PHA is transforming student apartments in University City into affordable housing
The housing authority promises there's more big news coming as it embarks on a three-pronged strategy of acquiring privately held buildings for conversion, fixing its old stock, and building new.
The Philadelphia Housing Authority purchased two student housing buildings in University City last week, with plans to convert them to affordable housing this summer.
The acquisitions are part of a larger strategy by the federally backed agency. In the coming months, PHA plans to acquire 2,000 units of private-sector housing, with an emphasis on areas with low crime rates and access to quality education, employment, and other amenities.
“We’re looking for properties in communities that have long denied PHA residents,” said Kelvin Jeremiah, CEO of the housing authority. “I subscribe to an approach that in any city there shouldn’t be anyplace where people of lesser means shouldn’t reside.”
The two buildings purchased last week are the 40-unit “Legacy at Powell” at 3608 Spring Garden St., purchased for $6 million, and the 44-unit University City Flats at 4030 Baring St., bought for $14 million.
When the buildings’ current leases expire in June, they will be refilled with tenants using the Housing Choice Voucher Program, known as Section 8 vouchers. The University City Flats will see its four-bedroom, roommate-oriented units divided into more family-friendly layouts.
This strategy of acquiring privately held buildings is cheaper than building new and can get tenants into housing more quickly. PHA estimates the cost at 45% of a new build of similar size.
“Here we can acquire a move-in-ready property and make it available to residents in three to four months,” said Jeremiah. “It would take at least 18 months [to build new], not including the preconstruction regulatory stuff. All that adds to cost, and the labor cost that’s a significant cost driver in Philadelphia.”
Both of the University City buildings were owned by David Blumenfeld of Cross Properties, who earlier this month also sold PHA the 233-unit apartment complex known as the Dane in Wynnefield for $51 million.
At the end of last year, the agency also acquired Brith Sholom Senior Center in Wynnefield Heights after the previous owner badly neglected it. PHA initially said that the remaining tenants wouldn’t have to move out, but in November announced the building had to be emptied before rehabilitation. Executives from the previous ownership, the Puretz family, have been sentenced to federal prison.
Jeremiah says that the city’s housing market is well primed for this acquisition strategy. Some private landlords are finding themselves burdened by high interest rates and intense competition in the apartment market, which makes it difficult to charge the rents they initially projected.
PHA has seen more private-sector landlords court Section 8 voucher holders for this reason, too.
“Virtually every day, I’m getting a request or two to consider purchasing this or that property,” Jeremiah said. “We’re seeing vacancies across the city. The housing market, the high interest rates are creating tensions for private market owners who are having to hold on to assets.”
Jeremiah says PHA plans to spend $200 million to $500 million on such acquisitions in the coming months.
The housing authority’s plan comes in the midst of concerns that thousands of currently affordable homes could be lost, as the subsidies supporting them expire. Many federal affordability programs are not permanent, as traditional public housing was, but offer protections only for set periods of time.
The University City town-houses controversy, in which a private landlord moved to close affordable homes after a subsidized contract expired in a high-cost area, typifies the fears of housing advocates. After years of protest, legislation, and lawsuits, a deal was brokered that left the city with a fifth of the site, where there are plans to build replacement multifamily housing for the displaced families.
Jeremiah says PHA will be keeping an eye out for opportunities to buy currently affordable housing, where a landlord may be tempted to sell the property after the subsidies run out.
Councilmember Jamie Gauthier, who represents University City, says she is excited by PHA’s acquisitions in her district.
PHA is “literally [the] biggest game in town in terms of acquisitions to keep units affordable in very desirable areas,” said Gauthier, who has made housing affordability one of her principal legislative goals. “I’m totally here for it.”
Local housing experts hailed PHA’s acquisitions as a good way to boost the city’s much-needed affordable housing supply. But some fretted about the authority taking on new properties as many of its older buildings suffer from the long-term retrenchment of federal resources for affordable housing.
“Most housing authorities have a ton of deferred maintenance on their existing buildings,” said Akira Drake Rodriguez, professor of planning at University of Pennsylvania. “I like the idea of this initiative, and making formerly privately held housing public. But how is this sustainable?
As of fiscal year 2024, PHA had a $3.8 billion gap in unfunded capital and redevelopment needs.
Jeremiah said that PHA would have more to report on its reinvestment strategy in the agency’s existing portfolio soon and emphasized that they have been chipping away at the backlog.
He said PHA has a three-pronged strategy of acquisition, rehabilitation, and new construction.
“We are not abandoning our existing housing stock,” Jeremiah said. “We’ve been investing heavily in that, but also our existing housing portfolio is insufficient to meet the incredible demands that exist in the city.”