Key takeaways

• Philadelphia’s program addresses a gap in the mortgage market by providing capital to traditionally-excluded populations of homeowners. Mortgage approval rates differ dramatically by race in cities across the United States revealing how racial discrimination and structural inequality continue to shape access to homeownership. The Restore Repair Renew (RRR) program provides one model to address these disparities, by connecting historically marginalized households with the funds to maintain stable housing and increase the value of their assets. The program thus seeks to rectify historical disinvestment in communities of color while providing a pathway for families to accumulate wealth. 
• Restore Repair Renew’s position within a larger, city-wide “Housing Action Plan” strengthened ongoing support for the program. The city’s efforts to develop a comprehensive local housing strategy have bolstered support for the program, which was then included within the 2018 Housing Action Plan’s framework, “Providing Pathways to Sustainable Homeownership and Wealth Creation.” 
• The program addresses the unique challenges of Philadelphia’s housing market through investment in the city’s existing housing stock. Philadelphia has defined itself as a “dual market city.” Like many cities in the United States, some neighborhoods in Philadelphia have seen high demand, new construction, and escalating housing costs, while  other areas continue to struggle after years of disinvestment. The RRR program directly addresses this disparity by providing funds to rehabilitate Philadelphia’s existing homes, 90 percent of which were built before 1980. 
• The program draws from a city housing bond that provides program stability. In recent years, both Mayor Jim Kenney and City Council have turned to bonds to fund public infrastructure. Philadelphia does not require a ballot measure for bonds if they are issued by a city authority. Instead, the City Council can approve those bonds. This flexibility allows Philadelphia legislators to consider a different set of political considerations when seeking funding sources.
• The program employs financial and project counselors (referred to as navigators) who likely contribute to the program’s success reaching low-income households typically excluded from mortgage lending markets, as well as its current low rates of loan delinquency. Navigators determine program eligibility, and if applicants fail to meet certain program requirements, such as threshold credit or debt ratios, navigators help applicants create a financial plan to become eligible. Navigators also advise loan recipients on how to identify high-value repair projects, seek estimates from potential contractors and manage construction schedules. 

Description

To revitalize the existing housing stock, Philadelphia has turned to programs like Restore Repair Renew to support homeowners with capital and counseling. Through RRR, Philadelphia homeowners invest in their properties, which raises the quality of the city’s existing housing stock. Eligibility requirements include applicants from households earning up to 120 percent AMI, which includes homeowners who would otherwise earn too much to qualify for grant programs, and yet are unable to access or afford the higher interest rates of private loans. The city’s lending partner, Univest, offers 10-year, 3 percent fixed Annual Percentage Rate loans to eligible homeowners.^[1] Loan amounts range between $2,500 and $24,999. Homeowners can use loans to fund any home repair that improves health, safety, weatherization, accessibility, or quality of life within the property, including exterior renovations, improvements to interior systems, or mitigation of health hazards such as lead-based paint, mold, or radon. The program also provides navigators who can advise loan recipients as they identify areas for repair and select a contractor. 

Eligible applicants must meet household income guidelines, have a credit score above 580,^[2] be current in their tax payments (or be in a payment plan), and must not have any open code violations (unless participating in the program will address those violations). Should an applicant fail to meet the criteria, navigators will support homeowners to work towards eligibility, through flexible tools such as payment plans for public utilities and taxes, or a commitment to eliminate violations through participation in the program. Similarly, if applicants fail to meet debt-to-income ratio or credit requirements, financial navigators will advise applicants on how to manage debt or to improve their credit.

To facilitate the program, Philadelphia secured key partnerships with organizations that provide financial counseling and application support, including the Philadelphia Council for Community Advancement and Clarifi. Additionally, the program maintains a list of licensed supportive contractors, to connect high-quality contractors with program participants. Finally, the program’s administrative costs are covered by a $40 million taxable bond issuance that is serviced by the City.

Process

In the city’s 2018 Housing Action Plan, Philadelphia identified an aging housing stock, blight, and vacancy as significant barriers to meet the city’s affordable housing needs. City data revealed 29,000 residential properties were in below-average exterior condition, with 11,000 exterior residential property violations citywide. The challenges identified by the Housing Action Plan were not new to Philadelphia’s legislators; the report emphasized Philadelphia’s ongoing commitment to housing rehabilitation, which gained significant funding in 2016 when the Philadelphia City Council authorized borrowing up to $100 million via bond issuances for housing preservation. The use of a general obligation bond eventually allowed Philadelphia to dedicate a large investment to several programs, including $40 million to administer the Restore Repair Renew program, instead of pursuing multiple small-scale funding sources. 

Highlights in the program development process include:

• February 2016: Council President Darrell L. Clarke first introduced a home repair program as part of a package to create local jobs through energy efficiency upgrades. At the time, he suggested a bond issue as one path forward for funding.
• May 2016: Council President Clarke introduced a $100 million bond issue which would include $40 million for a new home repair loan program, and $60 million to support three existing home preservation programs, which had seen funding cuts after the 2008 economic recession. The design for a home repair loan program drew from Baltimore’s 2004 “Healthy Neighborhoods Initiative” and Detroit’s 0 percent home repair loans program.
• 2017: Council President Clarke and Councilwoman Cherelle Parker introduced a bill to authorize the Philadelphia Redevelopment Authority to issue up to $40 million in bonds to finance RRR.
• 2018: Philadelphia published its ten-year Housing Action Plan, which included a commitment to continue the Restore Repair Renew program.
• 2019: With the support of the Housing Action Plan, the program launched.
• 2020: The Restore Repair Renew program released its first annual report, which demonstrated the program’s success at connecting nearly one hundred homeowners with an average of $19,555 of capital to rehabilitate their homes. Additional early results are outlined below.

Current outcomes 

• In its first year, Restore Repair Renew distributed $1.7 million in loans to 91 homeowners, 78 percent of whom were Black, 72 percent were female, and 47 percent were 59 or more years old. The average borrower has a credit score of 711 and a household income of 60 percent AMI, which is well below the program’s eligibility threshold of 120 percent AMI.
• In its first year, 53 percent of RRR loan applicants were approved. This shows progress towards addressing high home improvement loan denial rates for low- and moderate-income households in Philadelphia. This is especially important to the program’s goals because the city’s 74.6 percent denial rate for low- and moderate-income households from 2015 – 2017 helped inspire RRR’s creation.
• The average loan amount was $19,555. Loans went towards a wide range of home repairs, including most commonly, structural repairs, and bathroom and kitchen improvements.
• In its first year, the program saw a 3 percent delinquency on payments 30 days past due, and 0 percent delinquency on payments 60 days past due. In comparison, the national average rate for delinquency on payments 30 days or more past due was 2.5 percent, although this rate represents all types of loans, including home purchasing and repairs.

Policy significance

Analyses of mortgage approval rates in cities like Philadelphia reveal wide disparities by race and neighborhood, which some academics describe as a continuation of denying equal access to prime mortgages. The Restore Repair Renew program, along with others that target households with lower annual incomes, helps to both address the history of discrimination in traditional mortgage lending and attend to the unique nature of Philadelphia’s housing market by seeking out applicants who might otherwise be rejected for traditional bank loans. 

“I think that it’s very significant that our program has…a much higher proportion of loans to people of color and women, and the portfolio performs comparably” says a program staff person. “It opens up important research questions about why we are making ‘riskier’ loans and outperforming the HMDA loans, and the reasons behind the lending disparity relating to race, geography, income, and gender of the HMDA loans.”

Through repairs, Philadelphia’s existing homeowners can invest in their homes, build long-term wealth, and strengthen their communities. With this goal in mind, the program dedicates extensive resources to case management. Instead of rejecting applicants who fail to meet the credit or existing debt requirements, nonprofit partners advise applicants on how to work towards eligibility. Advisors support applicants in identifying repairs that will add value to their property, and connect homeowners with contractors. The program design seeks to ensure that homeowners add value to their homes, and the city maximizes the impact of the program.

Related resources

• Department of Planning and Development, City of Philadelphia. Restore Repair Renew: Philadelphia Neighborhood Home Preservation Loan Program, 2019-2020 Annual Report.
• Department of Planning and Development, City of Philadelphia. Housing for Equity: An Action Plan for Philadelphia. October 10, 2018.
• Department of Planning and Development, City of Philadelphia. Foundation for the Future: Developing Philadelphia’s Housing Action Plan. October 10, 2018.