ALLENTOWN, Pa. — The first deed-transfer tax increase in decades could help the city turn the corner on an ever-present housing crisis.
Council on Wednesday unanimously approved a measure to raise that rate from 2% to 2.5%, with all additional proceeds earmarked to support a housing fund that’s set to be established.
That could arm Allentown officials with millions each year to “level the playing field for our residents,” who often lose out on opportunities at homeownership to investors and corporations, according to Councilman Santo Napoli, who has championed the measure for more than a year.
“There's a lot of work that can be done with this reliable source of revenue, and it really gives us an opportunity to point more homes into home ownership, which will have positive benefits and impact citywide."Councilman Santo Napoli
Napoli said he “sounded the alarm” last summer after learning those wealthy buyers were scooping up more than 40% of all properties in the city.
That number hovered closer to 50% over the past 18 months, “squeezing out” Allentown residents from the market, he said Wednesday.
“Investors … come to the table with all-cash offers, they waive inspections, [offer] fast settlements, and that entices sellers to sell to them instead of homeowners,” Napoli said.
Many residents are “stuck renting” at higher rates than they might pay for mortgages while missing out on chances at “building generational wealth,” he said.
The deed-transfer tax hike could raise more than $3 million for the fund in its first year, based on 2024 home sales in Allentown, Napoli said.
That would support current homeowners and look to add new ones to the city through programs to rehabilitate blighted properties and support whole-home repairs for seniors and vulnerable residents.
“There's a lot of work that can be done with this reliable source of revenue, and it really gives us an opportunity to point more homes into home ownership, which will have positive benefits and impact citywide,” Napoli said.
'Prudent' solution: Controller
The city’s Department of Community and Economic Development will be tasked with administering the fund.
It will provide annual spending plans and reviews to council, and an independent committee will recommend whether to keep the fund after five years.
Those provisions will hold officials “accountable” for how they spend the money on housing initiatives, Napoli said.
“Dedicating this funding stream to begin to address that problem is something that will make Allentown much more livable and stronger in the long run.”Controller Jeff Glazier
If results match Napoli’s optimism, the housing fund — and its dedicated revenue stream — could become a signature achievement for the first-term councilman.
Controller Jeff Glazier called Napoli’s measure “one of the most impactful things council has done in a long time.”
“We know we have significant issues with our housing stock,” Glazier said. “Dedicating this funding stream to begin to address that problem is something that will make Allentown much more livable and stronger in the long run.”
He said a half-percentage-point increase in the deed-transfer tax is “prudent,” noting other Pennsylvania cities levy larger deed-transfer taxes.
Allentown’s deed-transfer tax rate was capped at 2% — 1% for the state and a half-percent each for the city and school district — since the home rule charter was adopted almost three decades ago.
Voters last fall eliminated that cap through a referendum.
The sale of an Allentown property for $200,000 cost $4,000 in deed-transfer taxes Wednesday. That tax bill will be $5,000, with $1,000 from that sale deposited into the new housing fund, when Napoli's bill takes effect in the coming weeks.
The deed-transfer tax increase equates to an additional $500 in fees per $100,000 in sale value; buyers and sellers typically split tax bills.
