Addressing Philadelphia’s Housing Needs
The Philadelphia’s Housing Authority’s Opening Doors Initiative is an ambitious 10-year plan designed to address the city’s affordable housing needs by creating new housing and reinvesting in its aging public and affordable housing stock, which require major capital investment.
The following is a summary of the city’s need and how PHA plans to use innovative federal programs to leverage the capital investments needed to create and preserve thousands of affordable housing units while maintaining resident rights.
PHA’s Aging Housing Stock
Public housing is the largest affordable housing resource in Philadelphia. However, PHA’s portfolio of more than 12,900 public housing units is aging and requires major investments to ensure that it continues to be a resource for future generations.
More than 3,800 units in 13 PHA housing developments are 70 or more years old with major design, structural and/or building system deficiencies that call for major redevelopment.
An additional 9,000 public housing units require significant capital investments. PHA will perform light to moderate rehabilitation to reposition them for long-term preservation. This includes PHA’s inventory of more than 3,900 “scattered site” homes throughout the city.
Capital Investments, Stable Operating Funds Are Needed
Historically, public housing funding provided by the US Department of Housing and Urban Development (HUD) has been unpredictable and inadequate to address capital needs or ongoing operating costs. Public housing rules make it exceedingly difficult to raise first mortgage proceeds as other private or subsidized owners routinely do to recapitalize their housing portfolios.
The cost to preserve and redevelop existing Philadelphia’s public housing is currently estimated at $3.8 billion. Actual costs will depend on many factors including inflation, interest rates and variable construction costs.
Federal funding can only address a fraction of the capital needs of the public housing program in Philadelphia. By way of comparison, PHA received only $55 million from the federal Public Housing Capital Fund program in 2023.
Converting to Section 8 Will Enable PHA To Leverage Funding
The federal Section 8 program provides more predictable and stable funding for operating costs while preserving resident rights. The Section 8 program, which currently assists 2.2 million households nationwide and over 20,000 households in Philadelphia, will enable PHA to leverage the public and private debt equity it needs to fund its preservation and replacement efforts. Converting to the Section 8 Project-Based Voucher program is a key element of PHA’s preservation strategy.
At the national level, HUD is encouraging housing authorities to reposition from the public housing program to Section 8. Section 8 provides long-term rental subsidy contracts, with annual inflation adjustments, both of which are missing in the public housing program and both of which are essential for accessing private lending. Converting public housing to Section 8 ensures permanent affordability and protects existing and future resident rights.
PHA Will Use Innovative Federal Government Tools
In 2013, the federal government created the Rental Assistance Demonstration Program (RAD) program to facilitate conversion of public and other assisted housing to Section 8 project-based assistance while ensuring permanent affordability and guaranteeing resident rights. Since then, over 170,000 housing units in the U.S. have been converted to Section 8 under RAD, generating over $19 billion in capital resources.
Under RAD, housing authorities can both convert existing public housing and support the development of new housing units through the “transfer of assistance” and “Faircloth to RAD” components of the program. Assistance can be transferred from an existing distressed public housing property to a newly developed property.
In addition, many housing authorities, including PHA, operate fewer rent-assisted units than their “Faircloth” limits allow – statutory caps Congress established in 1998 on the number of public housing units the federal government would support. Using the “Faircloth to RAD” program, deep rental assistance can be provided for nearly 227,000 new housing units nationwide, including approximately 7,000 in Philadelphia.
In addition to the RAD Program, other HUD tools that can be used to support the repositioning and preservation of public housing include Section 18 demolition or disposition and the use of “RAD/Section 18 blends”. Section 18 of the Housing Act of 1937 governs the conditions under which public housing can be demolished or disposed (removed from inventory), making the housing authority eligible for Section 8 replacement vouchers. Replacement vouchers can then be project-based either to renovate the buildings or to build new units, where appropriate.
PHA will utilize both RAD and Section 18 tools to preserve and expand affordable housing. Regardless of the option used, all residents will be guaranteed an absolute right to return and provided the same basic tenant rights and protections that currently exist in the public housing program.
Need for Affordable Housing Is Growing
The need for affordable housing in Philadelphia continues to grow. More than 105,000 low-income applicants are on PHA’s combined waiting lists, and many have been waiting for years. In early 2023, PHA opened its Housing Choice Voucher (HCV) program waiting list for two weeks and more than 37,000 applications were received.
PHA’s waiting lists capture only part of the real demand for affordable housing. A 2020 study by the Pew Charitable Trusts noted that 88% of renters in Philadelphia with household incomes less than $30,000 are housing cost burdened, meaning they spend more than 30% of income on housing costs. Even more troubling, 68% of these renters pay more than 50% of income for housing costs.