An increasingly cumbersome regulatory environment has converged with a broad market downturn to make operating apartment buildings in Philadelphia’s outer neighborhoods a major challenge. Some landlords are now heading for the exit.

The relative bargains they often leave behind are being scooped up by opportunistic investors.

Northmarq tracked 31 sales of multifamily buildings with 25 units or more citywide between the start of the year and July 22, which was nearly double the 16 seen over the same period in 2025. Class-C properties comprised 71% of those transactions this year, up from 46% last year. 

Ballooning operating costs and a challenging interest rate environment have hit some of those owners hard, and landlords say post-pandemic renter protections have extended eviction timelines.

“Everything is going against the small to medium-sized landlord right now,” Philly Office Retail President Ken Weinstein said.

“There's a lot of landlords that are just simply frustrated with the new rules and regulations and how they're being treated and not appreciated for the services they provide,” he added.

The Carlton Park Apartments at 2920 Midvale Ave. in East Falls sold for $20.9M in March 2024, equating to $178,800 per unit. That was down from the $29M and $247,900 per unit it traded for roughly a year and a half earlier.

Aside from a student housing complex purchased by the University of Pennsylvania, the biggest Class-C sale Northmarq tracked this year was the Bryn Mawr Apartments at 5100 Lebanon Ave. in April. The 106 units went for $13.8M, or $130,200 each.

The following month, the 36-unit St. Jude Apartments at 5016 Pine St. in West Philly sold for $2.5M, or $70K per unit. The price was down about 26% from the $3.4M the property traded for in 2019.

While Northmarq Managing Director Lizann McGowan said not every Class-C sale in Philly’s outer neighborhoods this year was the result of financial issues, she said some of them were.

“We are hearing that there is a growing amount of stress in the market,” she said.

This is particularly true of properties that were purchased via loans originated between 2020 and 2022, when interest rates were exceptionally low. This led to underwriting that was more optimistic than what actually came to pass as many of those loans matured in recent months.

“People probably underwrote a cap rate that's lower than where it would be today,” McGowan said.

On top of interest rates, rising construction costs have made it a challenge for owners to implement the value-add plans they envisioned in the immediate aftermath of the pandemic.

“That business plan did not materialize, and when the owner bought the property, they put floating-rate debt on it,” McGowan said.

“Some of them went back to the lender,” she added.

At the same time, elevated insurance premiums, higher salaries for employees, and rising property taxes and utility prices have been weighing on the multifamily sector citywide, said Riverwards Group Managing Partner Mo Rushdy.

These broad financial pressures aren’t unique to Class-C properties, but they are hitting that sector particularly hard, since its margins are generally tighter. 

Operating expenses don’t vary much citywide, but owners in the outer neighborhoods can’t charge as much or increase rents to the same degree as owners in places like Center City or Fishtown, Weinstein said.

The supply glut Philly proper experienced after developers raced to get projects underway before the expiration of the 10-year tax abatement in 2022 squeezed the low end of the market even further.

As Class-B owners offered months of free rent, the effective cost of a lease at those buildings began to compete directly with Class-C in a way it didn’t before the pandemic, Rushdy said.

In part because they generally work with lower-income tenants, landlords in the outer neighborhoods are also more likely to be impacted by a new slate of city council regulations passed since 2020 to protect tenants facing eviction.

Those include mandatory precourt mediation efforts and free legal representation for all tenants facing an eviction in certain ZIP codes.

While OCF Realty CEO Ori Feibush said he respects the intention behind the laws, in effect, they allow an occupant to prolong the amount of time they can stay in a unit, and some nonpaying tenants understand the new rules well and take advantage of them, he said.

“You have outer neighborhoods that are supported by landlords who are by definition charging less rent and accepting tenants with a broader array of tenant and employment history,” Feibush said.

“They’re getting burned left and right, because when they take a chance, they get totally and utterly screwed.”

The city’s Landlord Tenant Office, which previously handled a large share of court-ordered lockouts, was shut down in 2024 following a series of deadly shootings that occurred during evictions.

Those are now all being carried out exclusively by the Philadelphia Sheriff’s Office, which has a significant backlog.

The collective upshot of these policies for owners is that eviction timelines have been extended to up to 11 months in some cases, Weinstein said.

The financial distress some landlords are facing as they lose out on income is creating an opportunity for the Philadelphia Housing Authority, which has been buying up multifamily properties in the outer neighborhoods at a fast clip over the past year and a half.

“What we saw was a number of already stabilized deals facing some real questions around their solvency,” PHA CEO Kelvin Jeremiah told Bisnow in May about the agency’s spending spree. “So, we stepped in.”

PHA acquired 1,715 units between September 2024 and March of this year for a total cost of $333.5M. In its working annual plan for its fiscal year 2027, which runs from April 2026 through March 2027, the agency was considering another 369 units, which would come out to at least $33.1M.

Northmarq’s data only included seven PHA acquisitions totaling 1,157 units for $256M. The brokerage considered all but one of those complexes Class-B.

The one Class-C property included was the Dane at 2201 Bryn Mawr Ave. in Wynnefield, where PHA got 230 apartments for $221,700 apiece in December 2024. It was the third-largest Class-C sale by unit count in Northmarq’s dataset extending back to 2021.

“It’s a brilliant move on behalf of PHA,” Weinstein said.

“You can’t build new multifamily construction today for that price,” he added. “They’re providing an outlet to those landlords.”

Investors from Lakewood, New Jersey, also appear repeatedly as buyers in the data on Class-C buildings sold in recent years.

That includes the affiliate of Premiere Properties that bought the 272-unit Duffield House at 3701 Conshochocken Ave. in Wynnefield Heights for $38.4M and 88 units at 7012 Rising Sun Ave. in Lawncrest for $9.3M in the last quarter of 2024.

The 149-unit Grant Gardens at 2062 Grant Ave. in the Northeast went to an affiliate of Lakewood-based Chelsea Management for $13.9M in July 2023.

McGowan, Rushdy and Weinstein all said that New York multifamily players are also eyeing Philly’s outer neighborhoods.

“They see dollar signs, and they see minimal prices compared to what they might pay in New York,” Weinstein said.

While some Philly multifamily players are fretting about the city’s regulatory environment, the eviction protections pale in comparison to the rent restrictions and other rules in place in New York City, some of which Mayor Zohran Mamdani is looking to expand.

Philly also provides an urban quality of life similar to what is found in New York, but at lower costs for both landlords and tenants.

“They look at Philadelphia, and it feels like it’s a much smaller version of New York,” McGowan said.

“They can come down and get better yield,” she added.