More units are being lost than created
The same holds true for affordable units across the state, highlighting the limitations of using those tax credits to create and rehabilitate affordable housing. While the program provides much-needed funding, it is nonrenewable, requiring property owners to file a new application once the credits expire.
By contrast, certain rental subsidies from HUD can be renewed, as long as the owner is a willing partner. That arrangement sat at the heart of the controversy around the ultimate closure of the University City Townhomes in West Philadelphia. After nearly 40 years, the ownership group decided not to renew its contract with the federal government, putting it in a position to demolish the townhomes and sell the land.
This is partly why many federally supported projects in Pennsylvania — nearly half — rely on multiple sources of funding. That gives developers additional resources for construction, but also helps ensure the units remain affordable. For example, some developments are built with Low-Income Housing Tax Credits, but also operate with rent subsidies from the federal government.
The report comes at a time when more federally assisted units are on track to lose their affordability restrictions in Pennsylvania than new units are being built using these subsidies.
According to the report, between 2013 and 2022, just over 12,528 federally supported units were developed across the state. Between 2027 and 2036, 43,301 units are facing expiring affordability restrictions.
“Many of them will renew or refinance, and that’s what we really want to make sure we’re doing with these units. But there is a risk that we would be losing more units than we are potentially creating, and I think that’s the giant fear,” said Bryce Maretzki, the Pennsylvania Housing Finance Agency’s director of policy and planning.
Pennsylvania is working to tackle its broader housing shortage, and the PHFA funded this report as part of that effort.
Gov. Josh Shapiro is pushing for a $1 billion “critical infrastructure fund,” an effort aimed at supporting housing construction across the state. During his budget address in February, the governor told lawmakers it’s time to make a “major investment” in building new and protecting existing units to narrow the state’s supply gap.
“Rather than tinker with this, let’s go big and make a real impact,” Shapiro said.
The request is part of the state’s first-ever Housing Action Plan, which contends that Pennsylvania needs to build 450,000 new housing units by 2035 to meet projected demand. At the current rate of construction, the state will fall short by nearly 185,000, according to the plan.