Houses in the Philly suburbs are still in high demand, but developers aren’t building there

The third time Tajah Patel was outbid for a house in Philadelphia’s suburbs, she felt defeated.

Patel and her husband began looking for a home in the suburbs early this year — something walkable, with a train to Center City where they work. Both professionals, they had money to spend: Their ideal price range was between $500,000 and $800,000.

“We quickly found that we were looking at the higher end of that,” said Patel, a general counsel with Comcast. “Since things with COVID have settled down, we thought it might have gone back to somewhat of a normal time. We weren’t expecting the market to be so competitive.”

Not only were other buyers outbidding Patel and her husband, who asked that his name be left out because of his work as a therapist, they were willing to pay cash or forgo inspections to sweeten the deal.

Having bought a rowhouse in a hot South Philadelphia neighborhood in 2018 with little fuss, Patel was caught off guard by the cutthroat suburban housing market of 2023.

“I don’t know if the city market is just different, but this feels more hectic and frustrating,” she said.

The fact that even high-income home buyers, like Patel, are being squeezed in the suburbs is a testament to the soaring demand in the counties surrounding Philadelphia, where inventory and new housing construction have fallen to historic lows.

The suburban housing crunch is caused by a shortage of land, campaigns to preserve green space, and a powerful antidevelopment sentiment among incumbent homeowners, say suburban builders and county officials.

Those housing pressures are keeping more families in Philadelphia longer. Many of the city’s new homes come in the form of rental apartments, which is why rents in Philadelphia’s most desirable neighborhoods are rising less quickly than their suburban counterparts. It’s easier to buy in the city, too.

“If you want new homes, it’s a lot easier to buy in the city than it is in the ‘burbs because of the inventory issue,” said Shawn Tammaro, founder of Entourage Elite Real Estate & Property Management in Conshohocken.

Last year, Philadelphia planned more new housing units than any of its suburban counties, just as it has for each of the last 12 years. This year is on track to see much the same: The city permitted almost as much new housing in 2023 as Bucks, Chester, Delaware, and Montgomery Counties combined.

“There are many more restrictions on land use in the ‘burbs than there were even in the early 2000s,” said Tammaro, who has also developed housing in areas such as Plymouth Meeting. “This makes it very hard for the small- to medium-size builder to develop smaller parcels, which is really the only thing left in those close suburbs.”

All this means that Philadelphia, despite its post-pandemic tribulations, is succeeding in spite of itself from a development standpoint. So more people with means are staying in the city longer, sometimes permanently — even if they might prefer suburban living.

It’s a paradigm shift from the 1980s and 1990s when almost all regional housing construction was concentrated in suburban counties as deindustrialization and rising crime sapped the city’s economy and drove away residents.

In 1992, just 250 new units of housing received permits in all of Philadelphia, the lowest number on record in federal permitting data stretching back to 1980.

That same year, nearly every suburban county was planning at least a thousand new housing units, and some more than double that. That year Toll Bros. alone expected to complete 2,000 new homes across the collar counties.

Thirty years later, the suburbs are still in high demand, but developers aren’t building at the same pace. The city, meanwhile, is a more palatable alternative than it once was — and it’s one of the only places permitting sizable new construction, especially apartments.

Between 2019 and mid-2023, Philadelphia green-lit well over 35,000 multifamily units, thanks in large part to a speculative rush to lock in tens of thousands of building permits before the city reduced benefits tied to its 10-year tax abatement on new construction in 2021. Over the same period, its four suburban Pennsylvania counties together permitted just 6,500 new multifamily units.

The Northern Liberties Neighbors Association reported that it had reviewed development proposals encompassing almost 6,000 units of new housing just in the last five years. For comparison, all of Delaware County approved fewer than 4,000 new units of housing over the past decade.

“There are a lot of people, the older millennials who are in their 30s, who would like to buy a house in the suburbs,” Michael Pestronk of Post Bros., a major Philadelphia apartment builder, told The Inquirer in late 2022. “But the product doesn’t exist at the quality and price point they want.”

The Post Bros.’ Piazza Alta apartment complex, which recently began renting in Northern Liberties, contains about twice as many units of housing as were planned across all of Delaware County last year.

Housing costs reflect these trends. Philly’s suburbs are regarded as one of the most competitive rental markets in the nation.

A June 2023 report from the real estate tracking company CoStar showed areas such as Conshohocken, Plymouth Meeting, and King of Prussia leading the region with annual rental cost increases of 4% to 5% over the past year. High-cost city neighborhoods where housing construction is booming, such as University City or Northern Liberties, saw a 1% to 2% increase.

The disparity in increasing home values was more stark. Last year, the city saw a slight increase in home prices, while suburbs such as Delaware County saw double-digit increases, even amid steep interest rate hikes.

Demographic and economic shifts have also altered demand.

As people form households later in life and family sizes shrink, multifamily development is proving popular. And homeowners who locked into ultralow mortgage interest rates during the pandemic are reluctant to sell as interest rates have more than doubled, which restricts housing supply everywhere.

With home ownership out of reach for many, Pestronk said he sees high-end apartments as the new starter home for people in their late 20s and 30s who are priced out of desirable suburbs — a demographic that, a generation ago, would have already moved to the collar counties or South Jersey. They might not have ever considered living in Philadelphia.

“It’s really hard to buy a $500,000 house in the suburbs,” said Pestronk. “Because of that, we’re seeing people stay longer in the city. And so we are designing more and more for young families.”

While this new dynamic is partially about changing tastes — with millennial and Generation Z residents marginally more likely to prefer urban amenities and walkable communities than previous generations — it’s also a story of Philadelphia’s suburban jurisdictions making it harder to develop housing that meets those criteria outside of the city.

Chester County’s planning commissioner, Brian O’Leary, says the suburban slowdown is due to a combination of high building costs, little available unclaimed land, and increasing sentiments against new development.

“All these pieces fit together in limiting the supply,” said O’Leary. “The NIMBYism has always been somewhat of a factor, but it’s certainly much stronger now. They’re concerned about traffic generation. That’s the big one for everyone.”

Across the region, attempts to add density or reconfigure sprawling, auto-centered development from the past have been met with public opposition. Ardmore, an older suburban community hinged around a regional rail station, recently tabled part of a new master plan that would have encouraged denser residential development. New multifamily housing in towns such as Swarthmore is often reduced in size and unit count in the face of intense opposition. Cherry Hill in South Jersey recently rejected a senior apartment building due to traffic concerns.

For O’Leary, developing housing on underused commercial property, such as malls and office parks, is a good compromise, with few nearby neighbors and no natural green space to preserve.

But even those proposals have met opposition. Struggling mall owner PREIT hit a wall in its efforts to add 750 multifamily homes to the Plymouth Meeting Mall.

“Plymouth has just been a bear. The township’s been unresponsive,” Joe Coradino, PREIT’s CEO, said in a June interview. “What do the kids say? We’ve been ghosted.”

The company has successfully brought residential elements to its mall properties in other metros and, in South Jersey, added health-care services, in addition to apartments, to empty space at the Moorestown Mall.

But Coradino says the Pennsylvania suburbs are far more difficult political terrain.

“When you look at these municipalities’ master plans, they say they want to build additional multifamily,” Coradino said. “But then they don’t approve it. It’s a very frustrating and ironic situation.”

Philadelphia neighborhood groups often resist new development, too, but the city’s zoning code has proved much more amenable to housing construction than most of its suburban counterparts.

Jason Duckworth, president of the Arcadia Land Co., a development company in the suburbs, said the most desirable communities are more likely to throw up zoning barriers or wage successful campaigns against new development.

“Philadelphia for a long time was concerned about shrinkage, so it’s been incentivized to generate growth,” he said. “In places where there’s enormous demand for growth, zoning is generally about suppressing it. So the supply gets artificially constrained and prices spike.”

Suburban amenities, such as highly rated public school systems, are as attractive as ever. Part of the reason buyers such as Patel and her husband are struggling to find a house is that so many people want to move to the suburbs.

That dynamic has long contributed to residential segregation in the region, as lower-income people have been priced out of the suburban market. Today, the political hurdles to building new housing mean that middle-income residents also are finding it more difficult to move out of Philadelphia.

“The housing supply in the suburbs is low … anyone looking to buy a home has been looking for years,” said Ashley DeLuca, a real estate attorney with Ballard Spahr. “I have two friends I can think of offhand who are renting townhome units with their families in Philadelphia, who intended to move to the suburbs at some point and are still here.”

Even those who eventually do move are staying in the city longer because the hunt for housing is a lengthy process.

This summer, after losing out on five houses, Patel and her husband finally won the bid on a fixer-upper in Swarthmore for $580,000. They will stay in the city another year as the house needs at least eight months of repairs before it’s move-in ready.

“This experience makes me think that trying to get into the area around Philadelphia, there’s definitely inequity there,” Patel said. “For younger couples, or anyone trying to buy their first house, it really feels like the [suburban] housing market is unfair for a lot of people.”