In Lehigh Valley First, Bethlehem supports the association of tax incentives with affordable housing assistance


Bethlehem City Council has put forward a proposal to force developers to contribute affordable housing in exchange for a new tax incentive.

This is a first for cities in the Lehigh Valley, Bethlehem officials said.

The idea is to create a new Local Economic Revitalization Tax Assistance Zone – or LERTA – mainly covering vacant land on the south side of Bethlehem. Developers receive 10-year tax breaks on the new appraisal of a property resulting from new construction or qualifying improvements. The tax allowance is 100% the first year and decreases by 10% per year.

The housing component requires developers participating in the new LERTA to reserve 10% of new homes as affordable, defined as homes for which rent and utilities do not exceed 30% of the resident’s gross income.

As an alternative, the proposal gives developers the option of putting $ 25,000 for each housing unit they create into an affordable housing fund. The money could then be used to advance the creation or rehabilitation of affordable housing throughout the city through low interest loans, grants or rent assistance for low, very low people. and extremely low income as defined by the US Department of Housing and Urban Development (HUD).

City council gave its preliminary approval to the program on Tuesday, following a lengthy discussion on where to set alternative fees. Supporters of the $ 25,000 fee said it’s low enough for developers to sign up for, while opponents say it’s too low compared to similar programs in other Pennsylvania cities.

The preliminary vote was 5-2, with opposition from Councilors Paige Van Wirt and Grace Crampsie Smith.

Board chair Adam Waldron echoed the words of former councilor Karen Dolan in arguing for the $ 25,000 fee, saying council cannot let perfection be the enemy of good.

Final approval will be presented to the board at its September 7 meeting.

LERTA also requires approval from Bethlehem Area School Board and Northampton County Council.

Alicia Miller Karner, director of community and economic development for Bethlehem, noted that, as she told the school board’s finance committee in a presentation on LERTA, the purpose of housing assistance is not to strike a grand slam.

“But it’s the single and double rooms that are going to help us solve our affordable housing crisis in the city,” she said.

Bethlehem is considering creating a LERTA tax abatement zone on vacant land in Southside to encourage developers to build affordable housing.Courtesy of the City of Bethlehem

Bethlehem proposes to target vacant Southside plots like the SteelStacks Ruin Lots and Peron Development’s Flats Urban Infill Project for the area, while excluding buildings like Machine Shop # 2. The only two buildings included are the former Martin’s Furniture, 414-416 E. Third St., and the Cutters Bike Shop building, 418 E. Third St., at the request of the owner, Karner said. A subsidiary of Peron purchased the old building from Martin for $ 440,000 in September 2020.

LERTA’s properties could prove difficult for developers, according to supporters of maintaining the fee in lieu of $ 25,000. Given Bethlehem’s long industrial history, developers may face unforeseen costs when they start digging the lots, officials said. As an example, Karner referred to an unexpected cost of over $ 1 million when a Southside project revealed an active gas line that was not showing on engineering maps. Another developer had to deal with barrels of trash that had been buried at the site, officials said.

“We have no idea if they have any idea what’s going to be there,” said Councilor Bryan Callahan.

The LERTA benefits could be worth an average of $ 1 million to $ 2.5 million, Crampsie Smith asked for fees closer to the $ 129,000 per State College housing unit in a similar program and the $ 180,000 billed in Pittsburgh.

Crampsy Smith tried to get council to approve a slightly higher affordable housing fee of $ 42,450 with an annual increase of 5%. This figure is based on a HUD formula known as the Affordability Gap Method which considers the average market rent at $ 1,500 minus the average affordable rent of $ 1,146 multiplied by 10 years. Van Wirt supported the amendment, but it failed with only City Councilor Olga Negron joining them, and Waldron and Callahan opposed it along with Councilors J. William Reynolds and Michael Colon.

On Tuesday, the Board also gave final approval to:

  • An increase in water prices will take effect on September 1. The typical residential customer’s water bill will increase 8.5% from $ 84.47 to $ 91.70 per quarter. The typical commercial customer will see a 10.1% jump to $ 277.43 per month, while industrial users will see a 13.5% jump to $ 853.88 per month.
  • A zoning adjustment of the former Martin Tower site to accommodate more parking in front of the proposed medical buildings on Eighth and Eaton avenues.

Tuesday’s board meeting is available on YouTube.

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Kurt Bresswein can be reached at [email protected].

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