Halstead Property

Housing Boom Boosts Stagnant PHIladelphia Luxury Condo Projects Take Center Stage

Chris Dolmetsch

Bloomberg News

The Washington Post

Philadelphia

developer Craig Spencer is making the biggest wager yet on resurgence

in the city's housing market with a $250 million luxury condominium

project across the street from City Hall.

Spencer,

an owner of the Philadelphia Soul arena football team along with rock

star Jon Bon Jovi, will start construction in November on a 44-story

tower on the site of the former Meridian Bank building, whose

burned-out shell sat vacant for almost a decade after a 1991 fire.

More

than 40 percent of the Residences at the Ritz-Carlton were sold within

three weeks, exceeding Spencer's six-month sales goal with just one

advertisement posted in mid-July. The units ranged in price from

$400,000, to $12 million for the penthouse with a view of the 37-foot

tall statue of William Penn that tops City Hall.

"The

buying has been fast and furious," Spencer, 44, said in an interview at

the Ritz-Carlton, a hotel he helped build that is adjacent to the site

of his new project.

Spencer

is counting on a continuation of the boom in the Center City region

that has added 6,400 housing units since 1998, according to the Center

City District, an organization of property owners and businesses.

Low

prices, attractive mortgage rates and tax incentives have spurred

redevelopment and helped blunt a four-decade decline in the city's

population.

Housing

prices in Center City have more than tripled since 1984, to $525,960

last year, the district said in a report. That's still less than half

the average price of a Manhattan apartment, according to New York-based

Halstead Property LLC. Citywide, the median home price was $91,000 last year, a Philadelphia Inquirer analysis found.

"It's still a very affordable city," City Councilman Darrell L. Clarke said. "I just hope we can maintain the pace."

Other

planned projects include Marina View Towers, 25 stories of condominiums

at the foot of the Ben Franklin Bridge to New Jersey, and the nearby

Waterfront Square towers, a $280 million, five-tower project next to

the Delaware River. Commercial construction is on the rise too, led by

Comcast Corp., the largest U.S. cable television operator, which is

building a $500 million headquarters on 17th street.

T.J.

Reilly, president of the Center City Residents Association, said he was

skeptical the boom in Center City would carry over to other

neighborhoods.

"I have to wonder how long it will continue," said Reilly. "It wouldn't surprise me if some of them don't come to fruition."

Philadelphia's

population fell by almost 7,000 last year to 1.47 million, after

falling about 40,000 in the previous four years, according to U.S.

Census Bureau estimates. Center City has about 88,000 residents.

Mayor

John F. Street's government helped spur Center City's growth in 2000 by

waiving property taxes for 10 years on new residential construction and

improvements to business properties. More than 1,500 units were

approved for this year in Center City and about 4,500 are in the works,

according to the district.

The

gains aren't spilling over into blighted neighborhoods to the north and

west, said Mark Allen Hughes, a former vice president at Public/Private

Ventures in Philadelphia. The city has lost almost 480,000 residents

since 1970, mostly to suburbs offering jobs, lower taxes, cheaper

houses and better schools.

"It

certainly blunts the population loss," said Hughes, who oversees

research projects on urban policy at the University of Pennsylvania's

Fels Institute of Government. "I don't think it's going to be a big

enough stopper to plug the drain completely."

Only

a quarter of 11th-graders in Philadelphia's public schools meet

Pennsylvania standards for reading and math, the state Department of

Education says. The Census Bureau estimates 35 percent of the city's

children live in poverty and the murder rate last year was three times

higher than New York's.

"The

condo boom will ultimately lead to growing pockets of prosperity in

Philadelphia, rather than large-scale urban renewal," Hughes said. "The

folks in West and North Philly need the creation of jobs in Center

City, not condos."

Philadelphia

was the biggest U.S. city whose population shrank in the 1990s, with a

decrease of 68,000, or 4.3 percent. Of the cities bigger than

Philadelphia, New York's population rose 9.4 percent, Los Angeles added

6 percent, Chicago's population grew 4 percent and Houston's surged 15

percent.

Philadelphia's

decline has slowed since the 1970s, when the population decreased by

260,000. Ed G. Rendell, Philadelphia's Democratic mayor from 1992 to

2000, balanced the city budget with help from the state after

inheriting a deficit estimated at $250 million. Rendell, now

Pennsylvania's governor, also moved to cut taxes, including a levy of

almost 5 percent on wages.

Robert

Inman, a finance professor at the University of Pennsylvania's Wharton

School, estimated in 2003 that the wage tax had cost the city 207,000

jobs in the past 30 years. Street has continued to reduce the tax to

4.3 percent.

Philadelphia

is also benefiting from the nationwide housing boom fueled by a drop in

borrowing costs. The average U.S. rate for a 30-year fixed mortgage

probably will fall to 5.76 percent in 2005, the lowest ever, Fannie Mae

forecast on Aug. 16. Sales of new houses likely will reach a record

1.28 million, the National Association of Realtors estimates.

"With

mortgage rates so affordable and downtown revitalized, the fundamentals

are there," said Susan M. Wachter, a professor of real estate at the

University of Pennsylvania in Philadelphia.

Bloomberg's Jef Feeley in Wilmington, Del., contributed to this report.

Saturday, October 01, 2005