How Will The City Council Election Affect Philadelphia CRE?

Philadelphia is one of the most heavily Democratic cities in the U.S., but after Election Day, its legislative body moved even further to the left.

Four new members will be joining the Philadelphia City Council on the first Monday of January, and two of them have markedly more progressive views on housing and land policy than their predecessors. Just what that means for the city's commercial real estate industry remains to be seen, but change is coming.

Jamie Gauthier's big victory came in the spring, when she defeated Jannie Blackwell in the Democratic primary for the 3rd District seat. The West Philly district includes both a wide swath of working class, majority black neighborhoods and all of University City, and had been held by either Blackwell or her husband, Lucien, since 1975.

The city charter requires that two of the seven at-large council seats be occupied by a minority party, and in what some consider the biggest upset of the election, Republican Al Taubenberger lost his seat to Kendra Brooks of the Working Families Party.

“Over the course of the Trump administration, for obvious reasons, we’ve seen a backlash and shift to not necessarily an extreme left, but a more polarized version of the left," NAIOP Philadelphia President Lauren Gilchrist said. "And some of these election results, particularly the WFP's win, are a realization of that backlash.” 

Both Gauthier and Brooks rode a blue wave into office, but their respective effects on council could be distinct. As an at-large member, Brooks has no land on which to exert influence via the tradition of councilmanic prerogative, while Gauthier's predecessor was among its most notorious users.

Blackwell largely refused to implement the most recent zoning code from the Philadelphia City Planning Commission and attempted to pass increased parking minimums. Gauthier's background is in urban planning and she has pledged to bring West Philly's zoning code more up to date.

“[Gauthier] is coming at this with a level of professionalism that I don’t think we saw in the 3rd District," Philadelphia 3.0 Director of Engagement Jon Geeting told Bisnow. “She’ll be running a 21st century office. Even if she doesn’t agree with people in the development community, she can have more fact-based discussions on it.”

Brooks ran on a platform that included abolishing the 10-year tax abatement for new construction, which the Philly CRE community considers its lifeblood, and pushing for rent control. She and Gauthier both oppose parking minimums and other zoning policies that make developing affordable housing more difficult, although Gauthier supports reforming the abatement rather than killing it, Geeting said.

Brooks will not be alone in council as a proponent of doing away with the abatement — Council Member Cindy Bass was the most recent one to introduce a doomed bill to that very effect — but her election doesn't necessarily spell the law's end.

"Aside from Brooks, people prioritizing [ending the 10-year abatement] did not win their races," said Geeting, whose organization's political action committee was Gauthier's formidable fundraising engine. "So the math has not changed all that much on the abatement, but it has probably changed enough that some sort of compromise bill gets passed. I don’t think we’ll see a complete elimination.” 

That would be a relief to developers like Spak Group founder and principal Ryan Spak, who say that the elimination of the abatement would likely mean that all the development Philadelphia has enjoyed in the 21st century would grind to a halt.

Spak, who is currently developing a multifamily building with three units designated as affordable at 5050 Baltimore Ave. without any public subsidy, said he supports a reformed abatement if that is the only thing that would keep it alive.

“If you leave [the abatement] as is, it will eventually be eliminated, and I don’t believe that that is the answer," Spak said. "With the council that has been elected, it shows that the population wants a progressive change, but all the studies have shown that it’s a boon to the city in a multitude of ways.”

Now that the election is over, Gauthier and Brooks, along with their fellow newcomers Isaiah Thomas and Katherine Gilmore Richardson, will go from campaigners to politicians. That means trading idealist proposals and black-and-white rhetoric for dealmaking and accountability, and it also means an opportunity for the business community.

“One of the things that real estate professionals should be thinking about with these new politicians is how can we effectively educate them about the issues affecting the industry and their real-world impact on the built environment," Gilchrist said. "And I don’t even mean advocacy; I mean making them aware of costs, rents and the way capital moves through and around Philadelphia.”

The voters have pushed the city council to the left, but what it will do with that position remains an open question. 

“On paper [the election] looked like a push to the left, but in practicality, nearly everyone is a Democrat in Philadelphia," Gilchrist said. "It will depend on the individual views of the council members.

"So my advice to CRE is to develop relationships before you need them," she said. "[Developers] shouldn’t just assume that because there are more left-leaning people in council that it’s a negative for the development environment.”