Dina Schlossberg offers testimony to Philadelphia City Council on the crisis of affordable housing preservation

PHILADELPHIA CITY COUNCIL
Committee on Housing, Neighborhood Development and the Homeless, Bill No.221017

Testimony By Dina Schlossberg
Executive Director, Regional Housing Legal Services
April 24, 2023

Good afternoon. Thank you for the opportunity to testify today. My name is Dina Schlossberg. I am the Executive Director of Regional Housing Legal Services.

I would like to thank Council Member Gauthier and the Cosponsors to this Bill- Councilmembers Brooks, Bass, Driscoll, Johnson, Vaughn, and Lozada, for their interest in housing affordability and housing preservation, and for the introduction of this Bill.

Regional Housing Legal Services is a unique organization. We are a statewide nonprofit law firm and a legal aid program. We have unique expertise in affordable, sustainable housing and its related components — community and economic development, utility matters, and preservation of home ownership. For 50 years, RHLS has helped deliver housing solutions to Pennsylvanians throughout the Commonwealth, including the development or preservation of over 10,000 affordable homes with our nonprofit partners.

With a commitment to racial justice at the core of our work, RHLS provides innovative project and policy solutions that offer healthy, safe, and affordable homes in communities of choice where everyone can thrive. We utilize our deep networks and relationships with both public and private stakeholders to move Pennsylvania ever closer to a place where every family has an affordable, healthy, and secure home.
We provide legal representation to nonprofit organizations engaged in affordable housing development and preservation, and equitable development, including dozens if not hundreds of nonprofit and community development organizations involved in and committed to housing affordability in Philadelphia.

We have a deep expertise in housing development regulatory systems and financing structures. We understand the mechanics of affordable housing development and the myriad issues that encompass these systems. We do this work because we believe that housing is fundamental and that all people regardless of amount or source of income, have the right to safe, affordable homes in neighborhoods of choice. We also do this work because we recognize the racial and economic inequities embedded in the laws and policies of the American housing system and strive to find ways to redress these inequities.

It has already been stated, but bears stating again, the City of Philadelphia is at a crisis point when it comes to affordable housing. The need is far greater than the supply. We cannot afford to simply build new housing as a way out of this crisis. The city needs a coordinated and comprehensive strategy to preserve our existing subsidized affordable rental housing. Almost 50% of our city’s households spend at least 30% of their income on rent and housing expenses, making them cost-burdened as defined by the US. Department of Housing and Urban Development, with the highest proportion of cost-burdened renter households located in parts of North and West Philadelphia (1).

This need to preserve affordable subsidized rental housing is not unique to Philadelphia. Nationally, it is estimated that over 325,000 publicly supported rental homes with existing affordability restrictions will expire during the next five years (2). This is a tsunami waiting to happen. Our state is not immune. In Pennsylvania, it is estimated that as of 2022, 7,642 publicly supported rental homes with existing affordability restrictions will face the expiration of these affordability restrictions sometime in the next five years (3). This is an urgent issue that needs to be addressed in a comprehensive strategic manner here in the city, statewide, and quite frankly, throughout the entire country.

As a municipality, we need to galvanize around strategies to preserve existing affordable subsidized housing. A considerable amount of the subsidized housing at risk in Philadelphia is in neighborhoods in parts of West Philadelphia that are experiencing deep economic and demographic changes. This is an equity issue at its core. Residents who are lower income who live in historically Black, gentrifying neighborhoods who are forced to relocate due to gentrification and displacement tend to move to poorer, non-gentrifying neighborhoods within the city, thereby exacerbating racial segregation and inequality.4 Indeed the University City Townhomes is a classic example of what happens to residents residing in subsidized affordable housing in a resource-rich community when there is no comprehensive plan to address the looming termination of the affordability period and the owner does not wish to continue the existing use of the property.

As Andrew Frishkoff included in his testimony information about the Preservation Network, Regional Housing was a founding member of the Philadelphia Preservation Network. I, along with Rachel Garland of Community Legal Services lead the regulation subcommittee of the Preservation Network. Regional Housing endorses the testimony of our partners, LISC and CLS, and the testimony of Rasheedah Phillips, who is a national expert on all things housing! Among the strategies that the Preservation Network seeks to employ, is a regulatory framework to support and encourage the preservation of existing subsidized affordable housing.

In 2019, the regulations subcommittee of the Preservation Network promoted a regulatory scheme that would provide a coordinated approach to preserving existing subsidized affordable housing development. This regulatory scheme required that owners of existing affordable subsidized rental housing developments provide notice of their intent to “opt out” of this regulatory framework. The goal of this notice is to provide the parties who receive the notice, ample time to locate a new proposed owner (Right of First Offer), who will then acquire the development, with the promise of maintaining affordability into the future. If no such proposed owner comes forward, the existing owner is free to market the property, subject to the right for an affordable housing developer to “match the purchase price” of a market rate offer, should one then exist. This mechanism is essential to create a path to preserve existing subsidized affordable housing.

We are appreciative of Council for passage in 2019 of Bill No. O 190860-A which established the beginnings of a regulatory framework that would allow for an organized and structured response to owners of an existing federally subsidized development’s notice of intent to “opt out” of this regulatory framework. We applaud Council Member Gauthier for the introduction of Bill No. 22101700, which amends Section 7-200 of the Philadelphia Code, entitled “Preservation of Affordable Housing”. These proposed amendments will modify and strengthen requirements imposed on owners of subsidized rental properties before they may sell, dispose of, or make certain other changes to this housing, and builds on the existing regulatory framework Council passed into law in 2019.

In particular, these proposed amendments will do the following:

1. Clarify that the regulatory framework seeks to preserve federal, and state-subsidized affordable rental housing;
2. Requires that Owners of existing subsidized rental housing provide notice of intent to opt-out, no less than 12 months in advance of the time the owner intends to withdraw from the housing contract or to sell the property, and expand the list of parties to whom the notice of this intent must be provided to ensure more parties can work toward a solution to preserve the affordability on site and to address the needs of the residents who reside in these homes;
3. Provides that no owner may enter into a binding agreement of sale for a property covered by the ordinance until notice of the salient terms of the sale are made public to a list of Eligible Parties (qualified organizations, companies, and tenant organizations that commit to maintaining the property as affordable housing), and that provides these parties an opportunity to match the terms of the sale. This” Right of First Refusal” or ”Matched Agreement of Sale” is critical to the overall structure to capture as many opportunities for the preservation of existing subsidized rental housing as possible.
   This proposed regulatory framework is not novel or unique. A form of this regulatory framework has been adopted by many other municipal jurisdictions, including such places as Chicago, Illinois; Washington DC; Santa Cruz, California; and Denver, Colorado. In 2109, when the initial part of this regulatory framework passed, there was concern raised from private, for-profit developers that they would be hampered by this requirement (Right of First Refusal or Matched Agreement of Sale) and it would depress the market for these buildings. We submit this is not the case, and that this regulatory framework allows an owner to be financially compensated pursuant to the terms originally proposed by a third-party buyer, and that are acceptable to the owner of the building. In addition, we submit that Eligible Parties have greater access to resources to exercise this Right of First Refusal, through such funding sources as the Neighborhood Preservation Initiative, the state Housing Opportunity Grant Program, and other sources that can be brought to the table to enable an Eligible Party to match the terms of the sale and preserve the existing affordable homes.

I welcome the opportunity to discuss this regulatory framework with members of City Council as part of a comprehensive approach to addressing critically needed housing preservation in Philadelphia.

Thank you for the opportunity to provide this testimony. I welcome any questions you may have.

1 Philadelphia-2023-the-state-of-the-city.pdf (pewtrusts.org)
2 2022 Preservation Profiles – National Housing Preservation Database (NHPD)
3 PD-Profile_2022_PA.pdf (preservationdatabase.org) 4 Unequal Displacement: Gentrification, Racial Stratification, and Residential Destinations in Philadelphia, American Journal of Sociology ( https:/www-journals.uchicago.edu/doi/epdf/10.1086/711015