(Photo: Jon Geeting)
A few weeks ago we reported that Philly had permitted over half the new housing units in Pennsylvania in 2021, based on the November totals published by the U.S. Department of Housing and Urban Development (HUD.)
It seemed likely those percentages would probably hold once the December totals were announced, so we felt comfortable publishing that headline. But little did we know, the December numbers released this week would render that a vast understatement of the situation.
With the December numbers added, and revisions made to prior months’ totals, the final number of housing units permitted in Philadelphia in 2021 came in over 26,000 units—roughly double the total to-date from November!
That’s a shocking number, representing more than five times the housing units that Philly would have permitted even in a very good typical year. Even more shocking is that it means Philly permitted two-thirds of the new housing permitted in Pennsylvania in 2021.
Clearly, 2021 was not a typical year, owing in large part to the policy-induced deadline to secure the full 10-year tax abatement on property improvements. That policy’s value decreased by about half starting January 1st, leading local builders and contractors to scramble to get their zoning permits before the end of the year.
At a Center City District event this fall, former Building Industry Association president Leo Addimando said he estimated the expiring abatement probably pulled forward in time about 2,000-3,000 housing units that would’ve been initiated in future years instead, if not for the December 2021 deadline. It would be very interesting to revisit that prediction given the much larger-than-expected final number for 2021.
Unfortunately, the HUD data groups together all projects over 5 units into the same category, so it’s tough to get a sense of what types of buildings account for most of these new units. For that reason it’s helpful to pair this information with Center City District’s new housing report released last week week that broke down the housing boom in more detail for the greater Center City area. One major finding was that three in five homes permitted in Philadelphia in 2021 were in greater Center City.
While this is obviously a lot more housing supply than Philadelphia is used to, there are also some reasons to think it’s still not going to be enough for the short-to-medium term.
For one thing, while the rental market might be saturated for a little while once all this inventory is built, there’s also still a shortage of single-family homes for sale in both the city and region, and the HUD data shows Philly’s rate of single-family home construction was actually fairly anemic, even as multi-unit projects boomed.
The HUD data shows Philly only permitted about 1,500 houses the entire year, which works out to around 150 per City Council district (though not evenly distributed of course) for all of 2021. Is 12 new single-family houses a month per Council district enough housing when all reports suggest there’s barely any inventory available?
And while inventory is low in Philly, the situation is even more intense in the surrounding counties, where the Philadelphia Business Journal reports that the Greater Philadelphia housing market had less than one-month’s worth of supply as of January.
“Inventory will continue to be one of the biggest hurdles for buyers this spring, the agents said. The housing market had less than one month of supply in January – meaning that the inventory of homes for sale would be gone in less than a month at the current sales rate – according to data from MarketStats by ShowingTime based on listing activity from Bright MLS.
“People are not moving because there’s literally nowhere to go,” Check said.
There were 6,094 new listings put on the market in January, a 13.8% decline year over year, according to Bright MLS.
Successful buyers have to be willing to “waive everything,” Check said. While she doesn’t like to advise her buyers to waive contingencies or inspections, it has helped buyers secure deals. Check has also seen buyers close deals by going for a home that’s under budget and offering more than the asking price.
Waiving all the inspections isn’t something anybody voluntarily wants to do when buying a house, but this is a function of the extremely low inventory and the market power that sellers can wield when buyers have too few options. And the only way out of this is to create more options by permitting more housing.
Despite high and rising prices in many of Philadelphia’s affluent suburban cities and towns, many of these locales permit pathetic amounts of new housing, despite having the kinds of land values that would make new home-building a very attractive business proposition.
All combined, the four counties outside of Philadelphia—Bucks, Chester, Delaware, and Montgomery—permitted just 5,183 homes in 2021, which is just one-fifth of Philadelphia’s total.
Delaware County permitted only 535 homes the entire year—less than some individual Philadelphia apartment buildings permitted in 2021—while Bucks permitted just 966 homes, Montgomery permitted 1,494, and Chester permitted 2,188. The wealthiest region of the state, minus Philadelphia, only accounted for 13% of the total housing permit issued in Pennsylvania in 2021. In addition, just 1,318 of the 5,183 units permitted in the suburban counties were in multi-unit buildings. Meanwhile in Philadelphia, 94% of the housing permitted in 2021 was multi-unit housing.
These totals are best viewed in comparison on a per-capita basis, per 1,000 residents in the county, as a way of thinking about the rate of housing growth in each county. Philadelphia grew at a very respectable rate of 16 homes permitted per 1,000 residents (higher than New York City in 2021) while Delaware County came in last at a rate of 0.9 homes permitted per 1,000 residents. Bucks permitted housing at a rate of 1.4 homes per 1,000 people, Montgomery at 1.74, and Chester at 4 homes per 1,000 residents. Only Chester and Philadelphia came in above the state average of 3.
These are extremely low rates of house permitting for one of the wealthiest metro regions in the United States, and this is why it’s so important for state lawmakers to take more of an interest in the many opportunities that exist for solving these problems from the state level. Local governments unfortunately don’t have the right balance of political incentives to solve this problem on their own, as creating more opportunities for housing to be built comes with some very tough local politics and ruffles the feathers of some powerful constituencies. But at the state level, lawmakers have a lot clearer of reasons to support greater housing availability and affordability in broad strokes, greater opportunities for people to live close to jobs, more economic growth, and more good-paying jobs for non-college workers.
There are all kinds of things state lawmakers who wanted to do something to make our wealthiest areas permit more infill housing could do to make it happen, especially for areas close to regional rail stations in the Southeast, and it’s past time we started to see some lawmakers start throwing some bills at the wall to see what can get support.