15th September, 2017
Rising Demand for Apartments in Philadelphia

In recent years, Philadelphia has been experiencing a surge in apartment building construction and renovation, even though the bulk of these renovations have been primarily taking place in the Greater Center City. According to a recent article that was published in Curbed, “in Center City alone, about 30 residential projects are currently under construction or have been proposed. Just a handful of those 30 are condominium developments.”

Additionally, extensive reports conducted by the National Multifamily Housing Council and the National Apartment Association (NMHC/NAA) have been advising the city council to approve and construct even more apartments in Philadelphia, which accommodate all price points and not only the high end market, in order to meet the growing demand from young professionals, couples, families as well as empty nesters. 

Furthermore, data compiled by Hoyt Advisory Services discovered that as a result of a forecasted increase in apartment household growth, growth in renters, as well as population growth, Philly will need 38,000 new apartments by 2030. The current average annual construction rate in Philly is expected to build only 32,930 apartments by 2030.

In other high growth areas, like New York metro, developers have successfully made their case for growth. This helped encourage Post Brothers to start development on new luxury apartments in North Bergen, New Jersey and successfully launch The Duchess Apartments.

Although we can clearly see a measurable increase in apartment demand, Philadelphia’s metro has several other obstacles that could potentially negatively affect apartment growth. This is due to the following reasons: Philadelphia is currently ranking sixth out of 50 metros in terms of most difficult cities to add new apartments; whereas Honolulu is ranking at number one (these figures are based on reports released by the NMHC/NAA). Moreover, Philadelphia is currently ranking 5th out of 50 in terms of ease of licensing approval for construction/building purposes (with number one being the most difficult). Philly is considered by many experts to be one of the most restrictive and limiting metro areas in the United States. Organizations including Philadelphia 3.0 and the Committee of Seventy have been pushing for reforms to modernize and improve local government. 

According to the Curbed article, the following is a possible explanation for why it is so difficult to build in Philadelphia:

“Lengthy and sometimes multiple approval processes even when proper zoning is in place; use of control density with some type of minimum lot size restraint; use of affordable housing requirements and/or open space and infrastructure cost requirements in some areas; long-term lot development cost increases in excess of general inflation; and lengthy review times.”

Apartment demand in Philadelphia is growing at a faster rate than ever before and the government as well as other relevant parties are struggling to keep up. Producing a sufficient amount of new apartments to meet this demand necessitates a fresh development approach, more incentives and fewer construction limitations.  

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