Mayor Cherelle Parker was clear on the campaign trail: Her administration’s approach to solving the runaway cost of housing in Philadelphia would involve building more homes — a lot of them.
Even though the administration has since adjusted its goals, the supply-side message has stayed consistent. So, too, has Parker’s affinity for one particular program that already exists in city government: Turn The Key.
Designed to incentivize developers to build homes on City-owned lots, which are then sold to first-time homebuyers at reduced prices, Turn the Key has been praised by lawmakers — including Parker, who has been a champion of the program since its launch in 2022. She attended one of the program’s groundbreakings in February and even invited a Turn the Key homeowner to be her guest at the mayor’s inaugural budget address, which mentioned the program numerous times.
It’s also earned praise from some pro-growth advocates who’ve been rare to applaud City Hall housing policy in recent years. They include Philadelphia 3.0’s Jon Geeting and Mo Rushdy, the head of the Building Industry Association.
Rushdy, a private developer who’s built multiple homes through Turn the Key, called the program “the next best thing to hit the Philly real estate market since the 10-year tax abatement,” the controversial program that spurred a residential housing boom throughout the early-aughts but was also viewed in some circles as an unnecessary kickback to developers.
It’s rare to see so much fanfare about a publicly financed housing program, especially one that’s a long way from reaching its goal of building 1,000 homes. And yet the program’s backers are asking the question anyway: Can a scaled-up Turn the Key be key to addressing the city’s housing crisis?
Workforce housing 2.0
Turn the Key is an example of “workforce housing,” a term that’s often confused with employee housing (like company towns from the 1920s or dormitories for resort workers).
Among policymakers today, the term is synonymous with any type of housing that’s accessible to middle-class professionals. Politicians who support workforce housing strategies, like former Mayor Jim Kenney, often invoke the low-paid plight of teachers, nurses, police officers, and other essential workers who might be displaced by rising rents. But in reality, the category refers to a broad middle ground of the housing market in between “luxury” and “affordable,” or roughly 80 and 120 percent of area median income, according to Brookings.
In Philadelphia, that range for a family of four is between $91,750 and $137,650 per year. The threshold for affordable housing is significantly lower, often half of that income range, depending on the program.
The appeal of workforce housing, in theory, extends beyond the people who reside there. Proponents argue that by offering government assistance to middle-income earners, it will have downstream effects on the cost and availability of rental units, including for those living further down the economic scale. Meanwhile, detractors say these programs siphon scarce public dollars from the most disadvantaged.
“You have the ability — not the potential, but the real opportunity — to get a quarter-million bucks of equity for paying less than $1,200 per month for the length of your mortgage.” — Mo Rushdy
Turn the Key is not the City’s first effort to boost workforce housing. In 2014, City Council created the Affordable and Workforce Housing Initiative, which shared some of the same design and ambitions as Turn the Key. The program set out to create 1,000 homes by transferring publicly owned land to developers for a nominal fee. Those developers then signed a restrictive deed requiring them to sell the newly built homes on once blighted lots at below market-rate prices, effectively passing along the savings from their cheap acquisitions of land to new buyers.
One of the hopes for the project, according to former City Council President Darrell Clarke, was to be a hedge against gentrification. But almost a decade after the program launched, an NBC10 investigation found that only 140 homes had been built, sold and occupied. Of those, only a quarter had been sold to Black and Brown homeowners. Also, several of the homes were being illegally rented out or had been quickly resold to buyers who were not income-qualified — violating the terms of the program.
“There were a lot of complaints about who ended up actually acquiring the property, which led to this connotation that we — or, workforce housing — is really a gentrifying agent,” says Angel Rodriguez, executive director of the Land Bank and senior vice president of the Philadelphia Housing Development Corporation (PHDC), the agency that coordinates policy across the City’s land-holding departments and where both workforce housing initiatives have resided. “We were not hitting the target population.”
Having learned from the inefficiencies and disappointments, Rodriguez and colleagues went back to the drawing board. “We probably had conversations for almost two years with legislators to try to figure out how we address the problem,” says David Thomas, CEO of PHDC. “What can we do differently that we’ve not done already?”
What came of those discussions was Turn the Key, “workforce housing 2.0” according to Rodriguez, which borrowed from its predecessor while trying to solve for its shortcomings. One reason the former program failed was the prohibitive cost of a down payment for many of the eligible buyers. To fill those gaps, Thomas and Rodriguez enlisted more than a dozen banks as participating lenders to offer a suite of loans, all of them requiring minimal down payment options (between 1 percent and 5 percent of the purchase price) for Turn the Key homeowners. According to Thomas, the banks were eager to work with the City because they could tap into federal fair lending credits by working with participants. “We sat down with a lot of banks before we launched it,” Thomas says. “I probably haven’t seen a banker so excited.”
Another concern that emerged was the post-pandemic rise in interest rates, making mortgage payments untenable for many would-be homeowners. For a person with a 600 credit score — the average for Turn the Key participants — the current market dictates a mortgage rate north of 8 percent. After establishing relationships with lenders, Turn the Key has been able to offer 6.7 percent interest rates on their average mortgage, according to Rodriguez. “That in and of itself is a huge savings on cash flow for homebuyers,” he said.
One more boost for Turn the Key: Philly First Home, a City program launched in 2019 offering grants of up to $10,000 for down payment assistance and closing costs. By combining those grants with the other financing options offered through the program, a Turn the Key Homeowner ends up paying $183,000, on average, for a three-bedroom home, after cashing in roughly $66,000 in subsidies from the City.
In neighborhoods like Brewerytown and East Kensington, where Turn the Key works, homes regularly sell for double that price, or more. “You have the ability — not the potential, but the real opportunity — to get a quarter-million bucks of equity for paying less than $1,200 per month for the length of your mortgage,” Rushdy says.
Although public sector employees were made a priority in the first wave of recruitment for buyers, the name “workforce housing” is a bit of a misnomer. Federal law prohibits PHDC from restricting the sale of homes so that they go exclusively to city workers, according to the agency. Only half of the finished homes have been sold to public employees. “There was some confusion initially,” says a spokesperson for the department. “We’ve tried to remind everyone that it’s open for you if you fit our eligibility criteria.”
Challenges to expanding the program
Like its forerunner, Turn the Key has the goal of creating 1,000 homes, and PHDC plans to get there by 2027. To date, 100 homes — each capped at a $280,000 closing price — have been completed and are now occupied, and another 266 are in development. While the Parker administration has yet to announce specifics on how they envision expanding the program, Thomas understands they’re considering it. “Mayor Parker has made it clear that she wants to see this ‘on steroids’. I think that was the quote,” he says.
All of Turn the Key’s funding comes via the City Council’s Neighborhood Preservation Initiative. One of the legacy programs that Clarke established before his retirement, NPI is a $400 million effort to double the City’s investment into housing — which supports programs for a wide range of income levels, not just middle-income homeowners.
Unlike a lot of housing incentives, Turn the Key does not rely on tax breaks or grants going directly to developers to entice them to participate. Instead, it promises the guarantee of a streamlined development process. To acquire land owned by the City, a developer normally must submit a 39-page application covering their intended use for the land, their track record of hiring minority- and women-owned businesses as contractors, their financials, and more — a process which regularly adds up to six figures. It’s a high bar to clear: In 2023, more than 57 percent of buyer applications were denied and only 155 properties were sold. But recent changes to the City’s policies around land disposition and the Land Bank have made it easier to create exemptions.
“Mayor Parker has made it clear that she wants to see [Turn The Key] ‘on steroids’. I think that was the quote.” — David Thomas
Those exemptions, even for Turn the Key, are not without critics. Some advocates question the imperative of workforce housing altogether, arguing that it may exacerbate housing inequality rather than address it for the most needy. “The problem is the land is not going to the creation of affordable properties,” said Nora Lichtash, founder of the Women’s Revitalization Project, in a recent story about the Land Bank in the Inquirer. “Instead, it’s all going to rich people.”
That negative perception has driven efforts to stymie Turn the Key proposals before they break ground. Last year, one project that was proposed for Norris Square — seeking to build 38 workforce homes — was opposed by a registered community group in the neighborhood, the Norris Square Community Action Network, which distributed flyers stating that the homes were only for “high-income earners” from outside the area: “unfortunately, you nor your kids, who grew up here, won’t be able to buy one!” After Councilmember Quetcy Lozada wrote a letter of opposition, the Land Bank tabled that land transfer.
Despite concerns that Turn the Key is targeting well-off residents, in part due to the upper-end threshold for eligibility, the average homebuyer in the program makes just 57 percent of AMI, or $45,771 for an individual. Instead of putting those earnings toward rent, participants accrue equity in the value of their homes, which are built in areas where prices are appreciating. Through the removal of blighted properties, the City claims to have added $300 million to its property tax base so far.
By the time PHDC reaches its goal, the NPI funding will have been exhausted. Without additional money, the future of Turn the Key is uncertain. “I don’t think we could have done this without the capital,” Thomas says, referring to NPI. “Maybe that’s why you may not have seen it in so many other places. It requires a real commitment.”
Subsidizing starter homes for middle-income Philadelphians is an expensive mission for the city to support. For only the first 75 Turn the Key homes, the City shelled out roughly $4.7 million towards mortgages. To continue pumping millions of dollars into middle-income housing in specific neighborhoods, excluding broad swaths of the city, will be a difficult pill to swallow for many Philadelphians.
Beyond the question of political will, there are also variables limiting the potential for a large-scale Turn the Key. Out of the 4,800 land parcels currently in the Land Bank, not all of them are ready-made for construction. Thomas said that some lots are too small for single-family homes while others are on top of underground creeks, adding costs for developers which could be deterrents.
And finally, there’s the open question of how to ensure oversight of Turn the Key outcomes, so that the homes don’t get flipped or rented out, as was true under the previous workforce housing plan. Before accelerating the pace of home building, some would prefer to see Turn the Key show a long-term track record.
Still, many argue that the program, if scaled, could help push down the cost of renting at large and build generational wealth in a city that desperately needs it. Rushdy, for one, believes Turn the Key could eventually be expanded to do at least 4,000 or 5,000 homes over the next several years, even if Thomas and Rodriguez were more muted about that possibility.
“We certainly have had conversations about the desire to see at scale, but we’ve not talked about how to do so just yet because I want to focus on the success of where we are right now,” Thomas says. “We haven’t even gotten to our halfway point.”
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