'We Just Stopped Looking At Deals': Affordable Housing Overlay Draws Critiques In West Philly

Residents, developers and lawmakers agree that West Philadelphia needs more affordable housing, but there are deep disagreements about how those units should be brought online.

One attempted solution enacted three years ago, the Mixed-Income Neighborhoods Overlay District, continues to face pushback from multifamily developers and at least one affordable housing advocate, who say it is negatively affecting the area's residential supply and affordability. 

The overlay, covering much of West Philly, requires 20% of new developments with 10 units or more to be affordable for tenants making up to 40% of the area median income.

The legislation's impact on development activity is difficult to quantify since its 2022 implementation coincided with a broader slowdown in construction. But developers say it has made new multifamily projects harder to pencil and led them to shy away from the area.

“The math doesn’t math,” said Spak Group founder Ryan Spak, whose multifamily development and ownership company is heavily focused on West Philly. “It doesn’t economically pencil for a developer.”

He said he was planning three new residential projects within the overlay when it went into effect, none of which have come to fruition.

Projects that triggered the overlay have brought 67 units to the market since 2022, 21 of which were affordable, according to Philadelphia Department of Planning and Development data provided by West Philly Council Member Jamie Gauthier’s office.

Officials also counted 56 units under construction, 15 of which are affordable, and 673 that have been permitted, including 191 affordable dwellings.

Gauthier was a driving force behind the overlay, which also covers small portions of Kensington and the Northeast.

“I created the Mixed-Income Neighborhood Overlay to empower my constituents to stay in the communities they have called home for generations,” she said in a statement. 

“The private market proved it will not generate the type of affordable housing Philadelphia families need,” she added.

But Jax Hebner, a member of the Philadelphia Tenants Union and a Temple University law student who wrote a research paper about the overlay, said the legislation is having the opposite effect.

“The way that it’s been strategically placed on the cusp of gentrification is pushing gentrification further west,” said Hebner, who lived within the overlay district for three years.

Spak said he believes there would be many more new units, affordable and market rate, within the overlay if the legislation had never been implemented.

His defunct projects at 889 N. 40th St., 34 S. 40th St. and 5127-5129 Walnut St. would have brought 107 new units to the neighborhood, 11 of which would have been deed-restricted, Spak said.

Two are still occupied by lower-density buildings with no affordable units, while one remains a vacant lot.

The financial conundrum is simple, developers say. The construction costs for a building don’t change when landlords have to charge less rent for some of their units.

The cost for a one-bedroom with a market rent of $1,300 could go for a maximum of $780 if it were part of the 20% affordability requirement for projects of at least 10 units, Spak said. This can lead to a 35% drop in profitability for a developer, which makes financing much harder to secure.

The city offers density bonuses for developers that set aside 10% of a project for affordable housing. The amount of additional space developers can apply for depends on the property’s underlying zoning and the level of affordability they choose to implement.

In an RM-2 residential multifamily district, developers can get a 25% floor area bonus if these units are for moderate-income tenants and a 50% bonus if they are earmarked for low-income residents. Those metrics jump to 300% and 400% in CMX-5 commercial mixed-use neighborhoods 

But Haverford Square Properties President German Yakubov said these bonuses still aren’t enough to make projects within the overlay pencil. The firm has traditionally focused on affordable housing in West Philly, but the overlay has led him to look elsewhere. 

“We just stopped looking at deals,” said Yakubov, who has moved the company’s offices out of Gauthier’s district. 

“I’m not aware of any significant developments that have been built in the [overlay district],” he said. “There are a lot more that haven’t been built because of it.”

Broader market trends have likely played a role in the development slowdown in West Philly.

Multifamily construction starts citywide fell from 17,289 in the fourth quarter of 2022 to 4,705 in Q4 2024, according to data from brokerage MMG. Nationwide, there were 403,000 dwellings under construction in buildings of five units or more in August 2025, down from 589,000 three years earlier, according to the Federal Reserve Bank of St. Louis.

Gauthier’s spokesperson, Harrison Feinman, cited the end of the city’s 10-year tax abatement and rising inflation and construction costs as contributing to the slowdown. Philly is also facing a glut of new apartments amid a more conservative lending environment. 

“It would be disingenuous to look at the pace of development now vs. four years ago and say that MIN caused the change,” Feinman said in a statement.

He added that Gauthier has made changes to the overlay based on developer feedback.

That includes an amendment allowing owners of properties that trigger the overlay to accept Philadelphia Housing Authority and Section 8 vouchers. In those cases, landlords can charge more for affordable units than they would otherwise be able to since the tenant is only responsible for part of the rent.

Residences built through the Turn the Key program, which brings affordable homes to vacant city-owned lots, are also excluded from the overlay.

But Hebner said the 40% AMI threshold is too high given Philly’s 19.7% poverty rate, which made it the nation’s second-poorest big city last year, behind only Houston. More subsidies are needed to help residents who fall below that get into these units.

Hebner also said the overlay will rarely if ever make an impact in neighborhoods zoned exclusively for single-family homes and duplexes since a project of 10 units or more would require a variance.

They said it is easy for a developer to avoid triggering the overlay by building nine units or fewer or by picking a site that isn’t within it.

Spak said the 24 new units at 5216 and 5220 Chester Ave. near 52nd Street in Kingsessing are an example of the latter trend.

Hebner said the overlay is pushing gentrification further into outlying neighborhoods like Cobbs Creek. They would prefer to see a citywide approach where only developers whose portfolios are 20% affordable are allowed to build within the overlay.

“I don’t think the solution is getting rid of it or stopping developers from having to cooperate with building affordable housing,” Hebner said. “It’s rather seeing housing as a social good and approaching providing it from a more holistic angle.”

Despite developers' complaints about the overlay, multifamily construction hasn’t come to a standstill in this part of West Philly.

Liberty Bell Management was granted permits for a 22-unit apartment building on a vacant lot at 50th and Market streets.

Owner Allen Borovich said he generally brings projects to fruition when he receives a permit, but this one will be a challenge.

His company has already built six complexes nearby and has several hundred units in the neighborhood. Liberty Bell can provide more equity than a less established developer would be able to, Borovich said.

“You need more equity for these deals,” he said.

Many of Liberty Bell’s tenants are PHA or Section 8 voucher holders, which Borovich said could help make the numbers work. The project may also be eligible for a density bonus, but he said a portion of those units will still be deed-restricted, which limits the upside for developers.

Borovich said the overlay policy has room for improvement.

“Maybe it could be repealed. Maybe it could be amended at a certain level,” he said.

“If the city wants to offer these tenants spaces at certain prices, maybe they have to compensate the developers.”

Yakubov described the overlay as well-intentioned but deeply flawed.

“When we try to provide simple solutions to complex problems, we get more problems,” he said.

Gauthier said three years isn’t a long enough period to judge the overlay’s long-term effects on her neighborhood’s housing supply.

“The true impact of any land-use policy changes of this scale cannot be fully assessed for many years, so we must be patient,” she said.