Renting in Philadelphia a Survey of Tenants and Landlords
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RENTING IN PHILADELPHIA A Survey of Tenants and Landlords Philadelphia City Planning Commission This report was prepared by Octavia Howell and Ian Lazzara of the Philadelphia City Planning Commission Staff. Funding for this report was provided by the William Penn Foundation. Research for this report was conducted by The Melior Group. © 2014 Philadelphia City Planning Commission BACKGROUND In 2011, the Philadelphia City Planning Commission (PCPC) adopted its Citywide Vision for Philadelphia. Within that vision, the Commission set a goal to ensure that a wide mix of housing is available to residents of all income levels. Decennial U.S. Census numbers indicate that rental tenure is increasing throughout the Nation. Renters account for nearly half, or 46%, of all households in the City of Philadelphia. Recent decades have shown a definite trend of growth in the city’s rental market and a weakening of the Philadelphia’s historically dominant homeownership market. The city added about 46,000 new units of rental housing since 1990. During the same time period, the city lost about 50,000 units of owner occupied homes. Accompanying this trend, the Census recorded population growth in the City of Philadelphia for the first time in a generation. Construction of luxury rental housing has been a visible component of neighborhood revitalization and expansion in the city’s core. While some neighborhoods are seeing a housing and construction boom and an increase of new residents, others have struggled to deal with the impact of the national housing crisis and persistent economic challenges among their residents. Figure 1. Philadelphia Owner vs. Renter Tenure, 1970-2010 400,000 380,000 360,000 340,000 s 320,000 t i n U 300,000 280,000 260,000 240,000 220,000 1970 1980 1990 2000 2010 Year Owner Occupied Renter Occupied Source: U.S. Census In order to expand the PCPC’s knowledge of activity in the local rental market beyond basic counts, the agency engaged The Melior Group, an independent marketing research and consulting firm, to survey renters and landlords. The PCPC sought to answer the following questions through the survey of tenants: • How effectively does the rental housing stock meet the needs of existing households? • Is rental tenure a precursor to homeownership within Philadelphia? • What proportion of rental tenants plan to continue living in the city indefinitely? The PCPC sought to understand through interviews with landlords: • What proportion of registered landlords in the city are landlords by choice? • What are the top challenges faced by landlords that would threaten their ability to continue to provide quality housing for the city’s rental population? What follows are findings from the research with each of these audiences. This work will help inform the PCPC’s ongoing preparation of the city’s comprehensive plan, Philadelphia2035. 1 RESEARCH METHODOLOGY To gather the information needed from renters, a 25 To prepare for the research with landlords, a subset question survey was conducted with Philadelphia of 250 rental properties with active rental licenses tenants above the age of 18. The online survey was were identified for inclusion in landlord interviews. offered to a panel of pre-qualified renters in an effort The selection included a mix of property types and to ensure participation from renters in each part of the locations across the city. Landlords and property city. Links to the survey were also posted on the PCPC’s managers of the affected properties were mailed website and the Phila2035 web and social media sites. invitations to participate in a 30-minute telephone Emails soliciting participation were sent to all City of interview. Realtors were also interviewed to add a Philadelphia employees as well as to community-based more global perspective. A total of 21 interviews were email lists. A total of 1,576 renters completed the survey. conducted. The information gathered provides a broad overview of the viewpoints of landlords and property The margin of error for the sample population of managers from across the rental landscape of the city. n=1576 is +/- 2.5% at a 95% confidence interval. If the study were to be repeated 100 times with the same methodology, the results would be consistent within two and one-half percentage points, or 95 times out of the 100 times the study is performed. Note that the margin of error is a function of the sample size and the margin of error will vary by geographic and analytical grouping. For the purpose of analysis, respondents were grouped into zip code clusters that closely approximate the PCPC Planning Districts. Survey respondents were also grouped by age and race of householder. Center City is home to the greatest proportion of the city’s renters, about 23%. The survey distribution method was particularly effective at reaching renters in this part of the city such that this group accounts for 43% of the survey participants. These renters are more likely to be white, younger, and wealthier than renters in the remainder of the city. The survey methods were less effective at capturing respondents from North and West Philadelphia. Only 5% of the survey participants were from North Philadelphia. Census figures reveal that the area is home to 12% of the city’s renters, second only to Center City in terms of its proportion of rental units. West Philadelphia residents were underrepresented to a lesser degree than North Philadelphia renters. Renters in these communities are more likely to be black, older, and have higher incidences of poverty than the population surveyed. 2 19116 UPPER FAR NORTHEAST 19154 19115 LOWER FAR NORTHEAST 19118 19150 19114 CENTRAL NORTHEAST 19111 19152 19138 19126 UPPER NORTHWEST 19119 19128 UPPER NORTH 19136 LOWER NORTHWEST 19149 19141 NORTH DELAWARE 19120 19144 LOWER NORTHEAST 19127 19135 19124 19129 19140 NORTH 19132 19137 19133 19134 19131 RIVER WARDS WEST PARK LOWER NORTH 19121 19122 19125 19151 19130 19123 WEST 19139 19104 19102 19103 CENTRAL 19107 19106 19109 UNIVERSITY/SOUTHWEST 19143 19146 19147 SOUTH 19142 19145 19148 LOWER SOUTH LOWER SOUTHWEST 19153 19112 Figure 2. Map of Zip Codes and PCPC Planning Districts Source: Philadelphia City Planning Commission 3 KEY FACTS & FINDINGS RENTERS LANDLORDS The average monthly rent in Philadelphia is Philadelphia is considered a good city to $1,000. Rents in Center City average $1,202. In other own rental property. Compared to the suburbs, areas of the city, rents average $846 per month. Philadelphia real estate is affordable, taxes are low, and For a typical renter, monthly housing and utility demand for rental housing is high. Individuals typically expenses consume 41.9% of household income. become landlords out of choice rather than necessity. Renters in Center City are younger and wealthier Many neighborhoods in Philadelphia are than in other parts of the city. Renters residing gentrifying, but landlords are not very concerned in Center City are five years younger, on average, because they see the change as part of an environment than those in other parts of the city, i.e., 33.7 years that enables them to charge higher rents. Almost old vs. 38.7 years old. Household incomes for all the landlords interviewed for this research those renting in Center City average $77,200, while seem to want to serve renters at the middle to household incomes of renters in other parts of the higher end of the market in their neighborhoods. city, combined, average $52,800. The average age of renters represented in this study is 36.5 years old. In areas where rental housing is in high demand, landlords prefer not to rent Renting is motivated by economic reasons. For their properties to low-income tenants. roughly one-third of respondents it was a choice that enables them to avoid the hassles of home ownership The current economic environment in and the flexibility to move around. For the majority of Philadelphia, is concerning to landlords. renters, renting is a temporary or less than ideal living Higher taxes, new fees, recent regulations, property arrangement. People rent largely for economic reasons maintenance costs, and a tenant-friendly legal including saving for a down payment or waiting to be system are substantially increasing landlord financial able to purchase a home in their preferred neighborhood. responsibilities and expenses. Rental income cannot be increased correspondingly given the risk of pricing The majority of renters say that there are “some” oneself out of the market. While it is still profitable to “many” affordable rental options available to buy, develop, upgrade, and modernize inexpensive within in their neighborhood. Availability of places properties in up-and-coming neighborhoods, in general, they can afford to purchase is limited. Residents of landlords feel their profit margins are narrowing. Center City are least likely report that they can afford to purchase a home in their current neighborhood. In order to keep their properties profitable, landlords are considering different options. Two out of ten renters are planning to purchase a Examples include increasing rents, modifying properties home in Philadelphia within the next five years. to maximize rental income, and upgrading properties to Roughly 44% of renters are undecided about whether or serve higher paying tenants. What actually happens will not to purchase a house. Affordability of a desired home, be a function of what individual landlords can afford in terms of one’s personal finances, is the most significant and what the expectations