Deferred maintenance can mean higher preservation costs
The Westpark project will bring nearly 1,000 units to a 12-acre site near 46th and Market streets.
In the coming years, PHA will erect a new mid-rise apartment building for older adults 55 and older, put up dozens of townhome-style units and gut and rehab the site’s three high-rise towers.
For PHA, preserving existing buildings is typically cheaper than building new ones. But those costs can rise substantially depending on the age of the property and how long it’s been since it was upgraded.
This is where rents and limited federal funding come into play.
Unlike a market-rate developer, the majority of PHA projects — both conventional public housing and developments backed by Low-Income Housing Tax Credits — do not turn a profit. That’s because the agency cannot charge tenants what it wants. Generally speaking, residents pay 30% of their monthly income in rent, and federal subsidies help cover the remaining cost.
The average monthly payment across PHA’s portfolio is about $365.
“It’s never enough to cover the capital needs of an existing structure,” Jeremiah said.
The housing authority receives some funding each year from HUD for capital investments, but that total isn’t enough to keep pace with its preservation demands.
Under the agency’s plan, called Opening Doors, PHA expects to spend $3.8 billion to modernize and redevelop roughly 13,000 units of conventional public housing, the majority of which are more than 70 years old.
The authority plans to spend another $2.5 billion to build or acquire 7,000 units, which were lost through redevelopment between 1999 and 2010.
To finance the initiative, PHA plans to use existing authority funding while also seeking a combination of public and private sources. The list includes LIHTC and CHOICE Neighborhood grants, as well as tax-exempt bonds and private mortgage financing.
In the interim, the housing authority must triage when it comes to making needed repairs and upgrades. That means there’s always a considerable amount of deferred maintenance, which can lead to higher construction costs when PHA secures the funding to revamp a property or site.
“The worse a building’s condition, the higher the rehab costs,” Jeremiah said.
The same can hold true for properties that PHA acquires and renovates.
In 2024, a Philadelphia judge cleared the way for the authority to buy Brith Sholom, a 360-unit apartment tower for older adults in Wynnefield Heights.
The ruling ended years of turmoil at the property, including impending threats of displacement over unpaid utility bills. Tenants also contended with years of building code violations.
Initially, PHA thought it could overhaul the 12-story building for well under $50 million. But upon closer inspection, the total quickly ballooned because of how dilapidated the property had become as a result of its previous owner’s negligence over decades.
The estimated cost to renovate Brith Sholom is now just over $100 million because it turned out the property needed to be gut-rehabbed.
That added more than $100,000 to the cost of each unit.