If you haven’t seen this TED2015 talk from Chicago artist Theaster Gates, How to Revive a Neighborhood: With Imagination, Beauty and Art, you really need to stop what you’re doing right now and watch it:

Theaster Gates [TED]
Theaster Gates [TED]
Oftentimes we look to real estate developers or to government check-writing to “fix” broken neighborhoods, but it’s really the artists who see potential in abandonment who arrive many years before anyone else and sees a positive opportunity in a neighborhood that actually causes a redevelopment cycle to happen all on its own.  Usually, these folks have literally no capital to start out with.

Many times these people, who are the most creative and imaginative, are thwarted by local governments either through zoning or in permitting.  Our local government always wants to intervene and sometimes for some really not so great reasons.   Cities that face a lot of abandonment, like ours, really need to take a step back and realize that without these creative ideas or the freedom to be creative, you just add another roadblock on the path towards a neighborhood revitalizing on its own.

Kensington right now is going through this kind of transformation, with artists working in areas as far north as Harrowgate.  L&I has already shut down Viking Mills which was partially warranted because of blowtorches and questionable electrics, but getting back in compliance should be made easy, not hard.

But Gates’ talk as he progresses from how he started thinking about abandoned property to how he’s grown shows what’s possible in Philadelphia that you can’t easily do anywhere else.   And it’s this kind of creativity that leads itself to interest in a neighborhood from without and within.

In a report published today by the Philadelphia Coalition for Affordable Communities, proponents have put together their first  high-gloss policy brochure to  combat housing unaffordability in Philadelphia.

The brochure is heavy with emotional appeals and anecdotals, but within it on two pages are the crux of their legislative agenda:

Capture

The answer is a 50% increase in the Real Estate Transfer Tax and an additional penalization surcharge placed on land transactions that occur quicker than 24 months apart.

The Transfer Tax

Let’s start with this proposal.   The Mayor’s budget for this year has this to say about the money it collects off the Real Estate Transfer Tax:

FY16 of areas in the city where residential properties may have been under or overvalued. Because of only conducting a partial reassessment, tax base growth is anticipated to be only 1.5%. The next citywide reassessment of all properties will occur for FY17. The Realty Transfer Tax base is projected to have strong 20.0% growth in FY15 and 10.0% in FY16.

The City is currently estimating that RTT revenues will be $222 million dollars by next year [Mayor’s budget here].   This is because the 10 year tax abatement for new construction is expiring on a lot of property that was built during 2005 and 2006 and the City swept through neighborhoods with AVI and reassessed a lot of property upwards.

While the RTT is set at 4%, it’s split between 3% for the City and 1% for the state.  By raising the City’s portion to 4.5% (bringing the gross tax to 5.5%) and all other things being equal, this represents an increase of revenue of roughly $111MM, or $333 million dollars.

Speculation Penalty

But if you read carefully, the policy statement from PCAC says that they only want the higher surcharge to apply to real estate transactions quicker than 24 months apart.  That is: if a developer (or anyone) purchases a piece of real-estate and then it is sold on the open market less than 24 months later, then the homebuyer pays the higher rate.

This type of condition is legally unworkable in Pennsylvania because our constitution will not allow for it.   Specifically, in the PA Constitution under Article 8 Section 1:

All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.

This sets up two real estate transfer tax rates.  While there have been exceptions carved out to support property tax credits for longtime homeowners, the indigent and veterans, there have been no exceptions carved out like this for the Transfer Tax.   Harrisburg would have to get involved here–a very Republican-dominated Harrisburg, where the Pennsylvania House has not been this Republican since World War I.

The only realistic way to use the RTT as a funding vehicle in the short term is to ignore the state constitutional problem and just raise the RTT on everyone.

Is Affordability a Real Problem?

It depends.  It certainly is on the minds of many.  Even CNBC is running a clickbait article right now commenting on how home sales and prices have picked up pace but overall wages are still flat from the Great Recession.

Let’s use this map that PCAC put in their brochure:

Arbitrarily-drawn "Gentrification Blobs"
Arbitrarily-drawn “Gentrification Blobs”

Well, now PCAC has defined with these generic blobs the specific areas of Philadelphia that they’re primarily concerned with.   Outer communities like Germantown, East and West Oak Lane, Lawndale, Kingsessing, the entire Northeast, Center City… we don’t really give a shit about these areas.

Those areas outside the gentrification blobs have their own affordability mixtures.  There practically is no new construction of homes in Frankford because that’s been a marginal neighborhood for 15 years, so why invest in it?   Germantown isn’t even on the radar and there HAS been new housing development up there, plus publicly-funded and tax credit funded housing.

Should these areas of the city see the RTT jacked up while also get zero benefit out of it?

Half of Kensington is not bubbled in on this map and it faces a severe problem with gap-toothed blocks where slumlords have kept their fingers on problem properties while working families have the capacity to purchase the property, but cannot because there’s no mortgages for extremely low house prices.

The median house sales price in Philadelphia is below $140K according to Trulia and home sales have never come close to 4,000 a month:

Source: Trulia.com
Source: Trulia.com

Of course if you cut out the entire city and just focus on the brown blobs in PCAC’s map, you’ll get a flat sales picture but a steadily increasing home price.  Like in Point Breeze:

Capture

 

The median sales price in Point Breeze has yet to crack $200K.  If you’re in the mood to buy existing homes and not new construction, and that includes rehabs, Philadelphia is still quite cheap, even in most gentrifying neighborhoods.

If you’re going for a 3b/3b new construction with all-granite, built-in units and a roofdeck like this $420K house in Point Breeze, well of course that’s gonna cost higher.  DUH.

House Prices May Actually Go Down Soon

One thing no one in City Hall is paying much attention to, or housing advocates for that matter, is that the Federal Reserve is still on target to begin raising interest rates.

For instance, at 3.5% on a 30y mortgage for a $155K home, the mortgage payment comes out to $690.

Jack that interest rate up to 4.5% and the payment skyrockets to $785.  Homebuyers pay extremely close attention to the interest rate on their mortgages, including paying a bribe known as “lock-in” to keep the rate from changing while the borrower is in the process of buying the house.

When interest rates go up, house prices start to go down as home sales slow up and those who are selling their homes have to wait longer and longer for a buyer.

While We Talk About Gentrification We Still Keep Our Blinders On

Image from PCAC brochure
Image from PCAC brochure

One of the other specie that’s inside PCAC’s brochure is the appeal to emotion.  On Page 9 is the short story of a community garden in Mantua that was cultivated on some vacant lots.  The volunteers worked very hard to keep it up and they had lobbied their member of City Council, who is no stranger to dispensing property to favorite groups, that they had a very particular interest in the property.  From the story:

To try to save the garden, Khenti visited her councilperson’s office. “We overwhelmed them with proof of our 17 years tending the garden. We gave them press releases, mural project receipts, attendance sheets from children’s classes, garden awards, and a petition from the neighbors of approximately 200 signatures.” But it wasn’t enough to save the garden.

In spring 2014, the garden uprooted its perennials to make way for the 6-unit apartment building that stands there today.

Well Jesus-fucking-Christ we all know God-damned well that the councilwoman they’re talking about is Councilwoman Jannie Blackwell.

And it’s not like this isn’t a new pattern with Blackwell… she took a royal dump on James Dupree–even slamming him with eminent domain.  Blackwell even feigned ignorance over the property involved in the performance art known as “Funeral For a Home“… that she actually had anything to do with her approval of a redevelopment project which is why the home was demolished in the first place.

Jannie Blackwell doesn’t give a shit if you’re an awesome artist or you’re a great gardener doing good for your community.  She’ll flush you down the toilet.

But I guess that’s why PCAC made sure not to mention her by name because they must be terrified of her, or something.  Whatever.

Findings

I’m really disappointed with PCAC right now.   Short of an unimaginative revenue generation scheme, albeit it’s one that will probably be politically possible if the constitutional issues are ignored, there’s very little substance here to show how housing affordability is going to actually be fixed according to the dire scenarios that they have laid out.

Further, some of the real problems with blight in Philaelphia are not addressed at all and they don’t even attempt to go there.   For instance, there’s no suggestion that we should direct housing funding to capture shells and rehab these for cheaper than new construction and rebuild broken-blighted communities in Southwest Philadelphia and North Philadelphia.

And lastly this doesn’t really touch at all on the lifetime Philadelphia homeowner who decides to sell their home in the open market, nor there is any data here that attempts to answer who is selling and for what reasons.  If for instance seniors are selling their homes to help pay for end-of-life care, which many do–how much of that goes on vs. a homeowner who is forced to sell because the cost of living has climbed too high?   What makes a landlord raise their rent and what usually triggers that?

Maybe PCAC will come back later with some better analysis of what’s actually going on within Philadelphia and identify where the need truly is rather than rely on national statistics, glossprint and appeals to emotion.

Until then, I’ll throw this report on the pile of other things I unfortunately wasted my time to read and declare “meh.”

 

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Are you having difficulty finding an affordable house in Point Breeze for less than $1.2 million these days?

Well, look no further!   Innova, one of City Council’s most beloved affordable housing developers, has put up this hot listing for a monster four level, three story house!  It’s at 1712 Dickinson and it can be yours for only $420K!  [pot jokes included in closing]

1712 Dickinson [TREND]
1712 Dickinson [TREND]
From the listing….

Another impressive home developed by Innova Redevelopment of the Point Breeze/Newbold community. Innova is Latin for “renew. “

Their mission is to create and preserve affordable energy-efficient housing while contributing to the sustainable redevelopment of transitional neighborhoods.

[sic 1712] is a dramatic home. Four levels of amazing living space remark…ably finished highlighted by all high efficiency appliances, 95% efficient furnace, 16 SEER AC, spray foam insulation, under slab drainage system, an Energy Star rated home and an approved 10 year tax abatement.

Innova donated a couple thousand bucks between 2012-2013 to Councilman Kenyatta Johnson of the 2nd District, where Point Breeze is, who is currently running for re-election.  Innova purchased the property from the City of Philadelphia for the bargain basement price of $25,001.00.

The reason for that extra dollar is because Innova bid for this property from the City’s Redevelopment Authority.

I’ve written about affordable housing developers in the city who continue to cling on to that altruistic feel-good image of loosely-defined affordable housing and have gone on to be sucked into the standard world of market rate development.  Who can blame them?  There’s quite a bit of money to be made in investing in Philadelphia’s neighborhoods.

If we really want to see affordable housing come down in the market rate world, there’s always the tried and tested method of building more supply than there is demand.  Unfortunately, NIMBYism and anti-development tendencies only restrict supply, therefore driving up the costs of existing housing, including existing houses that are sold and then rehabbed in the private market.

So, that’s why four-hundred and twenty-thousand dollars is quite “affordable” in Point Breeze.

Here’s the full listing on Trulia:

1712 Dickinson Listing (Trulia)
1712 Dickinson Listing (Trulia)
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Stephanie Singer, soon to be the ex-City Commissioner [Michael Bryant philly.com]
Stephanie Singer, soon to be the ex-City Commissioner [Michael Bryant philly.com]
The City Commissioners Office, which its title gives you no clue about what they do, are the folks who handle elections in Philadelphia.   They’re the experts on the elections process.   It’s headed by a three-member board, two Democrats and one Republican.

So it’s with tounge-in-cheek that I tell you if you liked Stephanie Singer, who won her seat after machine politicians abandoned Marge Tartaglione, well… you probably won’t be seeing her on the May 19 primary.

She was booted off the ballot.

Singer faced a petition challenge and the attorney challenging her managed to whittle the number of valid signatures to below 1,000–the number required to appear as a candidate in the May 19 primary.

Singer was previously hit by the Ethics Board and she was known for being quite vocally anti-Republican, even to the point leading up to days before the last presidential election.  While that’s perfectly fine for any other officeholder, getting very partisan in a job where you’re supposed to be a-partisan soured her reputation as a reformer.

Granted, before Singer became commish she had dazzled ward leaders and political wonks by publishing election returns to the public on her own site from information that was only available to political insiders on election day.   The new Commissioners website has also removed the mystery of the cumbersome elections process in the city–a process you generally only learned “by the ropes” [imagine some poorly-lit cigarette-stained room with an old man chain smoking telling you what to do].

Singer has vowed previously to appeal her petition signatures to Commonwealth Court, so this might not be the end of it yet.

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