Philadelphia’s Center City, (the fastest growing residential neighborhood in Philadelphia) is currently experiencing a shift in housing preferences from ownership to rental that is also impacting other major cities across the U.S. This is having a major impact on the local real estate market and development priorities for apartments in Center City and other “hot” areas in Philadelphia. After World War Two, there was a significant increase in suburban, single-family housing initiatives backed by the Federal Housing Administration (FHA), which issued, as well as insured, lending agreements that highly benefited Philadelphia’s outskirts for 20 years.
Even during the years 1990 to 2010, 82% of building permits in Philadelphia and neighboring provinces were distributed with a focus on single-family units. However, the number of single-family permits substantially decreased directly after the Great Recession and has stayed low since, with multifamily currently representing 44% of permits assigned to the relevant areas as of 2010.
According to insights presented in the article ‘2017 Housing Report: Building on Optimism’, “this shift significantly favored Philadelphia. In the 1990s, the city accounted for only 24% of the region’s multifamily permits and just 18% of overall housing permits. In 2015, Philadelphia accounted for 52% of the region’s new multifamily units and 38% of all types of units — a percentage larger than our current share of the region’s population.”
Additionally, data compiled by the American Community Survey expose a similar trend. Throughout the years 2005 and 2015, there was a 1% decrease in the number of owner-occupied households and a 14% increase in the number of renter-occupied households in the Philadelphia outskirts. Across all of Philadelphia there was a cumulative 5% decrease in households that owned their home and a 13% rise in Philadelphia apartment rentals. Moreover, from 2005 to 2015 Philadelphia has experienced a decline from 70% of households owning their own home to 66%.
Furthermore, when taking into account the 3% total growth in households in the past decade across Philadelphia, this adds up to 85,000 additional renter-occupied households (more than a third of this increase is taking place primarily in Philadelphia’s Greater Center City).
Reduction in household size is contributing to the increase in demand for apartments in Philadelphia. According to the report, “in 1967, only 8% of Americans lived alone — a figure that has almost doubled reaching 15% in 2016. In Philadelphia, the average household size has contracted from 3.0 persons in 1970 to 2.6 in 2015, meaning that for every 100 people, five additional housing units are required today compared to 1970. Across the city, 55% of those living alone are renters. In most neighborhoods of Core Center City, household size averages just 1.6 persons per unit.”