What is to blame for spike in land value?

A Social Welfare Policy professor has analyzed demographic and housing changes in West Philadelphia, with emphasis on the skyrocketing real estate values in University City -- and come up with some surprising results.

While the demographics of University City have changed in recent years, the racial mix in the neighborhood has not been significantly altered. There has even been a slight increase of blacks relative to other groups in the neighborhood.

And as the University continues to invest in development and maintenance projects both east and west of campus, critics have charged officials with strategically homogenizing the neighborhood. But according to the research of Dennis Culhane, those criticisms might be misguided.

Culhane said that the University's West Philadelphia Initiatives -- which include measures to create safer and cleaner streets, promote public education, encourage retail development and increase home ownership -- have resulted in a cleaner, safer and much more attractive neighborhood. The West Philadelphia Initiatives began in the mid-1990s under former Penn President Judith Rodin, and have taken root as Penn's strategic policy toward the surrounding neighborhood.

As a result, traditional criticism holds that the initiatives have resulted in increased real estate values, which have gentrified the neighborhood by filling it with wealthy white families.

But besides dispelling the idea of racial homogenization of the neighborhood, Culhane said that much larger forces are behind the increases in real estate values. He argues the dramatic price inflation that has occurred over the last decade was not an unintended consequence of those actions.

National trends like low interest rates and the return of the middle class to the cities are by far the greatest sources of the rise of housing prices in University City, he said. He estimated that at most Penn's initiatives were responsible for about 20 percent of the tremendous inflation.

"Had the national trend of price inflation not occurred, we would probably have a much more affordable neighborhood, and we would have the amenities that the University put out there," Culhane said. "I don't think the University programs were behind a 200 percent to 300 percent increase in prices."

Culhane cited comparable neighborhoods across Philadelphia, including Northern Liberties, Art Museum and Queen's Village, as having experienced similar rates of inflation in their real estate markets over the past five years, without ever feeling the influence of Penn.

Common Ground Realtors broker Lindsay Johnston, whose office is at 39th and Chestnut streets, agreed that the reasons for the increase in real estate values extends beyond Penn's initiatives.

"What we are seeing would have happened," Johnston said. "But it would have happened eventually and probably would have been much more gradual."

Johnston, who himself is a community resident, explained that Penn's involvement in West Philadelphia since the 1990s resuscitated and brought excitement back to a declining neighborhood. But since then, the development has taken on a life of its own.

However, many see Penn's role as central in increasing the appeal of University City and, as a result, increasing the real estate value of the neighborhood.

"I think the broad factors contribute," said Spruce Hill Zoning Committee chairman Barry Grossbach. "Nevertheless, this area has become an area of choice because of a number of Penn initiatives."

Regardless of their source, the escalating real estate prices underscore the crucial shortage of affordable housing in the neighborhood.

"The very low-income people in Philadelphia -- those who make less than $20,000 a year -- are at risk no matter what," Culhane said. "They have been at risk for the past 20 years, and there is no real strategy [for dealing with it] now."

And although the problem of affordable housing extends beyond University City, Culhane believes that Penn should be more proactive in maintaining affordable housing for lower-income tenants.

The original goal of the research that Culhane is doing in Penn's Cartographic Modeling Lab was to provide systematic information to the University on the changes occurring in the neighborhood. Culhane did just that when he presented some of his findings to the University Board of Trustees during its winter meetings.

During his presentation, he highlighted two areas of concern for the neighborhood of which he believes officials should be aware.

First, many longtime elderly residents on the periphery of University City are in danger of being victims to a quick loan process known as predatory lending that can result in the loss their homes.

The second is the danger of developers converting affordable apartments into condominiums, further exacerbating the problems.

The practice of converting of apartments into condominiums is becoming lucrative because rent prices have not experienced the same tremendous growth as real estate. But this often results in the displacement of current residents of less socioeconomic wherewithal.

And some see this problem getting only worse.

"It is starting to take place, and it will take place more and more," Johnston said. "It is a mindset that we are hearing a lot of investors moving in with."

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