PennPraxis

Preserving Philadelphia: Developing a Successful strategy to preserve existing subsidized housing

Research by Vincent Reina for LISC

The shortage of affordable rental units is a national reality, but is particularly profound in the city of Philadelphia. According to the U.S. Department of Housing and Urban Development (HUD), a household is rent-burdened if the occupants spend over 30 percent of income on rent, and severely rent-burdened when they spend over 50 percent. In Philadelphia, 87 percent of extremely low-income households are rent-burdened, and 74 percent are severely rent-burdened. One factor contributing to rent burdens is that naturally occurring, affordable rental units are decreasing, creating increased demand for ones that are subsidized. At the same time, many of the older privately-owned and publicly-subsidized rental properties in the city are either in need of recapitalization and/or are reaching the end of their affordability restriction periods. This means that as the demand for new affordable units remains high, cities like Philadelphia will also see increased demand for resources to preserve the affordability of existing subsidized housing and to recapitalize these properties. Professor Vincent Reina of PennDesign and Catherine Droser, Research Associate at PennPraxis, consulted on a project for Philadelphia Local Initiatives Support Corporation (LISC), to develop a report that provides an overview of what we know about the preservation of existing subsidized housing, what the need may look like in Philadelphia, and how other cities have addressed the need to preserve their existing subsidized-housing portfolios.

Some major findings highlighted in this report include:

  • Nearly 1,000 households lived in properties in the metropolitan area where the project-based Section 8 contract already ended prior to 2010
  • In 2017 alone there are 1,400 project-based Section 8 units in Philadelphia where the existing contract expires. Owners have the option to renew the subsidy or exit the program. Not all owners will exit the program, but even those that choose to renew can decide to only do so for five years or fewer. As a result, some of these contracts will come up for a renewal multiple times in the coming years.
  • There are nearly 200 units approaching the end of their affordability restrictions through the Low Income Housing Tax Credit (LIHTC) program in 2017. These properties cannot renew their subsidy and would need to apply for a new round of subsidies if they wish to remain in the program.
  • There were 238 new LIHTC units placed in service in Philadelphia in 2015, meaning that the potential scale of existing subsidized units needing recapitalization, or financial incentives to remain in a subsidy program, in any given year going forward will exceed the average number of units the LIHTC program produces in Philadelphia in most year

The report analyzes existing efforts to preserve subsidized and affordable rental housing from across the country to identify several components of a comprehensive preservation strategy. These components, and the strategies highlighted, offer important examples of how Philadelphia could address its need to preserve the affordability and quality of its existing subsidized housing in a comprehensive and strategic way.