You may have noticed, but sometimes life doesn’t make a lot of sense.
Candy corn, Auto-Tune, all those cat videos on the Internet—I don’t get it.
Life in Harrisburg can be quite confounding. Why does Forster Street have the same number of through lanes as the Pennsylvania Turnpike? Ah, the mysteries.
I find the housing situation here especially mystifying.
Here, you have a city where demand for a decent apartment seems to far outstrip the supply, yet there is practically no new development. Harristown is basically the only developer in the city adding inventory and, it’s doing so largely because its charter mandates that it revive the downtown.
Meanwhile, the city has thousands of developable lots, places where buildings used to be, but that have burned down or been bulldozed over the past 60 years. And, according to a 2018 study, Harrisburg has another 4,000 abandoned houses and commercial buildings. Yikes.
So, if developers wanted to build, they could. There’s a ton of opportunity in the form of empty land and empty buildings. Then why aren’t they?
According to builders I’ve spoken with through the years, there are three main reasons
High cost/low ROI
It’s expensive to build in Harrisburg. Land and buildings in downtown and Midtown tend to be costly, and many “available” properties sit for years on the market because they’re priced too high. Construction costs also tend to be high, especially when builders need to close off streets, work beside or near other structures and do expensive abatement and preservation work.
Also, most builders are not in the landlord business. Once a building is up, they want out. In Harrisburg, they often have trouble recovering their investments post-construction, much less turning a decent profit. There are a few Harrisburg-based companies that are buy-and-hold builder/managers, but they’re the exception and operate on a fairly small scale.
Land is much cheaper in other parts of the city, but total project costs still tend be more than builders can recover through rents or sales. For instance, the city’s MulDer Square townhomes cost almost double to build compared to what they sold for, the difference made up through government subsidies.
In Harrisburg, there’s another type of “builder”—the renovator. These generally are individuals attracted to the city for its charm, history, walkability and access to amenities. They like old buildings and city living and, so, are less price sensitive. I fall into this class. Since I’ve lived in Harrisburg, I’ve renovated several buildings and ultimately lost money on every one. My decision to live in Harrisburg is a lifestyle choice, not an economic one.
Regional competition
Harrisburg is not an island. The city competes regionally for residents, for businesses, for capital, for workers and for everything else. Thus, when developers decide to build in central PA, they have many places to choose from.
Builders are most likely to select an area where they can make the greatest profit—with low input costs and robust demand. For sheer return on investment—after all, construction is a business—Harrisburg has a tough time competing with the likes of Hampden and Lower Paxton townships
Harrisburg has more success competing in another category—not regionally, but nationally, against other cities. Compared to Washington, New York, Boston and Philly, Harrisburg is a ridiculous bargain. Perhaps that’s why we’ve seen in-migration from larger places, from veteran city-dwellers who happen to find themselves in central PA. Once again, I resemble that remark.
Slumlords
Blight is a big problem in Harrisburg, even in so-called nicer neighborhoods, with numerous implications for housing.
First, many blighted properties end up condemned or torn down, removed from the market entirely, thereby reducing supply. Second, rundown houses discourage people from moving into a neighborhood, even when it’s well located or otherwise desirable.
But perhaps the greatest problem is the self-perpetuating nature of slumlordism. If a rundown property is for sale, it’s often priced at a premium, based on its current cash flow. This assumes that the new owner, just like the old one, will spend virtually nothing on the property, happy to collect rent as the building falls apart around them. The inflated sales price scares off renovators, who need to get the property at enough of a value to make a costly restoration economically feasible.
Currently, Harrisburg is pondering a new housing policy. In my opinion, the city needs a universal solution to its difficult, complex, perplexing housing problem, overcoming some of the hurdles described above.
This broad solution might include zoning changes for denser development, stricter codes enforcement, homebuyer programs, tax incentives, renovation assistance and the greater use of organizations like the Lancaster Housing Opportunity Partnership. It also should include a welcoming attitude towards newcomers who want to live and invest in Harrisburg.
A universal solution might also include an affordable housing element. However, a smart, targeted affordable housing statute should be part of an overall solution that encourages more building and renovation. Otherwise, Harrisburg runs the real risk of having not just one active developer, but none at all.
In urban real estate, there’s a popular catchphrase that says, “more is more.” It means that a city needs more decent housing, period. It needs to remove obstacles, fight blight, welcome newcomers and bravely fight NIMBYism. I agree.
Lawrance Binda is co-publisher/editor-in-chief of TheBurg.
