Robert C. Larson Awards 2019 Winner: Philadelphia Redevelopment Authority’s Land + Credit = Workforce Homeownership Program
August 16, 2019
Philadelphia, a city of 1.58 million people is often referred to as a “tale of two cities,” one with rapid gentrification and high home prices, and extreme poverty and disinvestment in the other. This context had led to significant lack of supply of workforce housing (80-120% AMI) in desirable neighborhoods. According to the City’s Housing Action Plan, Philadelphia will need to preserve 5,500 units of workforce housing and produce an additional 6,000 to keep up with demand.
The goal of this Workforce Housing program is to create 6,000 new workforce homeownership units through a multi-pronged approach:
1) Locational analysis, which identifies clusters of publicly owned parcels in appreciating neighborhoods in order to package RFPs of bundled parcels that are appropriate for workforce homeownership;
2) Customized pricing, which disposes the publicly-owned parcels at a discounted price determined through an underwriting process that seeks the highest possible sale price to the public sector while providing a discount to pencil with a capped sale price to the homebuyer;
3) Restrictive Covenants, which require developers to ensure the properties are owner-occupied, homeowners are income certified, and that resales are made at an affordable price-point for up to 30 years; and
4) Credit enhancement, which provides construction lenders with a 25% partial repayment guaranty on the condition that they loan at or above 85% loan-to-cost in order to open up availability of capital for developers of workforce product.
The first workforce housing project under this program went to settlement in September 2015. The program so far has led to 13 projects with 148 units of workforce housing and an additional 62 market rate units in mixed-income projects for a total of over 200 units. One development is called the Francis Villas, which was developed by BMK Homes, an established market-rate developer. The project was built on a scattered-site acquired from the public sector in 2018, producing 16 for-sale townhomes sized appropriately for families. The project is located in the fast gentrifying neighborhood of Francisville. This is BMK Homes’ second workforce housing project.