City Council of Philadelphia September 2020
• Too many households – 28% of homeowners and 49% of renters in Philadelphia – are cost burdened, paying at least 35% of their income towards housing;
These are just a few of the many affordable housing problems that were challenging our City. City Council has worked diligently to expand the amount of local resources for affordable housing with such efforts as:
• Too many low-income homeowners did not have the funds to make the repairs to allow them to stay in their homes;
• Establishing the Housing Trust Fund which receives revenue from a special recording fees on mortgages and deeds;
• Too many low- and moderate-income households were unable to save enough money to buy a home;
• The $100 million dollar bond issue to eliminate the Basic Systems Repair backlog and provide low interest home improvement loans funded by a .1% increase in the transfer tax; and,
• Too many households were without sufficient income to even rent an apartment; and, • Too many disabled persons did not have the resources to make their homes accessible.
Securing a $20 million annual commitment to the • Housing Trust Fund funded by property tax revenue generated from properties whose 10-Year abatement has expired.
$300 MILION BOND BUDGET
TOTAL
$100,000,000 $100,000,000
Despite these efforts, combined with the devastating impact of the COVID-19 pandemic, we are well short of the resources we needed to bridge this period of uncertainty and what will certainly be a long-term recovery. We need to make sure all our citizens our housed and housed in safe affordable housing. Our City needs to step up and meet this challenge. In order to meet the overwhelming demand for additional affordable housing resources, City Council proposes to capitalize revenue streams, including a new 1% Construction Impact Tax, dedicated to affordable housing while issuing $300 million in new bonds. The bond(s) proceeds would be distributed among various successful City affordable housing programs as outlined in the attached budget. Over a three-year period, the initial investment of $261 million is anticipated to result in $1.9 billion of direct and indirect economic activity, while producing $54 million in local tax revenues in the first three years. In addition, some of these resources would be dedicated to rehabilitating the 871 structures currently under public ownership and make them available for rent, lease purchase, or sale to low- and moderate-income households. Projections, which are based on ten years of data provided by the Department of Licenses and Inspections (L&I), show an average yield of $20.7-$26.3 million in net revenue per year. Over the past ten years, the 1% Construction Impact Tax would have generated an average of $20.7 million annually. Over the past five years, the tax would have generated an average of $26.3 million annually. This increase in average yield is reflective of the robust, growing real estate development market pre-COVID from 2016-2020. CONSTRUCTION IMPACT TAX PROJECTION: 1% TAX RATE, 5-10 YEAR LOOK BACK
PROJECTED TAX YIELD
5-YEAR AVERAGE
10-YEAR AVERAGE
$26,301,524
$20,762,847
The Construction Impact Tax would not apply to tax exempt properties. The projected yield was discounted by 50% to account for tax-exempt projects – a conservative discount considering our analysis of the L&I data.
$300,000,000 $300,000,000
ESTIMATED ECONOMIC IMPACT PROGRAM
INITIAL CITY INVESTMENT
TOTAL ECONOMIC ACTIVITY
$30,000,000 $6,000,000 $60,000,000
$30,000,000 $6,000,000 $60,000,000
$30,000,000
$30,000,000
Production Permanent Homeless Housing
$120,000,000 $15,000,000
$933,333,333 $41,666,667
TOTAL
$261,000,000
$1,341,000,000
MAINTENANCE AND REPAIR PROGRAMS
BSRP Adapt Modifications Preservation HOME BUYING PROGRAMS
Philly First Home HOME CONSTRUCTION PROGRAMS
1 These estimates are based only on the spending for the programs, and do not take into account any impacts associated with raising program funds. 2 In addition to the programs analyzed in this memorandum, the City provides funding for additional programs such as Rent Assistance, Tangled Title, Eviction Prevention, Small Landlord Loans/Working Capital. The proposed funding for these programs combined over the next three years is $300 million.
PHILADELPHIA Direct Impact
$1,341,000,000
Indirect and Induced Impacts
$546,000,000
Total Impact
$1,905,000,000
Total Employment Supported (FTE)
11,300
Total Employee Compensation Supported ($M)
$580,000,000
3 The real estate transfer tax was calculated off an estimated 4,704 units transferred within the PhillyFirstHome and Housing Production programs over three years at the average price of $174,680 based on sales price information from the PhillyFirstHome program.
TAX TYPE
PHILADELPHIA
Impact
$17,000,000
Sales
$4,000,000
Business Income and Receipts
$6,000,000
Real Estate Transfer
$27,000,000
TOTAL
$54,000,000