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Philadelphia readies new inclusionary zoning policy

When I was living in Philadelphia as a graduate student, new development was seen as a bit of a gift. I remember developers telling me that it costs the same to build in Philly as it does in New York, except that the rents are obviously a fraction in the former relative to the latter. So it was tough to make projects pencil.

At the same time, Philadelphia had a 10-year residential tax abatement program in place. I think it’s still in place, but it may have been modified since I was there. Either way, it was essentially an incentive to develop or redevelop existing residential properties. In the case of a renovation, the taxes associated with any improvements were what got abated for the 10 years.

Put differently, it was an invitation to gentrify. Come buy an old row home, fix it up, and then don’t pay any additional property taxes on those improvements. This was the way things felt at the time. So it was interesting to learn today that Philly’s current development boom is about to get throttled down with a new mandatory inclusionary zoning policy that will take effect later this year. Gentrification, it would now seem, is a problem.

The policy requires that 20% of the units in any new housing development (with 10 or more units) must be affordable for at least a 50-year period. For rental households, affordability means 40% of the area median income (AMI). And for owner-occupied households, it means 60% of AMI.

I have already said pretty much everything I can say about inclusionary zoning. But one of the unique things about Philly’s policy is that it is only going to apply to two of its Council Districts. It is not a citywide policy. This is going to create a strong disincentive to develop in these areas, and will likely force new development into surrounding ones. But maybe that’s part of the point.

Photo by Dan Mall on Unsplash

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