years, the full abatement helped make development viable in neighborhoods far beyond Center City and the most affluent districts, offsetting lower revenues in “up and coming” areas with reduced operating expenses. Under public pressure, however, the program was restructured into a sliding scale abatement that averages out to roughly half of its earlier value. “Between cheap capital and the full tax abatement, it became possible to do projects in neighborhoods that had never seen development before,” Rushdi says. “With rates more than doubling and the abatement reduced, those two critical pillars In Philadelphia, the combination of high construction costs and slim margins led to what Rushdi calls a “supply hit.” Between 2022 and 2024, he estimates that building permits in the city dropped by more than 75 percent. Material costs, meanwhile, jumped more than 20 percent from 2020 through 2024 and never really retreated once supply chain issues eased. “It created a new baseline for costs,” he says. “Jobs became very tough to pencil out.” Another major factor was the change to Philadelphia’s famed ten-year tax abatement program, a longstanding incentive considered one of the most powerful drivers of housing production in the city. For Photo Credit: Albert Yee 22 BUSINESS VIEW MAGAZINE VOLUME 12, ISSUE 12
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