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Old homes, high poverty make Philadelphia housing less than affordable for some

PlanPhilly - a Project of WHYY July 25, 2018

In cities such as Boston, New York, and San Francisco, affordable housing is increasingly scarce. Across the United States, most lower-income households spend more than half of what they make each month on housing costs, according to “The State of the Nation’s Housing 2018,” a report from Harvard University’s Joint Center for Housing Studies.

But in Philadelphia, it’s not just a shortage of affordable housing that’s causing the crunch. Instead, poor-quality houses and an unusually high poverty rate — about 400,000 Philadelphians are living in poverty — tilt the equation so that demand far outstrips supply here, making affordable homes hard to obtain and difficult to manage.

To the uninitiated, the data in the Joint Center for Housing Studies’ annual report, released in June, might seem alarming. Among other statistics, the report states that affordable units for low-income renters both nationwide and in the 11-county Philadelphia-Camden-Wilmington region have become 50 percent more scarce over the last 10 years. The data point to a regional deficit of 117,132 affordable rentals.

At the same time, overall for-sale housing inventory in the region — as measured by a standard called months of supply— has dropped to 2.6 months, a historic all-time low, according to the report and data from real estate firm Houwzer LLC. Six months’ supply is considered balanced.

This hot seller’s market has contributed to higher prices. Home values in the city of Philadelphia alone have jumped more than 11 percent in the last year, to a median of just above $147,000, according to real estate search engine Zillow.

Observers intimately acquainted with the local housing market were quick to alleviate concerns the data in the Joint Center’s report might raise. (Most of the data break down only by the 11-county Philadelphia region, not for Philadelphia County specifically.)

Philadelphia is the most affordable city in the Northeast Corridor aside from Baltimore, said Kevin Gillen, a housing expert and economist at Drexel University’s Lindy Institute for Urban Innovation.

For housing to be considered affordable, the level of household income going toward costs such as mortgage payments, utilities, maintenance, and property taxes should be less than 35 percent, Gillen said. In Philadelphia, that figure hovers around 34 percent, just below the moderately unaffordable cut-off. For context, San Francisco and New York are in the 50 to 60 percent, or severely unaffordable, bracket.

How can Philadelphia be so affordable at the same time affordable housing is so scarce in the city?

“There are a large number of relatively affordable neighborhoods across the city… [but] we have a lot of housing that’s not affordable to a lot of poor people because they are in poverty,” said Alan Greenberger, the city’s former deputy mayor and a housing-policy expert at Drexel’s Lindy Institute.

Philadelphia’s poverty rate is 25.7 percent, the highest among the 10 largest U.S. cities, according to the Pew Charitable Trusts. The Joint Center for Housing Studies report defines extremely low-income renters as those making less than 30 percent of the area median income, which is about $26,000 a year in Philadelphia, slightly above the federal poverty line (which is just under $20,000 a year for a family of four). To be considered affordable for extremely low-income Philadelphians, then, average monthly rent should be about or below $650 per month.

Though his statement about unaffordability and poverty may sound like a semantic distinction, Greenberger argued that high poverty makes the problems here different from those of metropolitan areas like New York and Boston.

Affordable is a relative term, Philadelphia’s housing situation suggests.

Timothy Henkel, senior vice president of Pennrose Properties, one of the few private-sector affordable-housing developers active in the Philadelphia market, agreed with Greenberger’s conclusion. High poverty rates are driving changes in the affordable-housing equation across the country, but Philadelphia is feeling the squeeze more acutely than most, Henkel said.

Prospective homeowners need to take into account their savings and credit scores when considering a purchase. Without financial counseling, would-be buyers are often unaware of the types of homes they can reasonably afford, said Maureen Keown, a spokeswoman for the Philadelphia-based nonprofit financial-counseling service Clarifi. Some of the more affordable neighborhoods in the city include Grays Ferry and Port Richmond; Mount Airy, Graduate Hospital, and Fishtown are in the more middle-cost housing range.

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