Achieving the Goal
The Healthy Rowhouse Project has developed these six key recommendations that will help us preserve our rowhouses for the future and improve the health of our citizens.
Create a bold public health and housing policy for Philadelphia.
Philadelphia needs a bold housing plan to preserve its existing affordable housing. Philadelphia’s housing budget has been shrinking consistently over the past three decades. The city must establish clear policy priorities and focus its limited dollars on stemming the loss of affordable homes. Preserving homes that are affordable to lower income Philadelphians is far less costly than building new houses or tearing down abandoned homes.
Public health policy should align with housing policy to improve occupants’ health and lower health care costs. Poor housing conditions are associated with a wide range of health conditions, including respiratory infections, asthma, lead poisoning, injuries, and impaired mental health. Directly addressing substandard housing will decrease health disparities between low- and high-income Philadelphians.1
Agencies within the City’s housing and public health departments will need to cooperate. The City must clearly assign responsibilities to relevant agencies, avoid duplication of effort, and restructure inter-agency relationships to allow city departments to work together collaboratively to identify and deliver housing improvements to homeowners and tenants who need help.
Increase the resources available to lower income property owners.
Expanding resources to property owners can improve occupant health and the viability of their properties, and can also help ensure a fair balance of public housing dollars between new construction and rehabilitation of existing homes.
Under its Basic Systems Repair Program, Philadelphia currently provides grants to lower income homeowners for housing repairs. However, four-year waits for assistance are common due to underfunding. For too many families, help comes too late: their home has become uninhabitable, and they have been displaced. The Healthy Rowhouse Project recommends augmenting direct grants with a mix of matching grants, deferred loans (due upon sale of the property), and low-interest loans. In this way, many more households can be served at modest individual cost.
Loan programs work best in neighborhoods where values are appreciating. Property owners with limited incomes can tap into growing equity to support a small loan to pay for home repair assistance. For some property owners, significant property appreciation over the past ten years – 22% citywide – will support a small loan.3 Other homeowners may be able to pay a small percentage of the total cost for labor and materials. This increase in values does not put money in the pockets of owners to spend on repairs, but modest loans can tap into that equity to finance needed repairs.
The City can make its dollars go farther by putting more of its direct funding into repairs and renovations. In the decade ending in 2011, the City spent 64% of its subsidized housing dollars on new construction, according to Phila2035, and that percentage rose to 87% between 2009-2011.4 Each newly constructed single family house costs a minimum of $300,000 to build, requiring gap funding on the order of $200,000. Between 14 and 30 existing homes can be brought to a state of good repair for the same investment.
Establish viable financing mechanisms to bring home repairs and rehabilitation to scale.
The right financing tools can enable us to repair 5,000 owner- and renter-occupied homes each year. These tools will be based on successful models in other cities and will include deferred loans, due upon sale or transfer of the home, and low-interest loans. Philadelphia will need significant new funding to renovate 5,000 homes every year. A coordinated rowhouse preservation program could adapt financing tools from other cities to Philadelphia’s unique conditions.
Potential Models to Finance Repair of Owner Occupied Homes:
Deferred Loans: Several United States counties offer deferred loans to low- and moderate-income homeowners. These require no monthly payments but are due in full when the owner sells or transfers ownership of the home. For example, King County in the State of Washington offers this kind of deferred loan of up to $25,000 for home repair, with a zero-percent interest rate. St. Paul Minnesota offers similar zero-percent interest loans, permitting forgiveness of the entire amount if the owner stays 30 years. Genesee County OH also offers deferred loans and forgives a portion of the loan for low-income households.
Bond Issue: In Philadelphia, Council President Darrell Clarke has proposed “2000 New Affordable Housing Units Initiative” to fund new construction of for-sale and rental homes in designated “Workforce Housing Development Opportunity Zones.” Bond issue proceeds could also be used to preserve existing rowhouses. Austin Texas invested $5 million of a 2006 bond package and $12 million of a 2013 general obligation bond package to fund home repairs for low-income homeowners through its GO! Repair Program. The program created a collaborative among Austin’s home repair organizations, social service providers, public agencies and utilities and completed work on a total of 320 homes in two years at an average cost of $9,800 per home.5
Employer-Assisted Housing: The City could assist owners in tapping into programs offered by large employers that help employees purchase a new home or repair an existing one.
Sliding Scale “Basic Systems Repair” Payments: The limited resources available to the Basic Systems Repair Program can be extended by enlisting owners with sufficient financial capacity to pay for some repairs on a sliding scale. Habitat for Humanity requires homeowners to pay for a percentage of the costs of materials and labor, and have had a good repayment rate.
Utility Energy Efficiency Programs: Philadelphia utilities have programs that help homeowners to make home repairs that are related to lowering energy use. These programs could be expanded to allow homeowners to pay for a portion of the completed work as part of their monthly energy bill. In Baltimore when Exelon bought utility Constellation Energy, the utility agreed to make available $50 million to the city government for projects to permanently lower energy bills through energy efficiency work such as weatherization, home repairs and lower-usage education.6
Pennsylvania Housing Trust Fund: The Pennsylvania Housing Affordability and Rehabilitation Enhancement Fund (PHARE) commonly known as the State Housing Trust Fund, was created to help the 37 Pennsylvania counties impacted by Marcellus Shale natural-gas development, so Philadelphia did not benefit. The Marcellus Shale impact fee funds the program. Since 2012, PHARE has invested a total of $17 million for new low-income housing development projects and existing home repairs and rehabilitations as well as rental assistance. Senate Bill 1380 seeks to expand funding for the housing trust fund by dedicating a portion of real estate transfer tax future increases up to $25 million, and to to allow the fund to benefit every county in Pennsylvania. The fund proceeds may be used to repair both owner occupied and renter occupied housing.
Philadelphia Housing Trust Fund: The Philadelphia Housing Trust Fund was created in September 2005 to support the development of new affordable homes, repair of existing homes, and the prevention of foreclosure and homelessness. Mortgage and deed-recording fees provided $8.8 million to the Fund in fiscal year 2012. The Philadelphia Association of Community Development Corporations makes a strong argument for increasing the fees by adding other revenue sources in order to better meet the need. The fund proceeds may be used to repair both owner occupied and renter occupied housing.
Potential Models to Finance Repair of Rental Homes
Low-Interest Loans for Landlords: Low-income tenants are often the first to be displaced by either substandard housing conditions or a rapid rise in housing values. In many neighborhoods landlords (often small business people) report that rental income barely covers operating expenses, which makes them reluctant to make repairs or to take on debt.7 They may not have the management skills of larger, more professional investor owners. (National data shows that over 25% of these small landlords are “inadvertent” landlords who either inherited homes and rented them out, or could not sell a primary residence, and rented it instead.8) The City needs to recognize the importance of landlords who rent to low-income families and help them overcome financial challenges by offering low-interest loans and adapting programs to assist investor owners.
Revolving Loan Fund from Investor Banks: In Chicago, a non-profit Community Development Financial Institution (CDFI), the Community Investment Corporation (CIC), has created a $415 million loan pool for multifamily rehabilitation through multi-year commitments from 39 investor banks. From 1984-2013, the CIC made 1,900 loans for $1.1 billion to rehabilitate almost 50,000 units and to provide affordable housing for more than 125,000 people.9 In April 2014, CIC launched a new loan program for distressed 1-4 unit buildings to be targeted to a 32 square block area.10 CIC and its partners found that these small buildings provide almost half of the affordable rental in many Chicago neighborhoods. CIC provides loans to investors who seek to rehabilitate a minimum of nine units within 1-4 unit buildings.11 CIC was the recipient of the 2012 MacArthur Award for Creative and Effective Institutions.
National Housing Trust Fund: The new National Housing Trust Fund will be funded through the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) beginning in spring 2016. This is a new source of funding, as much as $500 million annually, nationwide, aimed at very-low-income households. At least 90% of the funds must be used for the production, preservation, rehabilitation, or operation of rental housing, and at least 75% must benefit extremely low-income households. Up to 10% can be used by homeowners, for preservation and rehabilitation. Pennsylvania will be allotted a share of the money based upon need, with a guarantee of at least $3 million. The fund proceeds will be administered by the Pennsylvania Housing Finance Agency though the Pennsylvania Housing Affordability and Rehabilitation Enhancement Fund (PHARE) program.
Protect tenants’ legal rights to healthy living conditions.
Protecting tenants’ rights and encouraging responsible rental practices through systematic enforcement will promote investment, rather than displacement. The Healthy Rowhouse Project seeks a systematic code enforcement approach that ensures healthy and safe living conditions for the 40% of tenants citywide who live in rowhouses. View a summary of Philadelphia tenants’ legal protections to a habitable, healthy home.
Code enforcement should be consistent, and data driven (to identify and prosecute the worst offenders) but focused on helping landlords (especially those with little financial capacity to make improvements). Strategic code enforcement can reduce health and safety violations without displacing tenants or removing affordable housing stock.
Develop capacity within health care and social service providers to refer residents to resources.
The Healthy Rowhouse Project seeks to connect health and social service professionals with programs to improve their clients’ housing conditions and their health. Health workers, social workers, and other professionals visit thousands of homes every year in Philadelphia, and so are well acquainted with the health risks of poorly maintained homes and the health advantages of good housing. The Philadelphia Corporation for Aging alone visits the homes of over 10,000 seniors each year. In addition, community-health workers at Temple University, the University of Pennsylvania, and other hospitals visit thousands of homes to provide services to patients. The Healthy Rowhouse Project recommends linking these caregivers to programs that improve housing quality so that patients’ health will improve along with their housing. Trusted health and housing professionals working together also can help owners make viable financing choices, prioritize repairs, and find honest, competent contractors.
Evaluate each Healthy Rowhouse Project program.
The goal of the Healthy Rowhouse Project is to create new opportunities for lower income Philadelphia property owners to obtain the resources they need to improve the condition of their homes. It is essential that we track the performance of these programs in order to determine their effectiveness and how they can be improved. This means defining the actions to be taken to reach the 5,000-house goal, defining baselines to understand the current status of the rowhouse housing conditions, setting targets to meet the goals, and choosing indicators that help the City see what is working and what needs improvement.
There is no more powerful engine of growth and jobs than maintaining, rehabilitating, and building new in the city’s rowhouse neighborhoods. By far the most important measure of the success of the Healthy Rowhouse Program is the difference it makes in the lives of lower income Philadelphians.
- Pollack, C., Egerter, S., Sadegh-Nobari, T. et al, “Where We Live Matters for Our Health: The Links Between Housing and Health.” Issue Brief 2: Housing and Health. RWJF Commission to Build a Healthier America, 2008.
- Alicia Glen, Deputy Mayor for Housing and Economic Development, City of New York, Housing for All New Yorkers, PennDesign Fall 2014 Lecture Series (November 10, 2014).
- Econsult Solutions Philadelphia Housing Index analyzed the sale of single-family homes, excluding condominiums, for 4Q2004 to 4Q2014.
- Philadelphia 2035, p.74.
- 2013 Affordable Housing Bond Program Program Summary, Austin Capital Planning Office (September 30, 2014).
- Exelon and Constellation Merger, Constellation Website downloaded January 20, 2015.
- Preserving Multifamily Rental Housing, Research Report for the Multifamily Housing Preservation Committee from the Federal Reserve Banks of New York and Philadelphia (2001).
- Alan Mallach, Landlords at the Margins: Exploring the Dynamics of the One To Four Unit Rental Housing Industry, Joint Center for Housing Studies (March 2007).
- Community Investment Corporation website, fact sheet, downloaded May 7, 2014.
- Community Investment Corporation webpage titled “New: Loans for 1-4 Unit Buildings”, downloaded June 19, 2014 ; Mary Ellen Podmolik, Aid for Rental Market, Chicago Tribune, April 4, 2014.
- Community Investment Corporation Fact Sheet: 1-4 Unit Rental Redevelopment Loan Program, downloaded June 19, 2014.