TRIGGER WARNING: White people whining about something.
In reference to this blog’s take on the transformed, significantly-less-crimey Point Breeze…
Response? Why waste your and my time writing a 10 paragraph epic to a douche comment made at 3 in the morning? Here’s a better response:
Can’t wait til’ it warms up and I get to see the spectacle of white people looking very white at a pop-up beer garden in an empty lot in the ‘hood, talking ’bout which white person they hope will become President.
Would you believe it? A major policy of former mayor John Street is being picked up and will be put into action in Baltimore, the Neighborhood Transformation Initiative. The Baltimore Sunsays it all…
Calling Baltimore’s abandoned rowhouses “hotbeds for crime,” Gov. Larry Hogan on Tuesday announced a nearly $700 million plan to tear down thousands of vacant buildings and replace them with new developments — a level of investment in Baltimore’s poorest neighborhoods some say is unprecedented.
NTI was a $300MM program put in place under the former mayor to demolish the hood. Scores of homes were leveled in areas across the city with an eye towards blight reduction and crime rates; most NTI demolitions occurred in the western neighborhoods of North Philadelphia. Towards the end of the program some of the money was drained to assist subsidized housing developments.
The key difference between Baltimore and Philly? Who is paying for it and the size and the scope of the program. Philadelphia paid for NTI by writing out massive amounts of bond debt. With no dedicated revenue to back up the bond payments this severely limited the scale of the program because of the debt load that the city could handle.
In Baltimore we’re talking $700MM committment and it’s going to come from the state with Bmore mayor Rawlings-Blake pledging to toss in another $94MM. Baltimore is quite a bit smaller than Philly and this has the potential to mow down not just a couple of blighted neighborhoods, but perhaps a half-dozen of them or more.
One of the neighborhoods targeted is Sandtown, where Freddie Grey lived.
Both initiatives have the same starting theory: mowing down crack and heroin dens should obviously reduce crime. It offers fewer opportunity for wayward young kids to get into trouble. At least, that’s how programs like this are sold to the public by officials to make the prospect of years of demolition palletable.
There’s certainly a downside, besides the debt. Building trades contractors seriously overbilled the city for work performed. The Redevelopment Authority which oversaw the demolitions had none other than John Dougherty running the agency–talk about a fox running the chicken coup. When Ed Rendell was mayor he was able to knock down 10,000 homes with just $88MM; 6 years later with a much bigger budget it achieved an efficiency below 60% thanks to the overspending.
Four years into the program NTI transformed itself. City Council, agencies and activists started to see NTI more as a honeypot to pay for all sorts of pet projects rather than follow Street’s original vision. Street also didn’t propose a rigid structure for what purposes the money was to be used for. This left the decisions to the whims of City Council. Towards the end of the funding term last year almost $30MM remained unspent.
All-in-all, NTI is seen as a failure. Demolitions were well underway when Philadelphia saw its homicide rate spike in the summer of 2006. NTI also avoided confronting property speculators–those people who actively own blighted property and are far more interested in holding the deed. Condemnation orders were slow to come or would not be issued at all. This resulted in some vacant and abandoned homes disappearing on city blocks but not other ones. The program also didn’t focus on VLCIPs (Vacant and Large Commercial/Industrial Property). Philadelphia is still littered with half-collapsed factory building blight which has never been touched.
Ultimately the largest failure of NTI was in its own namesake. It wasn’t really a transformative program. The policy which has boosted rehabs and new residential construction in blighted areas of Philly still remains the 10-year tax abatement program, a product of the Rendell Administration. That policy too is controversial; some people would rather be happier with class and racial self-segregation in its neighborhoods than see the gentrification that creates plural demographics and will only tolerate a demolition program so long as it keeps the deeds to condemned property out of the real estate market.
I can’t really say I want to congratulate Baltimore on this one. We went down this road and it didn’t go well. Maybe Maryland’s Republican governor who is paying for this and its Democratic mayor who is happy to accept the cash can figure out a better way to do it than we did.
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:
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.
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:
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 $140Kaccording to Trulia and home sales have never come close to 4,000 a month:
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:
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.
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
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.
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.”
Since the quota system was enacted in New Jersey, residents have become opposed to any and all high density housing schemes proposed in townships across New Jersey. One has to wonder: since COAH was created, has the mandated quota system actually contributed anything substantive in delivering affordable housing to folks who, for whatever un-Godly reason, want to call New Jersey home?
The short answer is no. Since the quota system came about, the pace of low-income residential construction in New Jersey did not pick up speed as townships armed with planning boards carefully crafted zoning codes to make high density residential hard to implement combined with green space initiatives intended to remove developable land out of the private market inventory. Low density residential construction aimed at higher price and less likely to trigger political firestorms continued.
In essence, affordable housing has all but disappeared all across New Jersey as the cost of living and rents have zoomed upwards while the number of new housing units is far-eclipsed by the private market rents moving upwards making affordability vanish. Gentrification occurring in Northern New Jersey worsens the issue because “worthless housing” which is a private-market side effect that creates affordability through disinvestment and deflating real estate values is reversed.
The higher cost of real estate in New Jersey caused by the Fair Housing Act is the core reason why New Jersey’s foreclosure crisis has not improved since the Great Recession began. The strong resistance by Jersey townships to develop any high density housing for fear of the required affordable housing quotas helps drive higher real estate prices overall as the supply never quite catches up with demand. Existing residents who might not have been NIMBY became complete BANANAs (Build Absolutely Nothing Anywhere Near Anyone).
Before the Recession that fact made flipping attractive, which raised the cost of real estate overall for middle class New Jersey residents. To buy a house in New Jersey pre-2007 meant taking out a mortgage for far greater amounts than one’s income could stomach, which sealed the fate for many borrowers.
The states surrounding New Jersey; Pennsylvania, Delaware and New York, have all recovered from the housing crisis and foreclosure rates have returned to normal. House price collapses led many private market houses turning over to the low-end private rental market. New Jersey is still dealing with the aftermath thanks to its clogged court system and a deep reluctance by creditors to flood the state with the backlog of homes which could destabilize the rest of the market and create a disinvestment price spiral. Not that the houses won’t sell at foreclosure: New Jersey’s higher rental rates makes foreclosure homes attractive to rent-seeking real estate investors.
Townships like Pennsauken, NJ are slowly but surely transitioning to a ‘rental town’, where the majority of residents are renting rather than owning their property. High rental to homeowner ratios tend to flatten or decrease property value as potential homebuyers are put-off by the quality of life problems that concentrated low income rental generates. Without gentrification, which is only present in pockets in Northern New Jersey in close proximity to New York City (there are none near Philadelphia), this makes protectionism the only real thing that holds up residential real estate value everywhere else in New Jersey, as the state’s skewed real estate market has centered around constricting supply since Fair Housing was created. Every Jersey township that embraced the Fair Housing Act has declined in overall property value. And with those declines came with it lower property tax revenue; which is not that much of an improvement compared to the protectionist township next door dealing with non-payment of real estate tax thanks to foreclosure of more expensive housing.
Compounding the real estate problem further: the labor market in New Jersey still remains unattractive, with NJ hanging on to an 8.4% unemployment rate compared to Pennsylvania’s 7.5%.
New Jersey’s experiment with court-enforced mandates to create affordable housing is a disaster. It didn’t create anywhere near the number of new housing units that affordable housing activists wanted to see built, and the only positive thing Fair Housing and COAH did for the state was throw a wet blanket over some urban and suburban sprawl at the expense of skyrocketing real estate values as a result of constricting housing supply.
The easiest solution for those living in New Jersey who are seeking affordable housing is simple: move to Pennsylvania. You’re statistically more likely to find a job, the housing is more affordable, the tax burden overall is less, and there’s no quota mandos on this side of the Delaware.