Philly Multifamily Developers Crave Subsidies, Abatements

Philadelphia developers are not eager to repeat last year’s lull in multifamily construction starts.

After the lowest number of market-rate apartment units launched in more than a decade, developers in the city are pushing for subsidies to bring the scene back to life, Bisnow reported. They may have support in a proposal from Mayor Cherelle Parker.

Just like other cities, developers in Philadelphia brushed up against a myriad of setbacks last year. High interest rates, rising construction costs and soaring insurance premiums hit builders, as did issues around restrictive zoning. There was also a 10-year abatement that expired in 2021, creating an oversupply in a pipeline that’s since thinned.

Slightly more than 1,500 market-rate units were started last year, according to Yardi Matrix, the fewest starts in the market since 2013. Three years earlier, there were nearly 7,000 starts in Philadelphia.

Deliveries, meanwhile, declined 37 percent year-over-year from a peak of nearly 6,000 in 2024. Yardi Matrix is projecting a further 9 percent drop in deliveries for this year.

In response to the beleaguered market, developers are pushing for help. There’s already a proposal on the table for a 20-year tax abatement tied to conversions. Developers are hoping for more, however, wanting to see the abatement applied to all multifamily construction and an easing of the affordability requirements attached.

For instance, Alterra Property Group managing partner Leo Addimando said that mandating 5 percent of units built through the abatement to be affordable at 60 percent of the area median income would virtually erase the benefits of the subsidy.

Still, Addimando is among the developers that believe a version of the 20-year abatement could help.

“The 20-year abatement can absolutely push a deal that is not financeable into being a financeable job,” Riverwards Group managing partner Mo Rushdy told the publication; Riverwards has pivoted towards single-family sales as factors such as insurance premiums have dragged down the multifamily sector.

Developers in Philadelphia are dealing with tight margins: while sporting the fifth-highest construction costs in the country last year, rents outside of the Center City neighborhood often fall below $3 per square foot, trailing other cities in the region.

— Holden Walter-Warner