Rule of the Rich: How a Tiny Class of Ultra-Wealthy Landlords Dominates the Philly Working Class

PHILADELPHIA — In the wake of a year of massive economic downturn coinciding with the COVID-19 pandemic, Philadelphia’s largest and most powerful landlords have the most to gain — all at the expense of the Philadelphia working class.

A Rapidly Changing City

Philadelphia has been changing quickly in recent years, with crises of gentrification, unemployment, and homelessness across many neighborhoods. In fact, two Philadelphia neighborhoods, Northern Liberties and Point Breeze, were listed as two of the most rapidly gentrifying neighborhoods in the country, according to a 2018 article in PhillyVoice, with rapidly rising property values and ceaseless new construction.

In the last four years, Philadelphia has undergone an unprecedented shift. Historically, the city has been characterized by a majority of its people owning their homes. In 2017, the city “flipped” for the first time: a majority of its residents were renting. Since then, this trend has shifted back slightly, and the city is split with 52% owning their homes and 48% renting.

What caused this shift? Who are the people buying up homes or investing in housing? How will the pandemic-induced crisis affect housing in the city? 

In an attempt to answer these questions, Pew Charitable Trusts published a study earlier this year outlining the general characteristics of Philadelphia’s landlord class. Their statistics are deeply revealing of the nature of capitalism and how housing markets develop under its rule.

Their general breakdown of homeownership in Philadelphia is as follows:

  • In Philly, there are about 55,000 landlords who own approximately 136,000 rental properties amounting to 288,000 units.
  • Of these landlords, the vast majority (73%) are small-time, “mom and pop” landlords, owning only one or two units, which account for 18% of rentable units in the city.
  • Over half of these smaller landlords are locals who live within the city.
  • 25% of landlords fall into a middle group, owning between three and 24 units.
  • The final 2% of landlords (≅1,000 out of 55,000 landlords), owning upwards of 25 units, own more than half of rentable units (152,000 out of 288,000 units).

These numbers are staggering. This means that the vast majority of rent is concentrated in the hands of a very small group of landlords who own the majority of properties (i.e., capital). These larger landlords are more likely to be a corporation or larger property investment firm compared to small landlords who are primarily individuals. Property investment businesses also tend to control properties across wide areas or regions, meaning many large landlords are not even based in the city. Rent paid to such landlords is money extracted from Philadelphia and turned into profit for people that live elsewhere. Take for example Morgan Properties, a company based in King of Prussia, who in 2020 was the nation’s second largest apartment owner with a total of 90,617 units across the country.

Power concentrated in the hands of a few

These statistics reveal that power is concentrated in the hands of incredibly few people and firms. Even among landlords, the vast majority own very little relative to the largest landlords.

To complicate matters further, local government plays a key role in preserving this imbalance of power and wealth among property owners, and it does so in a variety of ways. 

First, here in Philadelphia, there is the notorious 10-year tax abatement on all new construction and development, which allows owners of newly constructed or renovated properties to not pay taxes on those properties for 10 years. In Philadelphia, tax-abated properties are typically found in wealthier neighborhoods, where property values are highest. 

For example, WHYY reports that “at 22nd and Walnut streets in Rittenhouse, a single housing block contains seven tax-abated properties, each valued at between $2.4 million and $2.5 million.” The tax revenue that could be generated from these expensive properties would have a significant impact on the city’s budget and could be used on public projects: improvements to schools, infrastructure, public housing, etc. Instead, the rich get a tax break

There are very few tax-abated properties in the city’s poorest neighborhoods. Working class homeowners that may have owned their home for decades have to pay their property taxes in full. The 10-year tax abatement is legislation that leverages power in favor of those that already have capital, and thus have the means to buy and “develop” cheap properties. 

The local Philly government — all Democratic Party controlled — further reinforces the financial strength of the most wealthy through public housing projects such as Section 8. Section 8 housing is a public-private partnership in which landlords are incentivized to maintain and rent homes at a lower market value to low-income tenants. Using tax money, the government pays 30% of the rent on the tenant’s behalf.

“Individual investors are less likely to house Section 8 tenants compared to multi-unit properties owned by LLPs, LPs, or LLCs [private corporations],” according to a Brookings study. Simply put, it is the wealthiest landlords that rent to the most financially vulnerable sectors of the working class. These landlords collect rent from these tenants as well as subsidies from public taxes, which come from the wealth created by other workers. 

Section 8 landlords can make money even in times of crisis, such as during the COVID-19 pandemic, during which many tenants could not pay their rent. Smaller landlords, which make up the majority of landlords in the city, do not have the same safety net and may be forced to sell in times of economic crisis. The hyper-wealthy, who are largely unaffected by the crisis, are then free to swoop in and buy up those properties, further consolidating their wealth and power.

This is why a moratorium on evictions was only ever a half measure, whereas a full cancellation of rents and mortgages, as demanded by progressive organizations such as the Party for Socialism and Liberation, would have done a great deal to: 1) prevent the huge looming wave of unjust evictions and the accumulation of debt for workers, and 2) prevent the largest landlords from buying up properties and continuing to increase their profits. 

The ruling class is making money in all directions, all at the expense of workers. It is clear that capitalism is incapable of providing fair and adequate housing to all people. This close look at housing in Philadelphia reflects the greater trend of private enterprise more broadly in that it always trends toward consolidation and monopoly. Under capitalism, the state ensures that it stays that way. All people deserve adequate housing and a dignified life without fear of homelessness or starvation. Socialism is the only viable path forward to obtain that right for everyone.