Source: Hidden City
Date: 2/28/2018
Byline: Nathaniel Popkin
Editor’s Note: Now two years into leading the Philadelphia Redevelopment Authority (PRA), Gregory Heller has begun to make noticeable impact on the direction of community development across Philadelphia. Three public agencies own and manage potentially developable land in Philadelphia: The City Department of Public Property, the Land Bank, and PRA. The PRA owns some 2,400 land parcels valued around $150 million. Heller authored the 2013 biography of Edmund Bacon, the city’s legendary 20th century city planner, Ed Bacon: Planning, Politics and the Building of Modern Philadelphia (Penn Press), and is an expert in complicated public-private real estate finance. As PRA executive director, Heller has sought to advance the concept of social impact real estate development meant to deliver community value as well as asset return. Hidden City sat down recently with Heller to get insight on the direction of community development in Philadelphia.
Nathaniel Popkin: Since taking over at the Philadelphia Redevelopment Authority (PRA), you’ve made it a priority to sell off parcels to unleash neighborhood development that otherwise had been stifled. Do you have a couple of examples of how “getting out of the way” is working to bring investment to undercapitalized neighborhoods?
Gregory Heller: The public-sector has an important role to play in partnering and incentivizing the private sector to develop these properties in a way that contributes positively to their communities. One small but powerful tool implemented by the City in real estate proposals citywide is requiring development partners to describe their project’s “social impact” when bidding on public land. PRA has piloted this, and now includes it in all of our RFPs. We have been including “social impact” in our scoring. This has been incredibly successful and is now the policy for all RFPs within the Department of Planning & Development.
One proposal that came out of these RFPs is a project to be built at 8th and Race that includes an affordable senior housing building and a new office building that will co-locate 25 public-interest law organizations to cluster their service delivery. Another is a project at 36th and Haverford in Mantua that will have a community grocery store and 20 percent of the residential units set aside for affordable housing. The developer of that second project decided to partner with a local community development corporation.
We didn’t require or define any of these [social impact] elements. We left the projects totally open-ended in the RFP, and the developers came up with these great community-serving projects and partnerships. We believe that the best results will come from incentivizing rather than legislating, showing that the City is a willing partner, and nudging the private sector to innovate.
NP: In another sense PRA itself is a real estate developer with a major role to play in the physical and economic development of the city. Your role is to develop parcels and, through various legal arrangements, encourage high quality development. Do you have broad strategies for how to go about this or is each project/parcel different? What are the underlying factors either encouraging or retarding development right now and how do you exploit or overcome them?
GH: PRA and the Land Bank are active players in Philadelphia’s real estate scene, but we’re not developers and we shouldn’t be. It’s not what these public entities were set up to do. We are large land holders, investors, and partners. We have a public mission to redevelop neighborhoods, but we also have to be fiscally responsible to the residents of Philadelphia.
Philly is at a significant turning point; we’re gaining population, our real estate market is appreciating, and we’re attracting outside developers and investors. Yet our city continues to have very high poverty and unemployment rates. And then there’s a third dimension which is that even though Philly is affordable, because of our high poverty rate we have a serious housing issue with over 50 percent of the population considered cost-burdened. We see this as an opportunity to be smart about leveraging our public land assets while we still have a sizable public land inventory and our market is, overall, still affordable when compared to other major cities.
There are a number of creative public-private-partnership approaches and structures that cities have taken to make the most of their publicly owned assets. We can partner with the private sector to build affordable and workforce housing, as well as public facilities more cost effectively. We can redevelop assets through structures that allow the public sector to hold and lease, retain equity, or share in distributable cash flow. We can use these public assets to secure long-term financing mechanisms. From both a social-impact and net-present-value perspective this kind of multifaceted strategy is the right approach.
It’s important to remember that real estate assets are just one part of our toolkit. PRA also has traditionally issued bonds and administered development finance programs.
The bottom line is that smart decisions today can build cross-sector partnerships that nudge the private market to redevelop our communities in a more equitable manner over the next two-to-three decades.
NP: In most cities the redevelopment agency and the industrial development agency are one in the same or part of the same government structure. Not so here. And traditionally the PRA and PIDC haven’t collaborated much. You’re changing that. What can be achieved by working with PIDC? Does the collaboration mean that Philadelphia’s redevelopment will be more strategic? How so?
Every city does community and economic development differently and there’s no one-size-fits-all approach. PRA and PIDC are different types of entities with different missions and capabilities, but they share the commonality that they were each created (in 1945 and 1958, respectively) in order to expand the public sector’s ability to partner with the private sector and to do things that were outside of the conventional role of government.
In recent times, PRA has been primarily focused on affordable housing, but under this administration we are working to broaden PRA’s focus and investment strategy into a range of community-focused development activities. PIDC focuses on economic growth, commercial and industrial projects and does not typically deal with residential development. Although PRA and PIDC are separate agencies, their activities in the past individually and together, have been strategically focused. Over the years there have been activities that we worked on together, but we’re currently taking steps to make that partnership stronger. A stronger partnership between PRA and PIDC will enable us to develop a fuller set of products and services to support all facets of community and economic development.