Two weeks ago, this blog discussed the controversy that resulted when the developer of One Water Place reneged on an agreement to provide a specified number of affordable units in the building. At the time of the post, the developer had not yet responded to the City of Philadelphia’s accusation that it had violated the terms of the zoning permit granted by the City’s zoning board. Now, the parties have settled the dispute with the developer agreeing to make a specified payment of $3.75 million to the City.
When the City issued the original zoning permit for the building, the developer received what is called a “height bonus” in return for the developer’s agreement to include 25 below-market rate units in the building. The height bonus allowed the developer to add five additional floors to the building – or 30 full price units – to the building beyond what was allowed by the zoning code without the bonus. When it learned about the developer’s decision to renege on the height bonus agreement, the City said that it would not issue an occupancy permit for the building, meaning that tenants could not move in and the landlord could not collect rent.
In an agreement announced last week, the developer agreed to pay $3.75 million to the city in exchange for the occupancy permit. The City will use the money to construct below-market rate apartments elsewhere. Such payments are permitted under the Zoning Code, but this case enraged affordable housing advocates because the developer of One Water Place was the first developer to receive a height bonus in exchange for including affordable apartments in the development. Some members of the city’s affordable housing community estimated the value of the 25 omitted units at $5 million, but the Philadelphia Association of Community Development Corporations, an advocate for affordable housing, praised the settlement.
This case once again demonstrates the manifold complexities of the Philadelphia Zoning Code and the commercial and residential development process. Anyone contemplating such a process can benefit from consulting an experienced real estate attorney who can provide advice on the land use statutes and regulations that may affect the property and can help steer the application through the approval process.
Source: The Inquirer, “Changing Skyline: One Water Street developer agrees to pay for affordable housing,” Inga Saffron, June 26, 2016