021 by City Council and Mayor Jim Kenney as part of Philadelphia's $400 million Neighborhood Preservation Initiative, a sweeping plan to invest in affordable housing, home repairs, small business revitalization, rental assistance and eviction prevention.

Philadelphia will finance the Neighborhood Preservation Initiative with bonds issued through the treasury office and the Philadelphia Redevelopment Authority. The first $100 million in bonds were issued in October, drawing interest primarily from large institutional investors.

"I already have all the banks calling me because they've heard whispers that it's coming back, so they're trying to line up and get themselves prepared to provide additional resources to their borrowers," Thomas said.

This time around, there will be some adjustments to the program, including a revision of the Area Median Income eligibility down to 100% from from 120%.

Only a small portion of people who obtained Philly First Home grants in the first round of the program were above 100% AMI. It's possible that those earning above 100% AMI were candidates for other grant programs that offered friendlier terms for their individual circumstances, such as a shorter forgiveness period or more than $10,000 toward closing.

"We don't believe this change is going to be a major hit on our program," Thomas said.

The 2022 AMI calculation for a family of four in the Philadelphia area is $94,500, a figure determined by the U.S. Department of Housing and Urban Development. The chart below shows the AMI eligibility figures, by household size, that will be used when Philly First Home resumes. (Note: These numbers will change in future years). 

Additional details about the the return of Philly First Home will be revealed when the program is formally announced, which is expected in May. 

The biggest questions facing Philly First Home now revolve around changes in the housing market since the program ended in October 2020.

"The market was just starting to heat up when our program was ending, so some of the horror stories that you hear about homeowners paying $100,000 above asking price – that didn't really happen during the duration of the program," Davis said.

More real estate inflation and competition among buyers, many of whom tried and failed to purchase homes during the last two years, could mean the program now will operate in a more cost-pressured environment.

Whitaker believes Philly First Home will thrive, much the way it did in 2019-2020.

"It opens up more doors and more inventory to buyers," Whitaker said. "A lot of first-time home buyers don't want to get a home and have to re-do it. They want a move-in ready home, mainly because they don't have the money to make those fixes."

There are other changes and barriers in the housing market that these grants could alleviate. At a time when sellers have the upper hand in negotiations, buyers are less likely to be able to work out a seller assist to cover closing costs, which usually amount to 2-5% of the sale price.

"I think that it will give buyers a stronger competitive edge," Whitaker said. "It was a lot easier for me to get my (Philly First Home) clients' offers accepted because we weren't going in asking for a seller assist. Our needs weren't the same. If a home needed new cabinetry in the kitchen, for example, my clients would feel more comfortable going after a property and addressing that later because they didn't have to put out $15,000 or more in their own closing costs."

City officials believe the demand seen during the initial rounds of Philly First Home will return.

There is tempered optimism that increases to mortgage rates could moderate home prices and add to stock of homes for sale as some sellers try to capitalize while home values remain high. If rates increase too much, however, the shift could also price many buyers out of mortgages and could push others on the bubble to jump into the fray before rates rise more and become prohibitive long-term commitments, even if they have the up-front cash. 

The Federal Reserve's move to raise interest rates, spurred by inflation and the conflict in Ukraine, has pushed the average 30-year, fixed-rate mortgage up to 4.72% in April. It had remained under 4% throughout 2021 and once fell as low as 2.68% in late 2020.

This type of change makes a substantial difference in affordability, particularly in a market that already has experienced historic home-price inflation. 

The average monthly mortgage payment in the U.S. for a 30-year, fixed-rate loan rose to $1,230 per month at the beginning of March. It's the highest level on record, according to data from real estate site Zillow, and a 36% increase from the average of $905 per month a year ago. 

The uncertainty around mortgage rates has led to wildly divergent real estate forecasts heading into the spring season.

Some market analysts, wary of rates climbing higher than expected this year, have revised their projections accordingly. CoreLogic, a real estate research company, believes year-over-year U.S. home price growth from January 2022 to January 2023 will be just 3.8%, a below-average annual increase. Zillow, on the other hand, still expects year-over-year home price growth to hit 17.8% from February 2022 to February 2023, with prices accelerating through May of this year based on sustained high demand and low inventory. 

In historical context, the average annual rate of U.S. home price growth since 1986 has been about 4.6%. 

In the Philadelphia metro area, annual comparisons between months show that home price growth has remained well above this benchmark. Bright MLS housing data from February reported median price increases of at least 7% year-over-year every month for the previous 20 months, including some months that came in much higher. Home prices in the region soared by 14.7% in Dec. 2021 compared to Dec. 2020. 

First-time buyers face a bleak outlook, one in which they'll be stung by a trifecta of high home prices, higher monthly mortgage payments and higher-priced rentals in the event that they are unable to purchase homes. 

But Whitaker doesn't feel her clients should be discouraged from buying this year if they have the fundamentals in place to afford a home. Delaying action does not necessarily mean market conditions will be favorable in the foreseeable future. 

"One of the things I always discuss with first-time home buyers is that if you're really looking for a home, the opportunity is now," Whitaker said. "We have just seen over the last two years that the price of so much of our inventory is rising. Real estate is always a cycle, and while what goes up definitely must come down, we are still nowhere near a projection for a market crash like what happened in 2007-2008. We don't have those predatory lending practices or a bubble. This is just something we're naturally seeing because there's an inventory shortage and more competition inflating what's there."

Whitaker said rising prices in the Philadelphia area have been expected based on trends over the last five to 10 years in the surrounding markets of New Jersey, New York and Washington, D.C., which usually signal changes that will catch up around here.

"We are due for home price inflation," Whitaker said. "I think that's just one of the natural things that's going on."

Davis wonders whether more Philly First Home grants might hit the full $10,000 threshold if 6% of the purchase price surpasses that amount more frequently this time around. The price point at which that happens is a home that sells for approximately $167,000.

The rate of sales in Philadelphia is not as rapid as in the suburbs, where inventory is much tighter from month to month and competition is greater. In Philadelphia County, homes remained on the market in February for a median of 47 days, according to The Long & Foster Market Minute. That figure stood at 30 days in Montgomery County, 27 days in Chester County, 24 days in Bucks County and 28 days in Delaware County. Nationally, the typical home spent 47 days on the market in February. 

A buyer looking in the Philadelphia area can expect sales velocity to pick up this spring, leaving even less time to assemble an offer on a property – let alone see it. 

The Philadelphia market, although faced with low supply and fewer active listings than a year ago, fortunately is in better shape than many other cities and towns in the United States. There is optimism that more sellers will be comfortable listing their homes in light of greater stability around the pandemic. They may be looking to capitalize now while higher home prices persist into the busiest real estate months of the year. 

Data from Redfin shows about 25% of single-family homes in Philadelphia sold above list price in February and 19.6% had price drops, with only minor year-over-year fluctuations. 

These two metrics tend to be less favorable to buyers during the spring and summer months. 

Last year, nearly 35% of single-family homes in Philadelphia sold above list price in May, rising to about 45% by June. The percentage of price drops was actually higher during much of 2021 than it is now, hovering around 30% from June through November, but this can be a misleading statistic depending on overall market conditions.

Sellers often lower home prices to create more foot traffic from buyers and drive up bidding beyond the home's previous list price. When home supply is low and demand is high, price drops serve as marketing decoys that can increase the number of homes sold above list price. 

First-time buyers in Philadelphia should anticipate that competition for individual properties will remain a factor given the sudden urgency around rising mortgage rates, with some reason to have hope that listings will increase and prices may soften later in the year. 

Buyers who struggle to find the right combination of home attributes and price may also decide that the most prudent action is to simply hold off on making purchases, instead of pouncing out of desperation. In one Zillow survey, 75% of people who bought homes during the pandemic admitted that they had regrets, most often that their homes are too small and that the properties they bought need more work than expected. 

Beyond this kind of broad conjecture, the experience that Philly First Home grant recipients will have in this year's market remains to be seen.

"The pandemic didn't stop demand for the program in 2020," Thomas added. "You would think that might slow things down, but folks were still buying houses even if they had to look at them virtually. The real question is, 'What has changed in the market?' Is it just as hot as it was when we shut Philly First Home down? There's a lot of bidding going on now and employment challenges out there, things that didn't exist as much when the program launched. I think all of that is still unknown."

Pennsylvania's unemployment rate fell to 5.1% in February, the lowest it has been since the start of the pandemic. In Philadelphia, the unemployment rate began 2022 at 7.7%, down from a peak of 19.5% in July 2020, according to the U.S. Bureau of Labor Statistics, but it remains above the national unemployment rate of 3.8% in February 2022. The city's job recovery from the pandemic has lagged behind the national economy, particularly in low-wage sectors, and Philadelphia was disproportionately hit by the downturn compared to other major U.S. cities. 

Where are buyers are moving with Philly First Home grants?

If the past is a strong predictor of what may happen in the coming months and years of Philly First Home, the data from 2019-2020 suggests that among the new first-time home buyers who currently rent in Philadelphia, the majority will look to purchase homes either in neighborhoods where they currently live or within a few miles.

The geographic distribution of homes bought through Philly First Home offers insight into how well the program works.

City officials provided PhillyVoice with key statistics and maps that break down what buyers chose to do with the grants they received. This includes demographic information, home price information and a look at the neighborhoods grant recipients most frequently targeted.

The first table shows how household incomes of the first 2,701 grant recipients in the Philly First Home program compared to the Area Median Income, which was based on income figures from 2019. 

The second table shows the distribution of sales prices of properties purchased by Philly First Home buyers.

The third and fourth tables show the distribution of Philly First Home buyers by race and ethnicity. The program did not keep statistics on buyers' ages. 

As the tables above illustrate, Black home buyers comprised the largest racial demographic in the program, though there also was substantial participation among Hispanics and whites.

"We didn't try to approach any one demographic. It was just a byproduct of this program that a lot of minority buyers became first-time homeowners," said Davis, of the city's planning and development department. "We're focused on trying to get people to be homeowners in Philadelphia, and it just happened that the majority of those folks were minorities. It helps all people in a middle income range buy their first home, no matter their color. And if it happens to be Black and Brown people, this gives them a chance to create generational wealth."

It is important to note that the outcomes of Philly First Home reflect the independent decisions of buyers in the private, residential real estate market. That begins with the choice to participate in the program's required counseling certification and to accept that grants come with a 15-year commitment in order to get the lien forgiven. This makes the choice of a neighborhood to buy in much more consequential.

"The market was able to drive it. I think that's what made the program so fantastic," Thomas, of the Philadelphia Housing Development Corp., said. "We didn't have to push this program at all. Once the gate opened, the flood came. Realtors, mortgage lenders, everyone was very much interested in figuring out how they could help people become homeowners. The barriers and challenges to homeownership were definitely mitigated."

(Note: The following maps were created by the Philadelphia Housing Development Corporation)

The three maps below show snapshots of home buying trends among 2,000 grant recipients between January 2019 and July 2020, about three months before the program ended. This also includes several months of buyers who received much smaller grants during the period before Philly First Home expanded to offer up to $10,000 in assistance.

In the first map, areas in the darkest shade of blue were the most popular for grant recipients to buy homes. The series of parallel lines indicate racially/ethnically concentrated areas of poverty – or RECAPs – a HUD-defined category for census tracts where more than 50% of residents are non-white and incomes fall disproportionately below the poverty line. These accounted for about 15% of homes of the homes purchased in this sample of 2,000.

The second map illustrates how far grant recipients moved when buying a home. More than 60% of participating households relocated less than three miles from their previous addresses, including 25% who moved within easy walking distance of the last place they lived.

The third map shows that most people who participated in Philly First Home already lived in the city. Only about 5% came from outside the city or state, and 17% bought homes in the same neighborhoods where they had been living. On this map, the parallel lines show places where intra-neighborhood moves were most common: Olney, Oxford Circle, Juniata Park, West Oak Lane, Overbrook and East Kensington.

In addition to the neighborhoods noted above, the most popular neighborhoods for Philly First Home buyers were in Northeast Philly and West Philly, with pockets of Northwest Philly and Southwest Philly comprising a larger-than-average share of homes purchased by grant recipients.

'Middle Neighborhoods' are strongholds for first-time home buyers

Considering that more than 65% of grant recipients had household incomes between 51%-120% of AMI, the Philly First Home program ended up serving a fairly large proportion of middle-income residents, not just low-income home buyers.

"If you look at where there are the most Philly First Home purchases, those are reasonably integrated, mixed-income neighborhoods," said Ira Goldstein, president of policy solutions at Reinvestment Fund, a mission-driven financial institution that invests in underserved communities and has offices in Philadelphia. "The neighborhoods that are in the lower part of the Northeast are mixed racially. If you go into Logan and Olney, those will be racially mixed. West Oak Lane, East Mount Airy, Cedarbrook. These are the solid middle neighborhoods in Philadelphia."

Goldstein is among a group of urban policy researchers who believe that strengthening "middle neighborhoods" is an essential part of fostering sustainable growth. These neighborhoods offer residents a path to affordable homeownership while minimizing the most egregious forms of gentrification and displacement.

Middle neighborhoods usually exist somewhere on the edge of growth and decline. They aren't the strongest neighborhoods, but they often have a good housing stock and would not be considered distressed. The quality of life there is high enough and stable enough that new homeowners are willing to bet on the future of their employment prospects, education and crime rates.

"These neighborhoods are economically attainable," said Goldstein, who considers Philly First Home an example of positive investment in these places.

The guiding idea behind supporting middle neighborhoods is that cities can take action to prevent them from slipping into dire states that would be much harder to reverse. The point is not to invest in middle neighborhoods instead of putting resources into RECAPs, but rather to recognize that the support middle neighborhoods require is less costly, by comparison, and advances a real path to mobility for residents.

"Middle neighborhoods stand as the living and breathing examples of the fact that people of different races and national origins can live together in a decent way," Goldstein said. "It's a pretty important part of the strategy of closing the wealth gap between white people and Black, Hispanic and Asian people."

Philly First Home helped many buyers land properties in middle neighborhoods, but the larger affordability challenges among low-income participants kept a lot of these families in distressed areas, too.

"If people are buying homes in neighborhoods they've long lived in, then this is a program that could perpetuate the segregation that was baked into housing markets a long time ago," said Gregory Squires, a professor of sociology and public policy at George Washington University in Washington, D.C. "It's not by design. I'm not suggesting that anybody in the city of Philadelphia is out to perpetuate segregation. But in effect, that can happen when a program purports to be colorblind."

Squires suggested that the dilemma facing policymakers boils down to a question of scope, and how to best deal with the practicalities of the private housing market.

"Should the goal be to help people access neighborhoods that have been traditionally inaccessible to them, or should the approach be to just help as many people as possible be able to afford a home? Is the goal reinvestment or integration?" Squires posed. "Housing affordability policies that take the existing housing market as a given – and try to make marginal adjustments, given the realities of the private market – put great limitations on what might happen right from the start."

The choices of so many Philly First Home buyers to purchase properties near where they were renting also could be chalked up to simple preference, at least in part.

"Some people likely wanted to stay in their neighborhoods because they have support structures already there – parents, grandparents, babysitters," Thomas said. "It's all predicated on the individual. There's a lot of naturally occurring affordable housing in the districts where many people bought homes that fit their price ranges."

Goldstein agrees that these are reasonable factors for many people who are looking to buy a home.

"There is an aspect of having to consider, 'What do people choose?' If someone moves from one part of West Oak Lane to another part of West Oak Lane, it may be because people become comfortable in their neighborhoods. They live there for a while as a renter, perhaps, and then they decide that if they can own there, they'd like to be there. I don't think that's necessarily bad. Philly First Home was not designed as an integration program, and I don't think it necessarily functioned as an integration program. But people were able to find homes."

Counseling teaches buyers homeownership fundamentals

There are important factors to consider when choosing where to buy a home in Philadelphia.

Many Philadelphia neighborhoods suffer from structural disadvantages that reflect the legacy of redlining and residential displacement due to redevelopment. In one of the nation's poorest big cities, large pockets are held back by failing schools, disproportionately high crime rates, limited economic opportunities and the uninspiring surroundings of blight.

An investment in home ownership in these places, where properties may cost less, is a big gamble for lower-income buyers and risk-averse banks – especially when compared to the same lenders doing lucrative business with speculative investors.

Among the sample of 2,000 Philly First Home buyers reflected in the maps above, roughly 40% moved to areas with lower property values than the neighborhoods they left. About 30% moved to areas of similar value and another 30% moved to higher-value areas.

"One way to try to improve the program during the counseling phase is to help future home owners choose a neighborhood that is better in certain dimensions, whether it's income, commuting, school quality and so on," said Fernando Ferreira, a professor of business economics, real estate and public policy at the University of Pennsylvania's Wharton School. "There's a lot of research showing that neighborhoods matter, especially for kids. There's data that counselors can use to guide families to neighborhoods that will be better for kids."

One of the largest HUD-approved counseling agencies to participate in Philly First Home is the Affordable Housing Centers of Philadelphia, which submitted approximately 800 of the 2,701 grant applications to the program.

The Fair Housing Act prevents counselors from giving opinions or recommendations about what constitutes a preferred neighborhood, explained AHCP executive director Ken Bigos. His counselors work closely with buyers to look at their incomes and debt-to-income ratios in order to gauge what size mortgages they can comfortably afford.

"We're the personal trainers to their housing and financial goals," Bigos said. "We offer broccoli, and the grants are the chocolate cake. Our real purpose is to ensure long-term success for people who are making life-changing decisions."

Not surprisingly, the availability of grants correlated directly with participation in the agency's counseling workshops.

"We had more participants in our education workshops in the first two months of Philly First Home than we had in the previous 12 months combined," Bigos said.

Housing counselors have an important role, but many of them are spread thin with heavy case loads. In addition to working with home buyers, their services include helping households facing foreclosure and guiding renters in Philadelphia's eviction diversion program. In a housing market full of obstacles to overcome and cracks for people to fall through, many counseling agencies offer free services with limited resources. They do their best to steer clients toward prudent financial decisions and investments.

"At the one-on-one sessions, the counselor will tell clients, 'This is the maximum monthly (mortgage) payment you can have to be eligible for the program,'" Bigos said.

In practice, much of the responsibility for guiding buyers into new homes falls on real estate agents, who have a clear financial stake in the sales they facilitate. Buyers have to strike an optimal balance between finding the right property and picking the right neighborhood when there's such high competition for homes.

"I'm definitely one to challenge my clients to think differently," said Tia Whitaker, an agent with Domain Real Estate Group. "I urge them to purchase strategically. The closer you are to Center City, the better to buy. That's where we're seeing our trend of how the real estate market is going. The closer you are to downtown, the more quickly you can you get there, the better it is to buy."

Most of Whitaker's first-time home buyer clients are Black, she said. When they talk about where they would like to start searching for a home, they often are interested in looking at neighborhoods outside of where they currently live, sometimes mentioning crime and safety as concerns. This contrasts a bit with the Philly First Home data on moves that were largely made within or near the neighborhoods where grant recipients had been renting. 

"They are looking for areas where they feel they can be a little bit more stable and comfortable," Whitaker said of her clients.

The most popular areas among Whitaker's home buyers include Mount Airy, Roxborough, Wynnefield, Overbrook, parts of South Philadelphia, and to a lesser extent, Northeast Philadelphia.

Certain neighborhoods that were long associated with cheaper homes also have seen property values increase, for various reasons. Whitaker grew up in North Philly and pointed to the 19121 ZIP code, which covers Brewerytown and Strawberry Mansion. These neighborhoods now exist unevenly between gentrification and distress, making them a complicated proposition for first-time buyers.

"You could buy a house there 20 years ago for $5,000 – at most," Whitaker said. "To purchase a property today in 19121, it's ranging anywhere between about $250,000 and $450,000. That's depending on new construction, rehab, etc. We see these changes in a lot of our neighborhoods. With the low inventory, buyers may get pre-approved for a mortgage, but they also have to look outside their neighborhood because the prices have gone up for what they want in a home and community."

There is a push among fair housing advocates to create more opportunities for people of color to integrate in neighborhoods where the private market prices them out of homes, whether they are rentals or places to own. At the most radical end of the reform spectrum, fair housing proponents contend that an affordable home should be a guaranteed basic right rather than a commodity subject to market fluctuations.

Squires said the issue touches on a longstanding and heated debate even among progressives, who consider racial mobility in the housing market an important goal.

"Some fair housing advocates are adamant that things, like Section 8 and housing choice vouchers, continue to be concentrated in all Black neighborhoods, perpetuating racial segregation, when jurisdictions should be making a greater effort to provide those vouchers to families that are moving into whiter neighborhoods," Squires said. "Others believe that what we need to do is just provide more vouchers and housing opportunities for people regardless of where they want to live – and that people have the right to stay put in neighborhoods if they want, with the expectation that schools and streets will be safe, and jobs and amenities will be there. In other words, that the mobility thrust of many fair housing advocates is well-intentioned, but misplaced."

The middle ground some reformists suggest is to recognize that people understandably look for homes in neighborhoods that they know and understand, where they have histories. Chipping away at the cycle of segregation should instead come in the form of education that empowers choice.

"The argument is that part of the policy goal should be to provide counseling to help show people neighborhoods that they may not be as familiar with, so that they choose among a broader range of housing options," Squires said. "By having that kind of knowledge, advice and support, more people will make pro-integration moves."

In its current format, the primary objective of home ownership counseling is to help buyers make necessary cost assessments for obtaining mortgages and managing expenses.

The most immediate benefit to low- and middle-income buyers may be that counseling can connect them with the best grant opportunities available to save money at any given time.

In addition to Philly First Home, many of Whitaker's clients use other grant programs for first-time home buyers, such as First Front Door and the Pennsylvania Housing Finance Agency's K-FIT and Keystone Advantage programs. Bank of America, Wells Fargo and other large banks periodically run grant programs in select U.S. markets, too.

Neighborhood LIFT, a recurring program from Wells Fargo, has offered down payment assistance up to $15,000 to hundreds of Philadelphia home buyers in the last decade. The program's past rounds have focused on qualified low- to moderate-income buyers, about half of them Black or Hispanic, who obtained grant approval from Wells Fargo's partnering lenders.

The Neighborhood LIFT program is not expected to return to Philadelphia in 2022, a Wells Fargo spokesperson said, but likely will in future years. First-time home buyers in Philadelphia can still get counseling funded by Wells Fargo's philanthropic arm.

Informed home buyers always will have a leg up simply by seeking counseling, but the larger challenges of the housing market go beyond what any down-payment assistance program can scale to address.

The return of Philly First home will create thousands of new homeowners in Philadelphia in the coming years. The city believes this represents substantive progress not just in finite terms, but in the model of choice it advances.

"People want to live where they want to live," said Davis, with the Philadelphia Department of Planning and Development. "What makes Philly First Home great is that it doesn't push people to live on a certain block or development. If you get approved for a mortgage, you can live wherever you want. Often times in city government, we have to be responsible in following restrictions with federal funding. Philly First Home gives people the freedom to choose."

Ferreira, the Penn professor, acknowledged the value Philly First Home will have for the families it helps in the coming years, but is skeptical about its overall impact when comparing the program's cost to the number of people it can benefit and the glaring supply shortage that needs to be prioritized.

"The best plan for neighborhoods would be to grow, to expand, to bring more people in," Ferreira said. "There is a direct and straightforward way of doing that through policy, and that is allowing and incentivizing a lot more construction in all of these neighborhoods. As you have a bigger supply of homes, the prices of those homes are going to be cheaper and it's going to be easier for everyone to buy and rent. This can be done without increasing cost of living and displacing too many residents. In fact, it should help local residents stay."

Incomes and rising rents keep homeownership out of reach

Evaluating the success of the city's first-time home-buyer program depends on considerations beyond the program's obvious purpose of helping people achieve home ownership. On balance, it is a relatively small intervention in a city that faces present and future affordability challenges for renters and homeowners, who are affected disproportionately based on race and class.

Out of 601,000 total households in Philly, about 53% own their properties and 47% rent.

The proportion of renters in Philadelphia has steadily risen since the turn of the century, a trend that's consistent with other large U.S. cities. Between 2000-2017, Philadelphia lost more than 100,000 homeowners – an 11% decline – and gained more than 157,000 renters – a 30% increase – according to U.S. Census data.

Factors influencing this shift may include construction of more rental units compared to single- and multi-family homes, the changing age demographics of cities and overall population and socioeconomic trends. Philadelphia's population declined during the second half of the 20th century, dropping from a peak of about 2 million in 1950, and has recovered modestly in the last two decades to just more than 1.6 million today.

Some cities similar in population to Philadelphia – such as Dallas, San Diego and San Antonio – experienced growth in owner-occupied and renter-occupied homes between 2000-2017. Others including Baltimore, Memphis and Akron followed a path similar to Philadelphia's, experiencing stark declines in owner-occupied homes as renter-occupied properties increased.

At Reinvestment Fund, some of Goldstein's projects have involved interviewing aspirational first-time home buyers, including people who have purchased in Philadelphia and received grants from Philly First Home.

"Universally, they said that this $10,000 – or up to $10,000 – was the difference between being a buyer and not," Goldstein said. "Without it, they'd still be renting. If the goal of the program was to position people to obtain home ownership, this did it. And it did effectively."

The importance of looking at rental markets to understand trends in home ownership is obvious, since an aspirational homeowner is most often a current renter.

In a city where 43.6% of residents are Black and 15.2% are Hispanic, racial disparities between renters and homeowners have a major impact on the composition of Philadelphia's housing market as a whole.

The table below shows home ownership rates among white, Black and Hispanic residents in Philadelphia based on statistics from five-year samples from the American Communities Survey between 2015-2019. The U.S. Census bureau has warned that its one-year sample from 2020 is unreliable due to data collection issues during the pandemic. 

The second table shows the median household income in Philadelphia among white, Black and Hispanic residents.

Sizable disparities exist in homeownership rates and income levels in Philadelphia, meaning rising rents and home prices are more of a burden on minorities who are getting squeezed by both markets. Out of the 30 largest cities in the U.S., Philadelphia's median household income ranks 28th, ahead of only Memphis and Detroit.

"With the price rises, we're really lopping off large sectors of the market at this point, and differentially so for people of color than for white people just because the incomes are lower," Goldstein said.

In the Philadelphia metro area, which includes Camden and Wilmington, the median rent for a one-bedroom apartment reached $1,679 in February, a 6.1% increase over the previous year. A two-bedroom apartment rose to approximately $1,950, an annual increase of nearly 5.5%, according to data from Realtor.com.

There are certainly better deals to be found on rental properties in areas scattered throughout Philadelphia neighborhoods, although anecdotal reports from apartment hunters and tenants who have recently renewed leases reflect greater-than-usual rent increases in 2022.  

Data from Apartment List, an online marketplace for rental listings, reported median rents in Philadelphia at $1,097 for a one-bedroom and $1,272 for a two bedroom at the end of March. Year-over-year rent growth of 11.2% in Philadelphia ranked 77th among the nation's 100 largest cities, while rents in Philadelphia are up 6.8% since the start of the pandemic in March 2020. Apartment List's methodology was revised this year to better account for luxury bias and has switched to using transacted rent prices instead of list prices in order to calculate estimates of rental rate growth.

Philadelphia's rent still pales in comparison to places like New York, Boston and Washington, D.C., but the effects of rental prices on residents are relative to the demographics of each city. All marginal increases in rent fundamentally erode savings that are needed to become a home owner, if that's a personal or family goal. 

Without the money required for down payment and closing costs, some renters who wish to buy will remain stuck in their current situations even if a mortgage would cost them less than they pay in rent on a monthly basis.

"There are a lot of renters who are sustainably paying $800-$1,200 per month. You could back into a mortgage that would allow you to sustain the same range," Goldstein said. "It's enough to get you into the lower half of home prices in Philadelphia. This is why a grant program like Philly First Home is so important. If that's as much as you can afford, you probably don't have a lot saved in the bank to buy a home."

Research on Philadelphia's growth in recent years has shown that the majority of new jobs created in the city are low-wage positions that pay $35,000 or less, while middle-wage growth has remained essentially flat. The jobs that disappeared during the pandemic were mostly in low-wage sectors, affecting minority residents and women the most amid rising housing costs. 

"Philadelphia only has mediocre economic growth, and that is a problem," Ferreira said. "But even mediocre growth can lead to high house prices and rents if we do not radically increase housing supply."

To outsiders from bigger, higher-growth cities, the cost of housing in Philadelphia appears both affordable and inviting by comparison. It's one of the reasons the city has become so attractive to transplant remote workers, who play a role in driving up the region's real estate prices.

Still, for all of Philadelphia's cultural and historical selling points, there are serious questions about the city's overall desirability for home buyers due to its increasing violent crime, high taxes and comparatively weak employment opportunities. This may be a more troubling quandary for long-time Philadelphia renters now considering home ownership. They have been exposed to the city's acute shortcomings during the pandemic, beset by everything from late trash collection to poor conditions on public transit, safety fears and noise pollution. 

Quality of life issues aside, most Philadelphia residents are flat-out too cost-burdened to become home owners as they feel the effects of inflation and incremental rises in rent. The income problem turns what could be an affordable city to buy a home into one where scarcity keeps working families drifting out of reach of home ownership while they pay their landlords more.

"When you think about what you can get here, the average first-time home buyer's mortgage payment is ranging anywhere between $1,000-$1,500 per month," Whitaker said. "To rent a three- to four-bedroom home, you're most likely starting between $1,400-$1,700 per month. For a lot of people, it makes more sense to own if they can do it."

For people of color, that's perennially a big "if" in Philadelphia and other cities that have been long-term homes.

Mortgage lending disparities block pathways to wealth

A recent report from the National Community Reinvestment Coalition underscores how racial disparities in mortgage lending have persisted during the COVID-19 pandemic, making it harder for people of color to access conventional loans in low- to moderate-income neighborhoods where they may be able and interested in buying houses.

Almost 60% of Black home purchase applications in the United States are through federally-backed FHA, VA and RHS loan programs. For Hispanic Americans, it's about 50%.

These insured mortgages usually reduce the size of a down payment, qualify people with lower credit scores and permit higher debt-to-income and loan-to-value ratios. They are an invaluable resource for many buyers, but they come with competitive drawbacks and additional costs that drain wealth in the short- and long-term.

Home sellers sometimes are reluctant to take offers from buyers who are pre-approved for FHA loans, for example, since the program has stricter appraisal guidelines that can depress the value of a property and may require more repairs in order to complete a sale. The loans may also face administrative delays that put buyers at a disadvantage in fast-moving markets. 

Most importantly, FHA loans are often perceived to be riskier. The borrower will need to pay higher interest rates and an insurance premium for the life of the loan in order to become a home owner.

"We find, more and more, that redlining and segregation that existed throughout the late 19th century and into the 20th century has shaped a lot of these communities in ways that are still being perpetuated today," said Jason Richardson, NCRC's director of research.

One of the most notable features of the current market for mortgage lending is that nearly 70% of loans in the U.S. are now originated by non-bank lenders, as opposed to large banks that may later purchase these loans from the brokerages. The key differences occur on the regulatory and retail side of the industry.

"The banks are covered by the Community Reinvestment Act, so they're examined periodically to make sure they're not excluding Low-Moderate Income neighborhoods or people," Richardson said. "Today, nobody is looking at mortgage companies the same way, except in a few select states."

When people of color apply for conventional loans from banks and other private mortgage lenders, they are more likely than white people to have their applications denied. Banks that focus on mortgage origination are wary of FHA loans because they don't want to have to buy them back if they default, as happened during the Great Recession, Richardson explained.

If large banks avoid FHA loans, and more than half of Black and Hispanic buyers rely on these loans, then the options for these buyers become more starkly limited to mortgage brokerages that are driven by commissioned salespeople, who already dominate the mortgage space. The commission structure incentivizes seeking out the largest loans and the easiest to close, which disadvantages borrowers who are less competitive in a sellers market, or who are up against investors purchasing multiple properties.

"Sellers can pick the best offer and there's really not much you can do about that," Richardson said. "They can't discriminate for a variety of things, but they're still allowed to judge the quality of the offer based on how it will close."

An analysis by Reveal News, independently reviewed and confirmed by the Associated Press, specifically identified Philadelphia as among the worst cities for Black residents to obtain conventional mortgages, which were denied at nearly three times the rate seen among white borrowers during the two-year period of 2015-2016.

There were more than 150 lenders that made loans to buyers getting Philly First Home grants, but 13 lenders accounted for more than half of those loans. The city did not provide specific data on lenders, but it appears that a large share of the mortgages obtained by Philly First Home buyers were not conventional loans. The grant money not only made buying homes feasible for them, but likely enabled them to make more competitive offers despite the category of loans they obtained.

Below is a snapshot of the loan breakdown among a sample of 638 Philly First Home clients who were counseled by the Affordable Housing Centers of Philadelphia. Only 28% of Black participants and 39% of Hispanic participants took out conventional loans, compared to 49% of white buyers and 70% of Asian buyers.

(Note: This graphic was created by Affordable Housing Centers of Philadelphia)

Larger reviews of disparities in federal mortgage data have consistently demonstrated the barriers people of color face in obtaining conventional home loans. The lending industry evades this criticism by resisting public disclosure relating to the use of credit reports and other data that could identify discriminatory practices. The argument is that withholding this information is a matter of consumer privacy.

"The industry is relentlessly pushing to keep that private," Richardson said. "Regulators do have (that information) now, so there is that kind of security. But I think it could be safely shared, even if it was anonymized."

One of the weaknesses of emphasizing credit reports for home loans is that they historically do not include a record of rent, utility and cell phone bill payments, unless a person happens to miss these payments and they become debt. In that case, the individual's credit score will be harmed. If the same person diligently pays bills and demonstrates some measure of creditworthiness, that history may only be factored in if the individual independently reports the information to a credit bureau.

Richardson is encouraged by the credit reporting industry's growing acceptance of alternative data, such as rent history. In the years to come, he believes adoption of this data will become more mainstream among credit bureaus and government-sponsored enterprises, like Fannie Mae and Freddie Mac, which help extend capital to lenders in the housing market.

Those who might look at today's disparities and suggest that mortgage lenders serve fewer people of color in order to avoid repeating the mistakes of the sub-prime crisis are misinterpreting the causes and effects of the financial collapse.

The Great Recession that followed the housing crash threw minority communities into unemployment and foreclosure, leading to wider financial industry reforms such as the Dodd-Frank Act in 2010. Predatory lending was an exploitative means to the end of profiting from exotic loans that ultimately dispossessed people, with little to no accountability. 

"The loss of wealth that would have been gained by Black and minority households prior to that housing crisis has only been exacerbated," said Josh Devine, NCRC's director of racial economic equity. "These groups were disproportionately affected by foreclosure, which has a generational impact. In many cases, this continues to be challenging in terms of finding affordable mortgage credit programs to support these families who are looking for opportunities to buy a home."

NCRC's analysis shows that the gap in homeownership rates for Black and white families is now near its highest point in 120 years. The long-term effects of the housing crash continue to deprive people of color of the benefits they could have reaped from sustained home ownership.

"I don't think it's really well understood by a lot of folks that the years you own a home are the biggest determining factor in the wealth that you have later in life," Richardson said. "The fact that Black, Hispanic and some other groups are habitually either steered away from, discouraged or have flat-out been locked out of home purchasing means that they have less wealth overall, over time. When we get into periods like this, when interest rates go down and refinancing becomes a great option, they are disproportionately unable to take advantage of that the way other groups can."

The basic problem with mortgage education is that it's "deadly boring" for most people, Richardson added, and while mortgage tech companies with accessible digital platforms can help even the playing field for consumers, the workings of the industry are bewildering – frequently and quietly by design.

"Mortgage policy and how mortgages are provisioned is a key part of how neighborhoods function over time and how families build wealth," Richardson said. "By creating a system that is so complicated, very few people really understand it. That makes it difficult to make changes to it and get people to really care about it the way they should. I don't think it's visible to most people how big of a hand this kind of thing has in shaping their daily lives."

Real estate investors vs. home buyers

In Philadelphia, one of the cruel ironies of the housing market is that there are plenty of homes for sale that lower-income families could conceivably afford. The properties may need work and they may be in troubled neighborhoods, but they are out there.

"We have housing stock that you can buy in some areas of the city for $90,000 – which is unheard of – and you can find houses for up to $190,000," PHDC president Dave Thomas said. "Both of those are scenarios where people can probably afford that mortgage more so than the rent. There are unexpected costs that you come across as a homeowner that you don't as a renter, but when you have a $1,300 fixed mortgage, your monthly payment doesn't change unless you make changes. When you're renting, (rent payments increase) the longer you stay."

One challenge is that banks are not making enough small mortgages available, Goldstein said.

"If you want to buy a $100,000 house, maybe you need a $90,000 or $95,000 loan. There just aren't that many being made, and this becomes a challenge for people who are trying to get in at that lower price stratum," Goldstein said. "Where do they get the money? If you're someone trying to buy a $100,000 house, you don't have it in the bank. Those homes will go to investors who scarf them up and take them out of range for a more modest-income person."

When individual buyers are unable to buy properties in this low price range, those homes instead are often bought by investors, who may fix them up just to rent them out in a market that incentivizes doing so. Alternatively, renovated houses can be flipped by investors at a profit, especially during times of low supply. This drives up home values, property taxes and often rents in these neighborhoods.

A mortgage loan officer from a large national bank, who spoke to PhillyVoice but declined to be named, suggested that smaller mortgages are less common, in part, because seller assists are less common due to low home supply. With buyer demand as high as it is, sellers don't have the incentive to bend over backwards to complete a transaction. Buyers who can't make the process as smooth and as profitable as possible for sellers will lose out to other buyers who are willing and able to pay more, or who aren't as concerned about home inspections. 

When it comes to low-priced homes, investors have more flexibility to spend and fully expect to put more resources into fixing up properties that need work. Lower income buyers of these cheaper homes can hardly cover the closing costs, which are comparatively expensive in Philadelphia, and they often need other forms of assistance such as grants. 

The sellers of low-value homes likely won't want to risk getting derailed by problems that an appraisal might find when a buyer is using an FHA loan.

"Why accept that when they can just accept someone else?" the loan officer said. "It's really hurt people who don't have the money saved. The mortgage loan officer is not going to turn down a loan or say no. It's just that the buyer doesn't have the necessary capital for a competitive offer."

At Wells Fargo, Ernest Campbell is the Philadelphia market's retail mortgage manager. He argued that philanthropic investments in non-profits should be expanded and used to match pre-approved, low-income residents with homes that need renovations, giving them a choice in the designs of the homes they will purchase. He cautioned that the cheapest properties in Philadelphia – those that need expensive repairs – are difficult investments for people who already lack resources.

"Typically, when I see a house at the $90,000 price point, the first thing I think is, 'What's wrong with it?'" Campbell said. "What you don't know is the state of those homes. Will they pass an inspection? Will they meet FHA requirements? Are they inhabitable? Do they have health and safety issues? A lot of these homes need work, and you can't get conventional or FHA financing unless you're doing a renovation loan to bring the house to code."

Mortgage brokers simply stand to benefit more from working with investors in neighborhoods with cheap homes, compared to a person buying a single home. An investor who wants to buy three properties is going to yield a higher commission for the broker than a low-income, first-time buyer who's barely affording a home in the $100,000-$150,000 range, for example.

"What's the incentive for the mortgage broker to make a $100,000 loan if they could instead work the same amount of time, or less, and make a $300,000 loan to an investor, or a home owner who has a lot of equity?" said Richardson, who previously worked as a mortgage broker.

Unlike the era of subprime mortgages, the retail side of the mortgage industry is no longer courting low-income buyers with the same tenacity, in part because regulations were put in place to prevent past abuses. The flip side is that some capable and qualified buyers are not as well served.

"If a borrower wants to buy a house in Philly for $100,000 and they go seeking somebody to make the loan, they should be able to find somebody, but it's not going to be aggressively marketed to them," Richardson said.

Community development corporations – also know as CDCs – and community development financial institutions – or CDFIs – are built to make secure loans to low-income home buyers by leveraging public and private capital, but their successes are isolated because they lack the scale of large, private lenders and the financial flexibility of investors.

In big cities, cheap homes and vacant lots are a feeding frenzy for investors because they have the resources to turn these properties around quickly and generate profits.

A Washington Post analysis of 40 metro areas in the U.S. found that investors had bought almost one of every seven homes for sale in these communities last year. In the Philadelphia metro area, 15% of homes were purchased by investors in 2021, a 4% increase compared to 2015.

In the 19121 ZIP code in North Philadelphia, about 35% of the homes purchased in 2021 were sold to investors. That percentage is as much as 44% in other parts of North Philly and West Philly.

Last year, across all 40 metro areas in the U.S., investors purchased 30% of homes sold in neighborhoods where the majority of residents are Black, compared with 12% in other ZIP codes.

The data on investor activity comes from Redfin, and Philadelphia ranked just outside the nation's top 25 markets being targeted by investors.

Even so, with the rate of home-price inflation in the U.S., many investors are now buying up a growing share of mid- and high-priced homes, too. This is more of a threat to the type of buyer who may be shopping for a property in the $150,000-$250,000 range using a Philly First Home grant, versus homes that are in greater disrepair or in highly distressed areas. 

It's also an indication that a large number of Philadelphia's cheapest homes likely already have been purchased by investors during the last decade, which saw a decline in the share of homes sold under $100,000 from 46% in 2012 to 31% in 2020, according to data shared by Reinvestment Fund.

(Note: This chart was created by the Reinvestment Fund)

It would be overly reductive to lump all property investors into a single category and malign their influence on urban real estate markets, many of which badly need investments in their housing stocks.

Investors could be large institutions, such as corporations and private equity firms, small or mid-size companies, "mom and pop" landlords, or wealthy individuals. They are not all created equally and their roles in transforming neighborhoods speak to the recurring theme of an inadequate supply of homes, especially single-family properties for owner-occupancy in cities like Philadelphia. Investors may convert these properties into rentals and compound the issue, but the existing lack of homes in a given area is a core piece of what makes that particular market attractive to an investor in the first place. 

A common complaint about investors in Philadelphia is that they are perceived to do hasty work using low-cost materials that don't preserve the character and history of the city's neighborhoods. These qualitative judgments are not insignificant – community groups often exert pressure on home renovators to conform with surrounding aesthetics – but there are more vital concerns about how attentive and fair new landlords will be, how durable and well-maintained their properties will be, and what the emphasis on single-family rentals does to neighborhood rates of home ownership. 

Another blemish on investors is that some choose to buy up vacant lots and crumbling homes in poor neighborhoods just to sit on them until other investment activity increases their values. In Philadelphia, certain tax reform advocates want to see this behavior discouraged by instituting a land-value tax that would make property taxation more equitable.

During the pandemic, institutional investors often have been blamed at the national level for driving up the prices of single-family homes and competing with regular buyers, who actually want to live in them as their primary residences. 

Visceral distaste toward Wall Street speaks to longstanding public grievances about staggering inequality that extends far beyond the housing market, a particularly sensitive issue due to the lion's share it represents in the average American budget. The actual share of single-family homes owned by institutional investors in the U.S., though growing quickly and diversifying in property type, still remains fairly small in absolute terms. 

Most often, investor purchases of single-family homes are made by smaller companies and individuals seeking second homes as rentals or vacation pads. Institutional investors focus on distressed, supply-constrained areas where there are place-based tax incentives to stimulate activity. The demand for home ownership appears comparatively low in these urban areas, either because residents can't afford the homes or because the available properties are in too bad of shape.

In Philadelphia, institutional investors are most in competition with smaller home-flippers and aspiring landlords, all vying for properties in neighborhoods that are gentrifying at different paces. 

The quality of the renovated properties that become available to renters – and to buyers with little else to choose from – will vary depending on the job and the neighborhood, assuming the homes are rehabbed or built at all. 

The exact pressure that institutional investors add in today's market is their depletion of home supply precisely in parts of the United States where lower-income buyers might be on the fringe of affording home ownership. These buyers don't have the resources to compete with mega-corporations that make all-cash offers or get loans with lower interest rates to finance multiple properties using rental revenue. 

When housing supply is low, rising mortgage rates also pose a particular threat to home ownership because investors of all kinds can withstand the higher expenses, while many regular buyers must back out of the running or further limit the price ranges of homes they can afford. 

In the event that home prices start to come down this year or next in response to higher mortgage rates, it may end up fueling more investor purchases relative to other buyers with harder financial constraints. 

The notion that investor-bought properties might create more affordable neighborhood rentals is often belied by the investors' transparent motivation to buy in places where they know they'll be able to jack up rents. Invitation Homes, for example, one of the nation's largest owners of single-family rentals, openly tells its investors that it operates in markets with "high rent-growth potential" and low expectation of new home supply, with a heavy presence in the Atlanta metropolitan area. 

Inherently, any shortage of home inventory makes real estate a compelling investment strategy for speculators.

The ways in which property investors distort prices in hot and distressed markets are still being studied, and because housing markets are cyclical, there also is a belief that investors can play an economically important role in setting a permanent floor of demand in the the event of a downturn. That's what happened when investors bought up foreclosed homes during the Great Recession, followed by a decade of curtailed new home construction that underlies today's predicament. 

The core issue for aspiring home owners today is that so many investment properties become single-family rentals. The best-case scenario is that this may help deliver enough supply to create affordability for a critical market of renters. The worst-case scenario is high levels of neighborhood displacement. 

Until home inventory for owner-occupancy rises, the present trajectory will greatly limit the most important pathway people have to financial equity and long-term wealth. 

"While investors always have a role in any community, when they crowd out owner-occupants, which we hear from many sources, there is an imbalance in the market," Richardson said.

Weighing financial risks and benefits of neighborhoods

First-time home buyers intrigued by single-family properties in neighborhoods that are targeted by investors may need to weigh more risks than they would in Philadelphia's less volatile middle neighborhoods.

If a buyer in Brewerytown lines up a Philly First Home grant, for example, they're possibly betting on staying in that home for 15 years to cover the period of the city's lien on the property. The increased values of nearby homes that are renovated by investors will raise property taxes, accruing a cost beyond the mortgage that will be hard to absorb if a home owner's income does not increase proportionately.

Depending on how much work this hypothetical buyer puts in to the home – assuming some is needed – the home's value should also increase with those around it and the owner will be free to sell at any time. The owner may even be able to do so at a margin much greater than the cost of paying back the grant amount, before 15 years have elapsed.

Of course, not everybody wants to buy a home with the primary consideration of selling it, a point that sounds more obvious than it is in today's exuberant, investment-driven market. Most aspiring first-time home buyers, the people now having the hardest time buying houses, just want comfortable places to live and raise families as they build equity, first and foremost. 

For those wary of future tax increases, Philadelphia has relief programs such as the homestead exemption, LOOP and a mechanism to appeal a high property-tax assessment, which could possibly rectify an unreasonable jump in cost. There's no guarantee the city makes a requested adjustment, however. (This is an issue that will soon come roaring back in Philadelphia as the city prepares to release its first property value reassessments in two years, ending a hiatus that covered a period of sharp home price growth). 

At PHDC, Jamila Davis said she believes all home owners in Philadelphia can and should be prepared to avail themselves of city resources. Sometimes, getting help is as simple as making a phone call or filling out a form, although the pandemic has, at times, affected the speed of responses.

Highlighting the greater disadvantages that Philadelphians of color face is essential to driving reform, Davis said. Big picture concerns about housing and neighborhood preservation will need to be addressed with a more comprehensive view of the city's demographics and expectations. 

"People of color can adapt to normal trends in real estate and life," Davis said. "As an African-American woman, I think it's sometimes a dangerous conversation we're having nationally to think that minorities can't or won't. Our programs are supposed to serve every single person. Yes, there are certain groups who are important to serve for various reasons, but the reality is that every Philadelphian deserves quality housing. Every Philadelphian deserves to be safe. Every Philadelphian deserves good neighborhoods."

The city's aspiring first-time home buyers, neighbors who will stay and shape Philadelphia's future, now face a housing crisis that leaves them with difficult choices about how and where to sink their resources. 

For determined buyers who don't have much in savings – even with the help of a grant – Wells Fargo's Campbell said it may not be worth it to stretch to put 20% down just to avoid paying private mortgage insurance in the short-term while building equity. The insurance can be removed from the mortgage once 20% equity is reached. 

"I'd rather see folks take advantage of some of the lower down-payment options and have more money in reserve, versus trying to get that 20% threshold," Campbell said. "While you may avoid the PMI, I'd rather you have $10,000 in the bank."

Campbell also suggested first-time buyers consider looking at income-producing properties, like duplexes, since anything containing four units or less is still considered residential and could be treated as a primary residence, as long as the buyer lives there. This might allow for a lower down payment than a typical investment property and would offer an owner the ability to generate revenue.

"Meet with a loan officer before you meet with your real estate agent," Campbell offered as a general rule for buyers. "This way, you can get pre-approved and know exactly what you can spend, what your limits are and what your cost-savings are going to be."

With such high competition for homes, an argument could be made that seeking properties below the median price is a smart strategy for some buyers. They might be able to gain more concessions from sellers for work that needs to be done, and there may be less pressure on these buyers to cave to some of the competitive madness that drives up home prices. This is especially important when competition inhibits people from looking closely at homes and evaluating their true conditions, which happens when multiple bidders spring to make offers. 

The ZIP code level data from the first round of Philly First Home grants includes a relatively low number of purchases made in many parts of South Philadelphia, for example. These ZIP codes have their share of high-priced homes, but plenty of properties also are listed for sale below the city median, or not too far above it, and could represent great value for first-time buyers. 

Competitive pressure on prices and mortgage affordability means that many first-time buyers will need to factor their disadvantages into a home search strategy. Other buyers who already own homes may be able to tap into home equity to make cash offers and escalate bidding on highly sought properties, often in rapid timeframes.

Goldstein reiterated that the safest bets for first-time buyers tend to be homes in Philadelphia's middle neighborhoods. They may not be the destinations and residential oases that places like Northern Liberties, East Passyunk and Fairmount have become, but they're reliable parts of the city where people can lay foundations. 

"These are not neighborhoods where you're seeing price changes of 20-30% in a year," Goldstein said. "You might see 5-7% changes in a year, in either direction. They just keep clocking along."

Every real estate strategy under the sun comes with the caution that others who are out there shopping will try to do the same things, or may adjust to the market in ways that have a ripple effect. Buyers who aren't finding luck looking for homes at their true budgets, for example, often lower their price ranges and are then able to offer the best bids on properties priced at the limit of affordability for others. 

Campbell sympathizes with the struggles of home buyers these days. He's been in the mortgage industry for 22 years and has never seen anything quite like the current market.

"It's just ridiculous. Homes with 28 offers on them and people waiving appraisal contingencies. Buyers willing to pay $100,000 above asking price," Campbell said. "You find it more in high-end places, but I think it's creeping its way more into middle America, as well. That happens more in greater Philadelphia, but there are examples in the city, too. A house is worth what someone's willing to pay. The marketplace, the mortgage can't control that. We're just here to offer financing."

It's difficult to predict how thousands of Philly First Home buyers will fare over the next decade or so, for better and for worse. The data the city keeps on outcomes is limited for a program that's still in its infancy, but Thomas said PHDC may look into having more follow-up contact with grant recipients in the future. 

The city does not expect that all of the people who buy homes with these grants will remain in them long-term, but the hope is that many buyers will. 

"It is difficult to keep people stuck in a situation. Incomes change. Jobs change. People have to relocate for reasons that are beyond their control," Thomas said. "It could be a situation where a house appreciates and the buyer wants to cash out. All scenarios are possible. We haven't seen it often yet that people cash out due to appreciation, but we do see where people are being relocated for jobs or other things."

The complication of just building more homes and apartments

If all roads to fostering home ownership in Philadelphia inevitably lead to an expansion of supply, the strategies chosen by Philadelphia's leaders in government and business necessarily rest on some consensus about how and where to ramp up housing construction.

Next to crime and law enforcement, issues surrounding real estate development are the most contentious matters of debate in Philadelphia. They strike at the root of competing interests on the block level and rise to disagreements over a larger policy direction that will result in the best possible mix of neighborhood harmony, equity and economic feasibility.

A recent housing report by the non-profit Center City District underscores that the vast majority of home construction in Philadelphia is concentrated in the neighborhoods in and around Center City, where population has grown 38% in the last decade – the highest rate in the metro area.

Greater Center City and its adjacent neighborhoods, which comprise just 16% of the city's land area, accounted for 62% of the total 6,421 new housing units completed in 2021. Other neighborhoods may not be growing as quickly because the demand and flow of capital are not there, land opportunities aren't there or because existing community members lobby against new housing.

The bulk of Philadelphia's new construction is oriented around the employment, education and transportation hubs of Center City and University City, places that lend themselves more to rental construction and a small number of condominiums rather than single-family, owner-occupied row homes.

In the neighborhoods surrounding these hubs, the economics also skew predominantly toward multifamily rental construction. This includes duplexes and triplexes on single lots that might have been well-suited for owner-occupied homes.

"Single-family deals are not penciling out the way they did seven, eight years ago, when you saw a lot of row home construction," said Mo Rushdy, vice president of the Building Industry Association of Philadelphia and managing partner of the River Wards Group, a private developer. "Land prices have gone up to where you need density for them to work. Most developers are doing multifamily."

Part of the rationale for multifamily construction is that there is a growing, younger, mobile population in Philadelphia that creates constant demand for rental units. Developers see more sense in owning market rate properties on these expensive lots, which they reason will increase in value over time. They also tend to obtain financing more readily to build multifamily projects and high-priced condos with better returns on investment. 

Rental construction is a great thing, provided that it's not all luxury and enough of it serves the immediate housing needs of low- and middle-income residents. Urbanists often push for vertical, transit-oriented, multifamily development projects that add residential density because the model supports sustainability, public transit and smart neighborhood design while increasing supply to keep rents in check. 

The problem lies in building too much of one thing and not enough of the other, especially when home prices threaten to put home ownership out of reach for too many working Philadelphians.

"It's important to help both sides of the market. The more supply you have on both sides, the more affordability you have for everyone," said Wharton's Fernando Ferreira. "The main goal of adding home supply is to provide more options, more units for current and future local residents. We have lots of high school students, college students graduating who need a place to rent and young families who need places to buy. If certain neighborhoods are not affordable anymore, it means we absolutely have a supply problem in these locations."

When builders are not keen on using private land for single-family homes, that leaves a development vacuum to be filled for aspiring home owners in the aggregate. 

From the 1990's up to the Great Recession, a major impetus driving home ownership for low- and middle-income families was federal funding that allowed cities, like Philadelphia, to plan and build subsidized revitalization projects. These developments would often be built in partnership with local CDCs, non-profits and even private developers that worked together with residents to specially design housing for income-qualified owner-occupancy.

Prominent examples of this model in the city include the Cecil B. Moore Homes in North Philadelphia and the Pradera Homes in West Kensington. The goals of these renewal projects were to repurpose vacant and blighted land by creating stable housing, which in turn spurs new affordable rentals and business development along these corridors that reflects the character of the people who live there. 

The Pradera Homes, for example, were built in the 1990s on land formerly owned by the Philadelphia Housing Authority, which holds a large number of vacant lots in the city. PHA recently recommitted to partnering with non-profits to develop more of this vacant land in the same areas of North Philly, and has made other land concessions in the aftermath of the 2020 homeless encampments in Center City, whose protests demanded community-led housing development for extreme low-income residents.

Financing large public housing projects like these has become much harder for cities today because there isn't nearly as much federal funding to support building communities for low- and middle-income home owners. In fact, this is one of the main reasons that Philadelphia decided to shift toward offering large grants for first-time home buyers, greatly expanding what began as a tiny down payment assistance program 20 years ago.

"In the past, we used to do a lot of construction, and we used to build a lot of affordable housing," PHDC president Dave Thomas said. "We'd spend 10 times what a Philly First Home grant costs to build affordable housing to get just one person owning a home. Now, we can get 10 people into homes for that same dollar amount. There was some thought behind what we were trying to do. Rather than having to rebuild housing to serve that population, it's a lot easier for them to go into a property that's already on the market, doesn't require a lot of subsidy to build and you still address that same population."

For all of its strengths, one thing Philly First Home cannot do is increase the city's supply of homes.

The Neighborhood Preservation Initiative covers an array of housing and community development goals, not least of which is resolving more than 10,000 tangled titles that stand in the way of rightful home ownership at existing properties. This alone could help uplift residents with more than $1.1 billion in tied-up family wealth. 

Likewise, funding for home repair programs represents a smaller-scale intervention to rehab properties that need work and keep families living in them. The community-wide benefits of such fixes have been proven to reduce violent crime on city blocks where homes are improved. 

All of the NPI's various programs hold the promise of addressing chronic problems that plague people and neighborhoods, but the actual expansion of home supply continues to be a source of dispute and indecision in Philadelphia. 

The reason for this boils down to how we define "affordable housing" and "neighborhood preservation."

Philadelphia's Housing Action Plan estimates the city should create between 30,000 and 40,000 new affordable housing units by 2030 to address the various needs of the population. That's an ambitious number that includes all types of housing.

"There are levels of housing insecurity and how it's measured, so the total number is less the issue than pooling together different tools to make the housing that we need," said PHDC's Jamila Davis. "Some should be home ownership, some should be rental, some should be transitional."

To get to this goal, all stakeholders need to think about the city's distinct housing challenges and what kinds of community buy-in it will take to make these projects happen at an impactful level. 

The economics of single-family home construction create a particular challenge that sometimes gets lost in the political conversation about housing justice, since it's reflexively seen as catering to a higher plane of wealth and affordability than the needs of those who are destitute, rather than furnishing a powerful generator of wealth.

"The issue of need is often portrayed falsely in terms of building more rentals. Not everyone wants or needs to rent. They want to buy a home," Davis said. "Then there are people who are homeless. You have a spectrum of people who have mental, emotional and addiction issues all the way up to wanting to buy a first home. It's weird to lump all of those people together. The picture that gets painted is often narrow and it has one narrative that is not really reflective of all of the housing complexities that Philadelphians find themselves in."

Is redeveloping Philly's vacant lots a solution?

The Building Industry Association of Philadelphia, an organization with more than 330 members, broke ranks with other local trade groups in late 2020 to support City Council's passage of a 1% construction tax.  

In doing so, BIA committed to Philadelphia's affordable housing goals by supporting a revenue stream that will back the bonds of the Neighborhood Preservation Initiative.

The 1% construction tax on residential development was passed alongside a reduction in Philadelphia's 10-year-tax abatement, a policy that has given developers and home renovators breaks as a means of stimulating new construction for more then 20 years, mostly on higher-end projects. The revised abatement now incrementally phases in property taxes for owners of new or improved homes over a 10-year period, instead of giving them a decade-long tax holiday. 

Critics of the abatement have argued that it encourages gentrification, chokes school funding revenue and inequitably favors wealthy owners of new homes. Meanwhile, the owners of nearby older homes resent that their property tax bills rise due to home-value inflation from the new and renovated homes around them, especially those that appear out of place and cheaply built for what they cost to buy. 

Each and every policy involving real estate development and taxation in Philadelphia neighborhoods could merit a lengthy examination of its own. 

City Council members downzoning neighborhoods to limit residential density in their districts, for example, is a major issue playing out in hyperlocal battles between residents who want the city to build more housing and those who don't want busy developers changing their neighborhoods.

The point of mentioning these lightning rods in community politics is simply to point out that every approach to the creation of new affordable housing will need to confront the willingness of self-interested parties to reach timely compromises in the years ahead. 

As chair of BIA's affordable housing committee, Rushdy has spent the last two years trying to broker win-wins for Philadelphia's development future.

"If you look at the number of affordable units you need on a yearly basis, the only way you're going to achieve scale and the only way you're going to resolve the issue is through the private sector. That's not just developers. It's the banks that fund these projects," Rushdy said. "The whole world can dance around how to get there. The private sector has to do it. It doesn't mean that others have to be excluded. It means that this is where everyone has to put their heads together to solve that issue. Non-profits have a role. Community land trusts have a role. The private sector has a role. Everyone does."

Rushdy's portfolio of developments under the River Wards Group umbrella includes a pair of workforce housing projects built on public land for single-family home ownership in Francisville and Port Richmond. Both projects were secured through a competitive RFP process and resulted in mostly three-bedroom, two-bathroom homes, which sold in the range of $230,000. Families who bought these properties qualified for them by meeting an income threshold of around $50,000-$60,000 annually, in addition to ticking off other application requirements.

That income range is still higher than the area median income percentages which some members of City Council believe new affordable homes should be built to prioritize in Philadelphia.

"In my opinion, housing for this moderate group is much-needed, and it's a whole segment of people who are not finding clean, new-construction, single-family housing," Rushdy said.

Both of Rushdy's workforce projects were done quickly and in a scaleable way. The developer still made a profit on them as part of a portfolio that includes market rate and luxury properties elsewhere in the city. 

Most importantly, though, the people who now live in those workforce houses were able to become home owners on modest incomes.

"That's what the private sector can do in terms of affordability," Rushdy said. "They can make these deals happen without any subsidy – no state, no city, no federal – and then can get the financing for it fast. The city has the single most important resource that can act as a subsidy, even though it's not a direct subsidy, that basically can resolve this issue – and that is public land."

The idea of using of public land for affordable, single-family home construction is avowedly a big piece of the city's end-game for disposing of the thousands of mostly vacant lots it owns. The issue is that it's not yet happening very much in a city that needs thousands of new homes. 

The creation of the Philadelphia Land Bank, a massive overhaul of the city's previous labyrinthine land-sale system, was meant to streamline the disposition process for about 6,500 lots split between the land bank, the Philadelphia Redevelopment Authority and other parcels owned by the city. These lots vary in size and are mostly scattered properties in different parts of the city. Their locations and other details can be viewed using the city's interactive map of public parcels.

Thousands of additional vacant lots also are owned by the Philadelphia Housing Authority, which has its own disposition policies, and another several thousand lots exist in a purgatorial state of ownership stemming from the city's disastrous 1997 securitization of tax liens sold to US Bank.

There is a wealth of public land in Philadelphia that can be made available for a variety of uses, from affordable home construction to community gardens, open space, side yards, business expansion and other public goods.

In practice, disposing of the city's public land is a slow process that requires multiple levels of vetting and approval. 

The screening requirements for land bank applicants vary depending on the project type, but all applicants must be up to date on paying their taxes, must be in good standing on their utility bills, and must be free of outstanding code violations or judgments against them. 

Certain land bank lots are available through a competitive RFP process, while others can be acquired non-competitively as long as an applicant's proposal is deemed up to standard by the city and local stakeholders, including neighborhood groups. 

The vast majority of land bank applications get rejected simply because they are incomplete or unqualified based on the requirements of the legislation. Those that do meet the city's basic thresholds are now scored using a "social impact" rubric, which covers everything from housing affordability to job creation and quality of life factors, and the lank bank then has 120 days to decide whether or not to move forward with a project.

The key and final step for proposed projects is meeting a state requirement that all sales transferring these public properties be approved by City Council within 60 days, or else the application is retired.

If Philadelphia's stated goal is to create a few thousand new affordable homes every year, the path to reaching that number is hindered by the arduous process it takes to get projects underway. 

Many of the land bank's requirements are reasonable considerations for publicly-owned properties, especially green spaces that communities use and care about, but the grinding pace of decision-making and transactions is becoming more apparent to all parties involved.

The city's major hang ups center on who should get first crack at all of this public land,  how much should be disposed competitively versus non-competitively, and what protections are needed to prevent the misuse of finite community resources.  

In the case of affordable housing, City Council and the lank bank have been acutely focused on construction proposals that can deliver AMI ranges low enough to accurately reflect the incomes of area residents. 

"What I try to explain to people is that it's a high threshold because it's everybody's asset," said Angel Rodriguez, executive director of the Philadelphia Land Bank, which is a non-profit that's part of PHDC. "We have to make sure that we're conveying the property to the appropriate person and we also have to measure that disposition with the competing interests of the Housing Action Plan and the Land Bank Strategic Plan, which includes uses other than affordable home construction."

Rodriguez stressed that the land bank is bound to the disposition policy set by City Council, which attempts to uphold equity goals and the core involvement of community members to pinpoint optimal AMI thresholds for affordable housing projects.

Like virtually every other matter involving Philadelphia City Council, land bank sales are subject to councilmanic prerogative – the deference given to council members to decide on community affairs within their own districts. Sometimes, this is abused for seemingly arbitrary and corrupt purposes. The federal trial of Second District Councilman Kenyatta Johnson and his wife, Dawn Chavous, has ties to the sale of land for affordable single-family homes in South Philadelphia that never came to fruition. 

Residents, too, are not above helping developers break their affordable housing promises in order to make a buck. 

City Council tried a version of the public land model that Rushdy is proposing with a 2014 program aimed at building workforce housing for people in professions like nursing, law enforcement and education. An NBC10 investigation into the outcome of that program found that the majority of homes that were built didn't go to working class residents in those neighborhoods, and some of the people who bought the homes violated their deed restrictions by renting them out, unbeknownst to PHDC. 

Political pillaging, land-flipping and plain dishonesty have long been pitfalls of the disposition process in Philadelphia. The exploitation of this system is what necessitated the land bank reforms in the first place. They were crafted with the intent to erect better safeguards, but this has come at the expense of greater volume in the transfer of lots. A backlog of demand has consequently built up and progress has been hamstrung by a gradual refinement of the rules in ways that are ostensibly meant to favor community-oriented development. 

In one land bank policy formulated in 2017, for example, only non-profits were able to suggest a non-competitive affordable housing development, whereas private developers were bound to the stricter RFP process. 

That policy was revised in January 2020 to allow for-profit developers to also propose mixed-income developments, non-competitively, as long as 51% of the planned construction on their approved lots yields affordable housing. The legislation says the other 49% can be market rate construction.

This change was tacitly an admission of the scale problem at hand to reach the objectives of the Housing Action Plan, and yet land disposition still has not occurred at a significant level during the pandemic.

Rushdy has testified before council and campaigned for more action to dispose land bank lots to private developers using the updated policy, but so far has been met with inaction by the city's elected leaders. 

"Why is this not coming together?" Rushdy asked. "The simple answer is City Council does not want to and is reluctant to dispose and to implement the legislation that passed two years ago. We are the only practitioner that can do this in scale, and the solution is in their hands. The reason they're not doing it is because there is this barrier of disposing public land to private developers, because it's bad optics. If you wait for the land to be disposed through the competitive RFP process, that's a trickle. You're trying to fill a bucket with a faucet that is giving you drops."

How the need for affordable housing is defined in Philadelphia

The use of public land isn't the only choice the city has to spur construction of affordable homes, but it may be one of the few options that will address the needs of aspiring home owners.

Other policy levers that the city pulls tend to focus more narrowly on affordable rental construction. 

The city's Mixed-Income Housing Bonus, passed in 2018, introduced a voluntary form of inclusionary zoning that allows private developers to build taller structures with more rental units in them than would otherwise be permitted under zoning regulations. The condition for developers is that they must either incorporate affordable units into these projects or pay into the city's Housing Trust Fund, thereby supporting other affordable housing initiatives in Philadelphia.

The vast majority of developers opted to make payments – more than $20 million since 2019 – instead of building affordable units on site.

In recent months, City Council has strengthened the program in ways that add new bonus contingencies for developers. In parts of West and North Philadelphia, where market pressures have left residents vulnerable to displacement, a percentage of affordable units will soon become mandatory for multifamily rental projects. The changes are meant to foster integrated communities by ensuring that more price-restricted affordable homes make it into rental projects in neighborhoods where property values are rising.

"The continued growth of our city is important, but it's unacceptable if it comes at the detriment of vulnerable Philadelphians," said Third District Councilmember Jamie Gauthier, who represents West Philly. She and Seventh District Councilwoman María Quiñones Sánchez co-sponsored the mandatory overlay bill. "With many developers prioritizing profits, regardless of the social repercussions, the best way for us to ensure that affordable housing options remain available in desirable neighborhoods over the long-term is to enact policy change."

Gains from the new overlay, which will take effect this coming summer, should increase affordable units in these areas and may indirectly help soften the market for home buyers. The change will not address the city's shortage of single-family homes, which appears less dire next to the plight of low-income residents.

The risk with inclusionary zoning policy is that developers who do build affordable units on-site – mandatory or otherwise – will shift the cost burden to the market rate portions of their rental projects. Some developers will choose not to build in these areas at all.

Rushdy posed a hypothetical situation where a developer is building in Kensington and will allot 20% of the project's units for households earning 40% AMI. 

"To make the deal work, the developer will raise the rents on the other 80% of units," Rushdy argued. "What you do is contribute to a huge inflation in the market rate numbers."

Cost-conscious renters might judge that these higher-priced units aren't worth it to them in a city where violent crime rates already scare people away from parts of Kensington and other neighborhoods, if not from Philadelphia as a whole. That's to say nothing of paying a premium to live in these parts of the city, even if many of them are close-knit, rebounding communities that get a bad name.

"You have to look at the demographics of the city that we're building in. This is Philadelphia," Rushdy said. "The developer doesn't have a depth-of-income-market to go put a building in Kensington and rent an 850-square-foot, two-bedroom, two-bathroom apartment at $2,200, when it should be $1,700. You're going to pay that higher number in Northern Liberties. Am I going to have you cross the Conrail lines in Kensington and tell you to come pay $2,200 for a lousy, small apartment? Really? No, you're going to say, 'I'm not doing that.'"

The Building Industry Association of Philadelphia supported council's 1% construction tax because its members realized that solutions to affordable housing ultimately should make it easier for them to structure better market rate deals, preferably with fewer zoning restrictions in the future. 

A growing emphasis on home ownership opportunities for low- and middle-income families is one of those solutions, a tangible step that could help create an economic base for a segment of Philadelphia residents who are confined to renting their earnings away.

"We believe the affordable housing crisis is a crisis, and we should be there to help," Rushdy said. "The crisis exists, but it's man-made. It's a manufactured crisis. We have an implementable plan. Public land. Single-family homes. Home ownership on these infills. We have applications already in the land bank for affordable housing. It's not theory or ideology."

Rodriguez, executive director of the Philadelphia Land Bank, explained that the tension over disposing properties to private developers stems partly from a sharp increase in Philadelphia's AMI that only became apparent after the enactment of the 2020 policy. The new disposition policy was based on AMI numbers far below the median income figures released a few months later by HUD, which factors in the higher incomes of the entire metro area.

"When we saw the income levels jump from $75,000 for a family of four to about $95,000, that's a big change," Rodriguez said. "When you talk about 120% of AMI, you're talking about a household income of $116,000. Nobody thinks that's an income for 'affordable' housing. Who are you building those houses for?"

In today's market, for a buyer at 120% AMI, a new house in Philadelphia might actually be very appealing compared to the prices and competition in some suburbs. Money saved from the property tax abatement might cancel out what that buyer will owe from the high city wage tax, relative to the costs of owning a suburban home, at least while the abatement lasts for a decade. This isn't the answer Rodriguez is looking for, but it's not for nothing in a market whose home scarcity severely pressures people with solid incomes, too. 

BIA's position is that developers can price a mix of single-family homes mostly between 60% and 120% of AMI on 51% of the Philadelphia Land Bank lots they receive – the affordable portion. On the other 49% of the lots a developer acquires from the land bank – the market rate portion – a combination of single-family homes and smaller multifamily projects would enable the builders to make the total package work out financially, on balance.

How low an AMI threshold can be set for a given affordable project would depend on the market in the neighborhood where the lot is located. Many of the city's vacant lots are nearby one another, and Rushdy believes neighbors with mixed incomes are important to the composition of a community and its local businesses. 

To reach a lower-income tier of residents, the city could tap into a portion of its Neighborhood Preservation Initiative dollars to help further buy down the AMIs on some of the affordable homes, enabling certain privately developed projects to be priced between 30% and 60% of AMI. That would make some homes attainable for families earning anywhere from about $28,000-$47,000 per year.

Going much lower than this would require larger subsidies or would leave the target buyers on the fringe of even obtaining a mortgage, which speaks as much to Philadelphia's egregious income problem as it does to the developers' bottom lines.

"The private sector is leveraging itself with its guarantees to get these construction loans done to build affordable housing, so what's the problem?" Rushdy asked. "You've got the developers to build it. You've got public land worth billions of dollars. You've got the tools to lower AMIs through the Neighborhood Preservation Initiative. And you've got banks that are willing to give mortgages with $5,000-$10,000 in closing cost assistance. Even without the Philly First Home program, I'm able to give most of my buyers full closing-cost credit through the CRA programs that require banks to spend money on mortgages in communities that are in low- and medium-income neighborhoods."

Rodriguez is aware of Rushdy's position and the adamant viewpoints of other developers, but he's also beholden to City Council's readiness to make resolutions that approve the sale of lots. The land bank's officials do not comment on pending legislation or negotiations about these issues that take place behind the scenes.

"The issue here is, how do we get the properties built in a reasonable timeframe, given all the approvals?" Rodriguez said. "It's not easy doing business with us. It's highly regulated and there are concerns about the timeline and high threshold for approvals. We are going to look at the array of opportunities that we have to create as much affordable housing as we can, maximizing those opportunities. Have we? There's always room for improvement. It's an iterative process. You have to build up a pipeline. The idea behind the Neighborhood Preservation Initiative is to start ramping up, and part of the issue is defining how affordable 'affordable' is."

Can economic growth and affordable housing coexist? 

It's not hard to see why City Council is fixated on AMI thresholds, especially with respect to the goal of integration and mixed-income rental construction. About 1 in 4 Philadelphia residents meets the federal poverty guidelines, set at $27,750 for a family of four in 2022. About 1 in 10 residents live in "deep poverty," defined as an income below half the federal poverty line. When these metrics are viewed at a neighborhood and ZIP code level, the concentration of inequality becomes glaring.

How to create low-income housing that legitimately raises standards of living for vulnerable populations is a question that both the public and private sectors have struggled to answer for decades. Structural impediments to social mobility rise from housing and family life into education and workforce development, resulting in vicious cycles of indigence that roofs alone don't break.  

In Philadelphia's ambitions to become more of an economically competitive metropolis – bidding, unsuccessfully,  for Amazon's second headquarters a few years ago, for example – the city also can't get too overzealous or its growth risks trampling the underprivileged population. This tends to get obscured by the clear advantages of business investment and the influx of high-paying jobs it brings to educated workers. The sheen of the tech giants that have nested in the Seattle region, for example, casts a glare on the city's housing crisis among low- and middle-income earners now struggling to stay afloat and buy homes there. 

Low wage jobs do not get workers very far beyond their bare, basic needs – if they do at all – and Philadelphia's wage tax doesn't show enough cognizance of the added burdens it creates both on this population and the diminished flow of jobs that otherwise would open pathways to advancement, even without an Amazon campus. The city has made efforts to reimburse more low-income workers with wage tax refunds in recent years, but inflation and wage stagnation are difficult effects to offset as pandemic stimulus checks fade into the rearview.

Future housing struggles may be foreshadowed in plans to redevelop the sprawling site of the former Philadelphia Energy Solutions refinery in Southwest Philly, a property that is being reinvented as a multi-modal logistics hub called The Bellwether District over the next two decades. Local institutions, such as Drexel University's Lindy Institute for Urban Innovation and the William Penn Foundation, have had the foresight to work with the developer to incorporate public involvement in the district's strategic planning, creating optimism that the economic benefits will be reaped by the local community.  

Growth that fails to take into account the city's existing demographics could spell deep trouble for the future of affordable housing in Philadelphia, especially without commercial policies and private sector investment that work in concert to broaden the range of career opportunities needed to lift people out of poverty in large numbers. 

While public assistance programs, such as Section 8 housing vouchers, help combat poverty, ideally providing the stability for families to invest wisely in themselves above the onslaught of their bills, nobody should confuse welfare as a specific direction out of low-wage dependency in the absence of meaningful education and job training.

For now, Philadelphia programs like Shallow Rent, the Rental Improvement Fund and the Eviction Diversion Program all help get low-income residents access to housing, acceptable living conditions and tenant protections. What these programs can't do is fix the city's rut of income inequality and the concomitant issues it bears on neighborhood formation and growth. 

The wish to better integrate people of different races and incomes, though debated from a methodological standpoint, can have profound impacts on the well-being of disadvantaged residents and the economic futures of their young children. 

Wharton Professor Fernando Ferreira stressed that the city would do wonders in some areas of housing policy simply by staying out of the way. 

Zoning to discourage residential density sends a contradictory message, for example. At a time when housing vouchers are threatened and project-based subsidies from federal and state sources are not available in sufficient numbers, the city too often impedes the kind of housing affordability achieved by scale. 

"The more we can limit the bureaucracy of getting permits and height restrictions for new construction, the easier it's going to be to build more affordable condos and rentals," Ferreira said. "If we want to increase affordability for everyone, the city needs to be more ambitious with its multifamily housing supply."

Philadelphia Housing Authority's plans to rebuild the public Westpark Apartments in West Powelton, adding some market rate properties to create a more integrated community, marks a form of compromise that could be a step in the right direction, in theory. Plans at the 60-year-old high-rise complex call for replacing the 327 existing low-income rentals with at least 650 total units, which will combine for about 70% low-income and workforce housing. The land will be used to build more townhouse-style and low-rise family units, though some of the existing towers, which have generally fallen out of favor in public housing, may be renovated. 

This process already has resulted in some of the hardships of displacement, though many long-term Westpark Apartments residents also are eager for fresh starts.  

Lately, Philadelphia's search for a viable approach to affordable rentals has included both aggressive tactics with developers and new models of experimentation.

At the University City Townhomes, a 70-unit site that has provided affordable apartment rentals since the 1980's, developer IBID Associates has declined to renew its federal contract with HUD that enables low-income tenants to use Section 8 housing vouchers to live there. City Council and the Philadelphia Planning Commission are attempting to keep affordable units at this site via targeted zoning legislation, but the developer has filed a lawsuit claiming that this violates a constitutionally protected right to sell the property. 

The valuable land where the University City Townhomes sit is in the heart of Philadelphia's burgeoning life sciences hub, pitting a beacon of the city's economic growth strategy against against a shrinking landscape of affordable low-income homes. 

Elsewhere, in South Philadelphia's Hawthorne neighborhood, a proposed 45-unit apartment complex is planned on a vacant Redevelopment Authority lot at 13th and Bainbridge streets, the same site central to Councilman Kenyatta Johnson's trial. There, the city wants to test out a "land trust" program that would involve leasing the lot to developer Benchmark Construction Group for a period of 99 years, instead of outright selling it. 

The idea behind this model is to ensure that a percentage of affordable rental units get included in the mixed-income project and permanently remain at 60% of AMI or less. The city would keep the property title and could even evict the developer if affordable housing requirements aren't sustained. Most other incentive-based programs for developers to maintain affordable units expire after a set period of time, usually several decades. 

The Hawthorne project has been delayed by a laundry list of community concerns, from resentment over the chosen use of a public space to fear of higher property taxes, loss of neighborhood parking and the history of corruption that doomed the original plan for a non-profit to build affordable, owner-occupied homes there. Benchmark, the developer, also has revised the initial share of affordable units at the new multifamily proposal from 35% down to the minimum allowable 30%, in order to make the budget work. 

The timeline for this project to move forward remains in question and the developer continues to engage with the community and the PRA board.  

What these cases is exemplify are the tensions that complicate revamped approaches to affordable housing, from the legacy of failed ideas to the competing interests of economic growth sectors and neighbors who don't want their ways of life disrupted and threatened. 

Low- and extreme low-income housing are areas the Neighborhood Preservation Initiative simply cannot afford to underserve, given the overwhelming need for such housing in Philadelphia. 

But this need can't be pursued to the exclusion of taking on other housing inefficiencies, such as declining home ownership, that will have lasting effects for generations if left ignored. 

The promising news for future home ownership opportunities in Philadelphia is that the land bank is committed to dedicating the majority of its vacant lots for owner-occupied homes. Rentals make less sense on the city's smaller lots because they raise trickier questions about how long the units can or should remain cost-controlled.

"The proposition with home ownership is the equity that's built for the home owner. It's a game changer and an asset that will appreciate," Rodriguez said. "What's often missed is that a lot of people fund college degrees by using equity out of their home. They take equity out of their home to address quality of life issues. That's how you use that asset. Home ownership plays a different role than an affordable rental, which solves more of a cash flow issue for cost-burdened people on a monthly basis. If you get to the threshold of home ownership, you're really pivoted in life."

The Pradera Homes in West Kensington are a model of non-profit success in the creation of single-family homes, Rodriguez said, and a reason why the land bank wants community development organizations involved in neighborhood interventions that continue beyond the initial home construction projects.

"There was no market in West Kensington before those homes were built. You couldn't get a mortgage because there were no comps. You had to heavily subsidize that area in the 90s," Rodriguez said. "Then you had homeowners who were able to buy these homes for less than $100,000. If you go up there now, in 2022, the homes are worth $350,000. There haven't been any defaults among those home owners."

Many of the families who bought the Pradera Homes have now lived in their houses beyond the original deed-restricted timeframes and can cash out by selling, if they choose. Some would not be able to buy into their own neighborhood in 2022, one of the stark paradoxes of home ownership in areas where newer development has created underlying housing insecurity. Weighing the incentive to sell high against the desire to remain put raises quality of life issues that policymakers and communities have to evaluate when charting responsible neighborhood growth. 

"We want to build forever homes," Rodriguez said of the tug-of-war to define affordability when building new homes. "I get that young people are in a position to look at a home as more of an asset to live in Philly for a handful of years and then move on, but we are thinking about the people who raise their kids here. Affordable housing is a primary concern because it has demonstrable effects on the city, the community, and more importantly, for children to have a stable home to live in. You have to think about success stories like Pradera Homes."

In the years ahead, Rushdy would ideally like to see Philadelphia's development community shift more of its construction mix to single-family homes versus rentals. He shares Rodriguez's view that home ownership is vital to uplifting disadvantaged communities and believes his past workforce housing projects show what owning can do for more residents.

About 38% of the buyers of those workforce homes in Francisville and Port Richmond were African-American, compared to about 10% for market rate properties built by Rushdy's development firm. 

"You need to create wealth. At a $230,000 price point on those homes, with a mortgage of $1,100, these families are stepping into homes that are already appraised at $300,000 when they're purchasing them," Rushdy said. "10 years from now, it's going be valued close to $400,000-450,000, and the mortgage is going to be paid down to about $150,000 on the principal. After a 10- or 15-year deed restriction, you have now allowed that family to have accumulated $250,000-$300,000 in wealth. That wealth can transform a family that's making $40,000-60,000 a year living paycheck to paycheck. They can use that money for education and business creation."

Philly needs new ideas about neighborhood preservation 

As lucid as developers' visions may be for constructing single-family homes on public land in the coming years, there are sensible concerns and questions to weigh about the private sector's role as the steward of Philadelphia's push for affordable homes.

For one, there's a sense of strong obligation among some council members to give community land trusts, registered community organizations and non-profit developers the right of first refusal in the disposal and review of Philadelphia's vacant lots.

Mission-driven organizations with strong community ties offer a measure of reassurance that projects will reflect a community's wishes, employ more minority-owned businesses to build up neighborhoods, and extend the use of land for affordable housing well into the future. 

For-profit developers who are given free rein to buy up land could be less invested in community engagement. The years preceding the land bank reform sometimes saw the sale of public lots shamelessly undermined by private builders reneging on agreements to construct affordable homes and public officials who gamed the system to flip properties. 

What's to stop any of that from resurfacing if the floodgates to public land are opened to private developers in a race to build affordable homes? 

Since most of the city lots best-suited for single-family homes are zoned by-right, private developers that acquire this land generally would not be subject to Philadelphia's stricter variance process. That removes an important avenue for community feedback, one that applies to most other construction projects, and it makes good faith land use and home sales hinge on developers respecting the power of residents. 

Having a solid track record in a neighborhood goes a long way in gaining support for other local proposals that require more oversight and often hit resistance, after all. 

When communities have opportunities to weigh in on land sales, residents are not shy about objecting to projects if they feel they are being sold a bill of goods, or if they are losing a valued space. Many Philadelphia neighborhoods are now bombarded with pending projects due to the tax abatement reform, which lit a fire under developers to secure record numbers of construction permits ahead of the reduction to the incentive.

In South Kensington, for example, residents pushed back against plans in 2020 for a multifamily apartment building that would have included 20% affordable units. Some of the vacant lots for the proposed project had been used for decades as patios and community gardens in the majority Black and Latino neighborhood.

The proposal, a partnership between the non-profit Asociación Puertorriqueños en Marcha and for-profit Scannapieco Development Corp., was stalled due to a lack of public input during the early months of the pandemic. The land bank held off on transferring the lots to APM – which has a long and successful track record that includes the Pradera Homes – until residents could be given more of a voice and City Council could revisit the zoning overlay in the area.

Even when a reputable non-profit such as Habitat for Humanity is prepared to build affordable single-family homes on public land, community members don't always welcome it. A proposal last year for seven single-family homes in North Philadelphia faced backlash from a small group of residents who complained they would lose parking spaces on the land owned by the Philadelphia Redevelopment Authority. 

The example in North Philly showcases the hurdles of public land disposition. 

Habitat for Humanity had received project approval from PRA and had already lined up future homeowners, who would pay between 30%-60% of AMI, to live in the homes proposed for the 1600 block of Page Street. That's far lower in price than what private developers would offer without the city tapping into the NPI. 

Since the Habitat project also requires City Council's approval, the objections that neighbors raised during a public hearing succeeded to convince Council President Darrelle Clarke to withdraw his resolution. 

Habitat has since worked with the North Philly neighbors to reduce the number of new homes from seven to six, which preserves some of the land that had been used for parking. Clarke reintroduced the resolution for the project in March, and the homes could be on track for construction as soon as this summer, allowing families to move into them in the fall. 

Would private developers be able to navigate neighborhood skepticism as successfully as non-profits and community land trusts? 

For-profits have tougher cases to make on projects like this – both to City Council members and their constituents – when the planned single-family homes or rental units are destined for people with incomes higher than the AMIs on the Habitat homes, for example, or in most of the surrounding community. The opposite may be true in wealthier parts of the city, but the objections are still an obstacle to new homes.

There also are legitimate concerns about whether unscrupulous developers and contractors will ensure that infill home construction on these lots doesn't damage neighboring homes. There have been nightmare stories of damage done to existing homes, leading to expensive legal fights and home-value depreciation, to say nothing of compromised safety. Increasing the number of infill projects in Philadelphia, regardless of the developer's business model, creates more overall risk to aging homes next door and multiplies the tiresome inconveniences of construction for neighboring residents. 

At its ugliest, reckless development can result in debris crashing down on city streets and properties, homes collapsing and tragic outcomes like the Center City demolition that led to the collapse of a Salvation Army thrift store in 2013, killing six people and injuring more than a dozen. It is unfair to call this representative of the private development community as a whole, but smaller examples of shoddy work done around the city don't inspire confidence to green light the private rush on public land. 

To a certain extent, pushback from communities comes with the territory of selling and redeveloping vacant lots. 

The land bank's strict requirements for applicants to be in good standing may slow this process down, but the city's safeguards also prevent projects from proceeding haphazardly against neighborhood wishes. The same can be said for City Council's mandated approval of land disposition.

The challenge for planners continues to be striking a balance of community input when deciding how many and which lots should be allocated to different types of builders, and over what period of time? 

Fights over the city's public engagement methods have lately led to a rancorous dispute concerning the redesign of Washington Avenue in South Philly, starkly underscoring the political tradeoffs and whims of inclusion in community planning. 

When this blurs into pure posturing in spite of the merits of better policies, everyone involved needs to hit the reset button and look in the mirror, including a city government whose own history is checkered with misconduct. This is the matter-of-fact point that private developers are trying to make about public land disposition. 

Rushdy has no objection to non-profits and community groups playing important roles in the land bank process. He just doesn't believe they have the experience, financing and efficiency to deliver affordable housing projects at cost and on time for the scale that's needed. They are more liable to run into administrative roadblocks on their projects, resulting in higher costs and delays as they line up state and federal funding. What they can achieve in lower AMI's is diminished by the problem of consistent reproducibility, which is needed for a semblance of coherence in how affordable homes will get built around the city. 

A private developer's capital stack precludes these worries, and there are potentially better tools to lower AMI's for home buyers using city resources and creative partnerships, Rushdy argued. 

BIA would prefer to see community land trusts, community organizations and other non-profits be given a set percentage of land bank lots to develop for the range of purposes they seek, including garden projects and affordable housing. They could then receive access to more lots as their initial projects come to fruition. This would prevent a glut of properties from sitting idle for several years, especially if approved non-profit projects get delayed for funding reasons, and would allow private developers to get to work building homes. 

Rushdy also would like to see non-profit and community groups be closely involved in qualifying new home owners to buy the homes built on public land. They could utilize their strengths in conducting outreach and offering counseling to residents about housing opportunities in the city.

Given all of the concerns about for-profit developers, it also would seem prudent to impose some limits on how much land they can acquire at once and consider what mechanisms might be used to ensure neighbors' considerations are dealt with fairly based on the characteristics of the lots. Reviewing them in detail and brokering AMI thresholds linked to the locations might clarify for individual developers whether specific lots will be worth the applications for their proposed mixes of affordable and market rate projects.

This kind of comprehensive inventory of vacant lots is a daunting task, one that Rodriguez admits the land bank has lacked the resources to manage without help from neighbors, who keep eyes on what happens with vacant lots both before and after they have been redeveloped. It's a desperately needed gap that neighborhood groups could potentially fill, simultaneously gaining more involvement and looping them in on potential projects under consideration for certain lots. 

It's fair to question whether the organizational will and city resources exist to formalize this type of feedback and improve compliance with the sale of new homes to the types of buyers programs, such as these, are truly meant to house. Developers also have increasingly filed lawsuits against registered community organizations and civic associations in order to crush community opposition, making it unlikely private builders would be enthusiastic about inviting neighbors into by-right projects that they're already taking smaller margins on to make affordable homes. They might be more amenable under the right scenario and process, given that the cost of acquiring public land is largely nominal. 

If Philadelphia is staring at the difference between getting thousands of new homes built versus hundreds of them in the next several years, the dilemma may be posed more practically.

"Does the end-user constituent really care who built the affordable home?" Rushdy asked.

The answer is perhaps more of a "yes" than pragmatic private developers are able to rationalize, and more of a "no" than idealistic planners will put aside their principles to consider. Residents are fickle about their environments in confounding ways. Neighborhood meetings routinely hash out where people stand on land use – even if it's at odds – but the worst-case scenario will be a merry-go-round of performative standoffs in Philadelphia that fail to create homes.

What bothers Rushdy most is that, in his view, the private development community is mistrusted for nebulous reasons.

"Why are resolutions not being introduced by City Council to dispose that public land for the applications already sitting there? Full stop. That's it," Rushdy said. "You know why? Because we're not the 'right people' to develop affordable housing."

Philadelphia's roiling conflict between NIMBY and YIMBY perspectives feeds into something much larger than the mundane quality of life issues – noise, parking, misfit modern facades, too many newcomers – that make incessant construction activity a bitter medicine to swallow for city dwellers surrounded on all sides by change. The territorial aspect of community politics is always tinged with a sense of foreboding that history's wrongs and blunders will be repeated, same as they ever were, in the name of abstract profit and grift.

All of the city's policy tinkering and clamps on development show the power of community self-determination and how easily the rigid cost-keeping of for-profit builders can move the affordable housing goal posts.  

As tempting as it is to assail NIMBYism for its myopic personal agendas and its cynical aversion to growth, the criticism becomes awkward, at best, when applied to communities of color where people live with unequal consequences, including those of NIMBYism. 

Some of the same North Philadelphia community members who stalled Habitat for Humanity's homes on Page Street also helped defeat Temple University's plan for a football stadium on North Broad Street four years ago. Their concerns about neighborhood change carry a weight that deserves equal parts recognition and rapprochement over the terms of affordable home construction. 

Above all, Philadelphia has to ask, is $400 million worth of "neighborhood preservation" really about saving the status quo, or is it about preserving future choices for residents as equitably as possible to meet holistic goals? Does profit entering the equation signify a bridge too far for City Council to get serious about home construction on thousands of infills that are strewn with litter in neighborhoods that need a course? 

The watchful eye of housing justice, understandably, is concerned with making things right for people who have historically been harmed by the traumatic buzzsaw of free market development, such as it operates in practice. The problem with steadfast convictions that are based on damaging lessons from the past is not the refusal among residents to be overly accommodative to development without having a real voice in these matters. It's that two eyes need to be fully open to see the future clearly – and sometimes they need glasses, to use an imperfect metaphor. 

When the only watchword for development is gentrification, there isn't much room for receptive dialogue about how the roots of neighborhoods can be fortified, cooperatively, to advance cultural and economic evolution. 

It would be wrong to call equity and inclusion a policy pretext for garden variety NIMBY opposition, not when so many neighborhoods from Graduate Hospital to University City, Point Breeze and lower North Philly contain stories upon stories of community loss to tell. 

What begs for deeper reflection in Philadelphia is how communities can unite around neighborhood changes that are conscientious and deliberate. How can the city create new housing that reduces displacement and absorbs demographic shifts in ways that avoid the annihilation of character? 

These are lofty intellectual goals to set, let alone to effectuate, when the language and attitudes around development so often default to arch ridicule, fervent disdain, callousness and disaffection. Even tenuously claiming humble respect and deference to the voices of marginalized residents falls short of the full community mindset needed to redress the housing dysfunction that affects Philadelphians of all backgrounds. 

Doesn't it feel easier to cover up discomfort by mocking the "bougie" ambiance of Fishtown, compared to the horrors of addiction a few miles north, and more just to condemn the slow-marching erasure of West Philadelphia's Black culture by waves of new development? 

Philadelphia must think more concretely and discerningly about what kinds of housing development will be beneficial now and into the future. Where can lines be drawn between the pains of growing the city's housing market to strengthen neighborhoods, on one hand, and pernicious forms of real estate development that carry on injustice, on the other? 

As Philadelphia home buyers, current home owners, investors and renters assess their housing goals, these are the questions that should provoke thought about what will be for the benefit of the greater good of the city's neighborhoods. 

Entrusting private developers with public land to expand Philadelphia's home supply portends to an uneasy companionship, one that requires vigilance and accountability, but their commitments may be indispensable to the equation of forward-thinking policy. With the right fundamentals of fairness in force, the approach offers a basis in realism that's not incapable of ingenuity.

Rushdy cautions those who are biased against this path to consider the deep resources and understanding of the Philadelphia market that the private sector can bring to the table of affordable housing. These builders have a stake in the crisis that they know will bite them the more they ignore it. Every incentive is there for them to work with City Council on pacts that will open up business in the name of this objective, as long as the playing field isn't slanted. 

"There is nothing wrong with creating win-win situations," Rushdy said. "The model works because it makes money, and it employs the muscles of developers to do a service."

What is the strategy for representative growth?

Philadelphia's vision with the Neighborhood Preservation Initiative shows ambitions similar to those of former Mayor John Street's Neighborhood Transformation Initiative, presenting the opportunity to refine a blueprint that fell short of its potential. 

The $295 million bond issue in the early 2000's was intended to eliminate blight, enlisting demolition companies to knock down derelict properties that would clear the way for new home construction and investment. The program also fixed up homes in struggling neighborhoods and attempted to support preservation efforts, even helping to fund the restoration of the Divine Lorraine Hotel and improve Bartram's Garden with some of its last remaining dollars toward the end of the last decade.

The Neighborhood Transformation Initiative has a complicated legacy, in part because the funds were overly depleted by demolition companies, and there wasn't a rigidly defined structure for how the money could be used. It left too much power to the discretion of City Council, leading to a combination of unspent funds and narrow interests that picked the program dry.

That initiative was once considered more promising than other drives for urban renewal because it leveraged private investment. It fell victim to inequitable development, however, and was deemed a "watered-down" version of a bold strategy that needed stronger leadership and implementation.

Reinvestment Fund's Ira Goldstein believes Philadelphia made a smart decision in the guts of the pandemic to move forward with the Neighborhood Preservation Initiative, taking a risk that other cities may not have had the nerve to in the face of endangered municipal finances. The city capitalized at a moment when interest rates were low, pricing the first $100 million in bonds to a strong market reception from investors last October.

"The city's decision to float those bonds when they did really showed great foresight," Goldstein said. "I give City Council and the administration a lot of credit for this. The way I look at it is, they were going to market and getting money about as cheaply as you could ever get it. Would you rather borrow money when it's at 1-2% or 7-8%? The city was getting long-term money at the moment that it was cheapest. They realized that they could make a set of investments that would create a set of returns."

Lessons learned from the Street-era program may partly explain the city's reluctance to charge forward with the disposition of vacant public lots. That cautiousness also could end up reproducing the same problems that once plagued the earlier program. 

Philadelphia's leaders want to ensure that the Neighborhood Preservation Initiative does not miss the mark of truly reaching and housing the city's most vulnerable populations, a noble pledge that warrants taking scope of the city's full complement of tools. 

Rushdy said he understands the different pressures facing City Council, but can't grasp the current approach of "trying to make the impossible work" by chasing private developers away from lots in favor of groups that lack the resources to put enough new homes on them.

"Sit down with a council member or with a community group and ask, 'Can you walk me through the economics of an affordable housing project?' Ninety-nine percent of the time, no one's going to walk you through any model because they don't know it," Rushdy said. "So then you ask, how is the policy being driven? How are you making the determination that one thing is good and one isn't?"

The land bank's Rodriguez believes the competitive RFP lots are helping to create a framework that will inform expectations for private developers when they eventually gain access to non-competitive lots. City Council still sits on the fence about whether the bargain for private sector resources will yield affordable housing of the kind that's meant when the word "crisis" is used to describe Philadelphia's needs. 

"There's some lots where we are leveraging the private and commercial financial markets to build these houses, so what's that value proposition for the developer to put their risk in doing this? That's the negotiation. We know what our population is and how affordable a home has to be," Rodriguez said. "If we're going to go to the private market and have developers do work, they have a price point. A house needs to be built at a certain level. You can't fudge those numbers. That's cost."

Rushdy continues to share BIA's financial models for affordable housing with City Council to reach an accord on a plan of action. Adding a steady pipeline of vacant single-family lots to the mix of rental construction projects in BIA's projections could be a groundbreaking change for aspiring home owners in Philadelphia. 

Somewhere between housing scarcity and unbridled housing abundance is a future in which Philadelphia could have ample, quality homes for residents of all income levels to live in places they'll be proud to call their neighborhoods 

The path to that future is made precarious not because Philadelphia lacks the capacity or the earnest desire to improve, but because the mindset too readily embraces offset victories that come only after adversaries have worn each other out. This celebration of concessions happens too often at the expense of better working relationships, leaving voids of progress to be filled instead with little more than loot on the scorecard of provincialism. 

"Philadelphia's problem is that everything is measured in small successes," Rushdy said. "And no one is coming up with a transformative plan."