In his
A photo depicted a man about to shoot himself in the foot.
"Bad local policy could kill the housing recovery and the real estate recovery," Gillen, a senior research consultant at the University of Pennsylvania's Fels Institute of Government, said later.
Gillen spoke amid uncertainty surrounding housing in public finance
Dynamics vary by city — in New York, Mayor Bill de Blasio has launched "
Philadelphia is not as expensive as other Northeast cities but has other housing challenges such as delinquent property taxes and a political threat to a popular 10-year abatement tax break for development.
In New York, de Blasio's plan calls for a $1 billion investment from the city's five public employee pension funds and the use of tax-exempt 501(c)(3) governmental purpose bonds to finance middle-income housing. He estimated the overall price tag at $41 billion, including all possible public and private sources.
In Philadelphia, "we have New York-type construction costs and Baltimore-type rents and prices. Housing affordability is a complete non-issue in Philadelphia," said Gillen. "The problem here is not that it's expensive, but that it's of low quality."
Tom Kozlik, a director at Janney Capital Markets, urged investors to monitor local spending against a housing backdrop.
"From a credit perspective I worry that steeply rising housing values are allowing some locals to spend at an unsustainable pace. I worry that some locals are spending at a pace that by future housing price appreciation will not match," said Kozlik, who just issued a report that cited "
According to Kozlik, one key area of uncertainty for investors in Philadelphia relates to the 10-year tax abatement, a political football there. Since 2000, the abatement allows the value of all improvements to real estate in the city to go untaxed for 10 years. According to Gillen's data, Philadelphia new housing construction is up 177% since then.
Recently, the City Council has been introducing bills to limit or shorten the abatement. Critics say the abatement is unnecessary and unfair; they also maintain the city needs the revenue and curtailing it would make housing development more equitable.
Gillen told Philadelphia analysts that the abatement has enabled developers and buyers to bridge the financial gap. He implored investors to involve themselves with local issues such as the abatement, tax delinquency, vacant land and the ongoing actual value initiative, or AVI, which corrects decades of inaccurate assessments and Gillen says makes broader tax reform possible.
Philadelphia's also has 103,000 delinquent properties that owe $515 million in taxes, although a crackdown of late by Mayor Michael Nutter has slowed the growth of the rate.
"But what that shows me is that there is plenty of untapped potential," said Kozlik. "Especially for a city that is experiencing a bit of a resurgence and an uptick in demand."
New York's housing plan, meanwhile, encompasses all five boroughs in a city where outer-borough commuter demographics are changing.
"Housing New York recognizes that our development and presentation efforts have to be coordinated with public investments in infrastructure and services," Vicki Been, commissioner of New York City's Department of Housing Preservation & Development, told a Citizens Budget Commission meeting in midtown Manhattan on Wednesday.
In Philadelphia, a Gillen map showed a cluster of dots along neighborhoods bordering downtown, including Fishtown, Queen Village-Pennport and University City — the latter home to the University of Pennsylvania and Drexel University.
"One of the conclusions [Gillen] made was that Philadelphia data showed that there are really two cities, notably, the 'encroachment' of higher-priced homes in neighborhoods that touch Center City," said Kozlik.
"One of the important takeaways, especially as far as the city is concerned, is that there's a good amount of positive momentum downtown. Fifteen years ago, when I was a graduate student, downtown Philadelphia was nowhere near where it is now."
In New York, Been, who runs the nation's largest municipal housing agency and is charged with implementing de Blasio's plan, touted a
"For the first time in many years, the Department of City Planning is playing a central coordinating role in creating the capital budget, so that the allocation of capital funds will be better coordinated and much more efficient," she said.
According to Mikiyon Alexander, a senior director for U.S. public finance housing for Standard & Poor's, demographic shifts are unclear for affordable housing nationwide.
"The recovery and the economy and the housing industry as a whole have had an effect on affordable housing [and] the effect on the financing mechanisms of affordable housing," he said in a
For example, said Alexander, single family housing has not performed at the multi-family level.
"A lot of that has to do with the uncertainty or the shifts in some of the potential homebuyers, the decisions that they're making, the young adults that could be prepared to purchase homes but at this point they're deciding to rent."
New York, said Been, has closed on 8,700 units in the second half of the last fiscal year.
"Obviously we'll need more than 8,700 units in a six-month period to meet the mayor's goals over time. But, as anyone with any real estate knowledge — or for that matter any common sense — will understand it will take some time to ramp up production. And our production probably will not be exactly linear, no matter how pretty the chart looks when it is linear."
Been, previously the director of New York University's Furman Center for Real Estate and Urban Policy, said her agency has undertaken other several operational improvements. They include interagency cooperation, marketing, foreign-language accessibility and notably enhanced in-house technology ranging from a new online system, real-time communication, video use to strengthen cases against negligent landlords and even better computers in-house.
"In the past we struggled with reams and reams of paper to keep track," she said. "It is no joke that at HPD, one of our computers is a Wang computer. Wangs haven't been made in 25 years, OK? So there is a lot of work to be done to bring our technology in line with where it needs to be," she said.
Capital budget allocations, she said, will help fix that problem.
