It’s Budget Season in Philadelphia. How Will the New Administration Choose to Fund Its Housing Priorities?

Local dollars, partnerships, and evaluation needed to advance the city’s housing agenda

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It’s Budget Season in Philadelphia. How Will the New Administration Choose to Fund Its Housing Priorities?
Lexey Swall for The Pew Charitable Trusts

For years, the housing needs of Philadelphians have simmered at near-crisis levels. Families, both new to the city and those who have lived there for generations, have grappled with myriad challenges including cost burden, which is a household spending more than 30% of its income on housing; mounting repair needs; homelessness; and an overall shortage in housing supply.

Despite a significant investment of public dollars, progress in resolving these long-standing issues has been slow. From fiscal years 2021 to 2023, Philadelphia housing organizations directed roughly $2.3 billion into housing programs and initiatives. Most of the funds—about 78%—came from the federal government; local funds made up most of the balance. In 2023, city government more than doubled its investment in housing with the help of the Neighborhood Preservation Initiative (NPI) bond. Those funds closed critical funding gaps and expanded initiatives, such as the Philly First Home down payment assistance program and the city’s repair program for low-income homeowners, but were temporary and are set to be exhausted by 2026.

The cost for resolving Philadelphia’s housing issues is enormous. It would take $882 million to eliminate cost burden for Philadelphia residents for a single year, according to Reinvestment Fund estimates; about $2 billion to address home repair needs in the city; and $3.5 billion to add an additional 15,000 market-rate units to the city’s housing stock. A significant infusion of funds from new public and private sources may be the only way to truly move the needle.

In the absence of a cash infusion of this scale, city leaders have to make hard decisions about how to allocate limited housing funds each year. As The Pew Charitable Trusts and the Reinvestment Fund described in a November 2023 report, the city’s decisions about how to address housing needs are made through multiple budget and funding allocation processes, which are rife with legal, administrative, and political complexities. Federal program requirements, objectives of the mayoral administration and City Council, advocacy by nonprofit service providers, public hearings, and decisions by program administrators all play a role in determining how much money is spent—and on which activities.

In March, Mayor Cherelle Parker initiated the months-long process of working with City Council to shape her administration’s first budget. Allocations for housing typically represent 1% of all general fund spending. However, the total volume of funding fluctuates from year to year. The fiscal year 2025 allocation will be dependent on factors such as mortgage recording fee revenue, federal formula allocations, and the priorities of the city’s new leaders.

Our examination of housing spending in recent years surfaced three lessons that policymakers should consider in the next funding cycle. First, local funding is a critical component of a responsive housing strategy. General fund allocations, the Neighborhood National Preservation Initiative, and the city’s Housing Trust Fund provide local decision-makers with the greatest degree of flexibility among the 18 major housing funding sources that officials currently use to advance a housing agenda.

Second, coordination among local housing entities and with private funders is key to unlocking additional resources. It was only through such cooperation that the Philadelphia Housing Authority and the city’s Division of Housing and Community Development were able to secure $50 million in 2023 through the federal Department of Housing and Urban Development’s Choice Neighborhoods program. And careful engagement of local lenders was critical to the success of Philly First Home, a city program that in fiscal 2021 leveraged $447 million in mortgage loans for Philadelphians who otherwise might not have been able to purchase their first home.

Finally, the return on investment framework prepared by Pew and the Reinvestment Fund illustrates the power of holistically examining the benefits that result from investments in housing. Rather than assess a program on a single metric, such as cost, the framework documents multiple factors, including the number of households served; dollars leveraged from outside sources; alignment with the stated goals of the Mayor and City Council; and positive effects such as crime reduction, public health improvement, and wealth building. Together these factors represent the range of returns that matter to the city’s taxpayers and residents.

The November 2023 report on the city’s housing ecosystem and the recent framework can both serve to empower residents and policymakers to participate fully in the budget process for this year (fiscal 2025). Just as importantly, highlighting the depth of the need to deal with Philadelphia’s housing woes can help bring together partners—new and old—to address these long-standing issues with creativity, dedication, and new solutions that support Mayor Parker’s vision of “One Philly, a city united” … with housing opportunity for all.

Octavia Howell is a manager with The Pew Charitable Trusts’ Philadelphia research and policy initiative. Emily Dowdall is the president of policy solutions at Reinvestment Fund.

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