Brotherly Love?

Philadelphia passes affordable housing tax on new construction, but it may not last

Development East News Urbanism
Philadelphia's rising skyline. (Jacqueline Day/Unsplash)

Philadelphia’s City Council narrowly approved a tax on new construction projects last Thursday, in a 9-to-8 vote that may not stand up to mayoral scrutiny. The measure would bring in about $22 million a year for affordable housing, but trade unions and developers are arguing that the tax would slow the city’s economic growth.

The one percent tax on new construction and significant redevelopments is part of a sweeping package aimed at boosting the city’s affordable housing tools. In a move to capitalize on Philadelphia’s meteoric building boom, the fee would apply to projects of any scope and be paid when filing a building permit. Funds from the new construction tax would go into a Housing Trust Fund, which non- and for-profit developers could tap for construction or closing costs.

A zoning change was also included in the measure, which would allow developers to increase the height and density of their projects in exchange for making 10 percent of their rental and condo units affordable. Opting into the zoning bonus would not preclude developers from also paying the new tax.

“Affordable” units, in this measure’s language, would be open to households who have lived in Philadelphia for at least three years, and who make less than a combined $105,000 a year; 120 percent of the city’s median income.

Not everyone is on board, and building trade unions, developers, businesses, and some affordable housing advocates around Philadelphia have come out against the tax on new construction. In a letter to the City Council’s finance committee ahead of a vote earlier in the month, trade unions came out swinging against the tax, arguing that it would dissuade Amazon from picking the city for its second headquarters.

On the other end, affordable and low-income housing advocates feel the $105,000 income cap is too generous, and that the city should do more to tighten the requirements.

Of course, the tax’s passage is far from assured. Sources within the City Council have reportedly indicated that Mayor Jim Kenney is likely to veto the bill over the rising pushback in a move similar to Seattle’s recent head tax controversy. The veto would be the first of Kenney’s career, and would require 12 City Council votes to override–far from a sure thing, considering the slim margin that the bill originally passed with.

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