Starting this summer, the City of Philadelphia is launching a low-interest loan program that aims to give homeowners as much as $25,000 to fix up their aging homes.
The initiative — born out of city legislation passed in 2016 and called the Housing Preservation Loan Program — aims to give residents who have struggled to get loans a new chance at borrowing. For years, homeowners who had less-than-perfect credit scores — and who were not eligible for city grants — were forced to sideline major repairs, worsening their home’s problems.
Collectively, officials say, it’s created a city housing stock filled with more troubles than just old houses. In 2015, according to the U.S. Census Bureau, more than 160,000 homes in the Philadelphia metro area experienced roof leaks. Nearly 120,000 had a crumbling foundation. At least 70,000 homes had mold. And 258,000 were reported as being “uncomfortably cold” for 24 hours or more.
In 2016, City Council President Darrell L. Clarke proposed raising Philadelphia’s real estate transfer tax from 3 to 3.1 percent — an extra $200 in taxes on a $200,000 home — to find revenue for home repair. In total, Clarke planned to pump a $100 million bond into repairing the city’s housing stock, using future transfer tax revenue to pay down the debt.
Specifically, Clarke and his cosponsor, Councilwoman Cherelle Parker, envisioned splitting that $100 million into two categories: $40 million would go to create the new loan program, which will be housed under the Philadelphia Redevelopment Authority. The remaining $60 million would be used to alleviate massive backlogs in the city’s home-repair grant programs.
For years, three of the city’s home repair grants — the Basic Systems Repair, Weatherization Assistance, and Adaptive Modifications Programs — had faced a three-to-five-year waiting list of nearly 8,000 residents. In May, those programs received the $60 million cash infusion. Already, city officials have reached out to half of those wait-listed and productivity has “tripled,” said Dave Thomas, executive vice president of the Division of Housing and Community Development.The low-interest loan program has been slower to launch as the city has searched for financial lenders to partner with the Redevelopment Authority. The agency issued a Request for Proposals in late December, seeking private or nonprofit lenders who will service the new program’s loans. According to Greg Heller, executive director for the Redevelopment Authority, the city’s intention is to “reduce the public sector’s role as much as possible” because “the private sector can originate and service these loans more quickly and efficiently than we can.”
The new loan program comes at a time when public officials have publicly expressed concern that Philadelphia has become “a tale of two cities.” In recent years, the city has experienced an influx of wealthy residents and an unprecedented development boom. Yet at the same time, Philadelphia faces a poverty rate of nearly 26 percent and thousands of residents with credit scores far below a healthy range.
According to research from the Healthy Rowhouse Project, 24,000 Philadelphia households applied for home-repair loans on the private market between 2012 and 2014, with nearly half requesting less than $10,000. Yet 62 percent of those applications were denied — a rate that exceeds the national average of 37 percent.
In contrast, the city’s new loan program allows residents with credit scores as low as 580 to apply, according to Heller. Loans, which can be used to repair anything from leaky roofs to installing wheelchair ramps, will be distributed in amounts of $2,500 to $24,999, always at an interest rate of 3 percent. The term length for each loan will be 10 years.
Applicants must also be the home’s owner, use it as a primary residence, and be current on all city taxes. The maximum income an applicant may have is much higher than the guidelines for home-repair grants — 120 percent of area median income, or $70,000 annually for one individual. However, Heller added that the city hopes to make loans “at levels below” that.
The loan program is expected to be available starting this summer.