Public-private partnerships are fueling a multibillion-dollar affordable housing renaissance in Philadelphia. The initiative, led by the Philadelphia Housing Authority, is restoring declining neighborhoods and spurring private development in areas where few builders saw opportunity before.
"Instead of repair and patch-up, we are able to build mixed-income, rental, and homeownership communities," explains Carl Greene, the housing authority's executive director. The blended funding allows the Philadelphia agency to create affordable housing that compares with market-rate offerings. "Mixed financing has allowed us to build what are often the finest developments in a neighborhood, driving up property values in the surrounding communities."
That's the beauty of the mixed-finance program, which allows public housing authorities to combine capital grants with other public or private funding sources, and secure private financing by pledging future capital grant funds as security. The resulting housing at the workforce-affordable, Section 8, and market-rate price points increases inventory and often serves as a catalyst for community revitalization and retail/ restaurant development.
More and Better Inventory
Since 1998, the Philadelphia Housing Authority has received more than $150 million in private investment through tax credits and bond allocations. In 2004 alone, the agency and its partners raised more than $48 million in equity.
The jewel in PHA's crown is the $165 million Greater Grays Ferry Estates project. The 40-acre mixed-income development features apartments and single-family homes, a community center, and a senior care center, all built with a combination of low-income housing tax credits, bonds, and other financing sources.
"We knew that to attract people to live in our buildings we had to include the same amenities as private market housing, such as carpeting, air conditioning, and garbage disposals," Greene says. "We could not build the kind of beautiful housing we do today and include these kinds of amenities if we relied only on federal capital funding."
This trend towards mixed-finance deals is being driven by several factors:
- Reduced federal funding. Budget cuts mean less capital from Capitol Hill. "Federal funding levels are headed down and federal policies are constantly shifting," Greene notes.
- Investor interest. Urban infill markets are in demand, both from residents and investors. "Competition for deals and the resultant inflated land prices are driving the trend," explains Nicole McAllister, executive director of development and external affairs for the University of Southern California's Lusk Center for Real Estate in Los Angeles. "Institutional investors are under tremendous pressure to place money in real estate, and the surplus of capital sometimes has made investors pay astronomical prices for land and units."
- Economic development and community redevelopment. Many municipalities and community organizations want to "generate business investment in communities beyond the bricks and mortar," says Bernard Husser, managing director, acquisitions, in MMA Financial's Boston office. "There's increased recognition of the economic power of these communities."