Allentown officials eye property sales tax as steady funding stream for housing programs

ALLENTOWN, Pa. — A tax increase on property sales in Allentown could provide the money the city needs to truly address its housing crisis, according to its proponents in city government.

Buyers are required to pay a 2% deed-transfer tax on properties purchased within Allentown city limits. Half of those tax revenues go to the state; the city and Allentown School District split the other half.

Councilman Santo Napoli is proposing — and five of his six colleagues are co-sponsoring — a measure that would raise the city’s deed-transfer tax half a percentage point, doubling its revenues.

That tax was capped at 2% since Allentown adopted a charter in the late 1990s, but voters last year approved a referendum to remove that limit.

Council now is moving to raise the tax and earmark those additional revenues for a housing fund.

A half-percentage-point increase in the deed-transfer tax amounts to an extra $500 per $100,000 spent on a property.

Deed-transfer taxes often are evenly split between buyers and sellers, meaning a buyer would pay $250 more per $100,000 in property price.

The sale of an Allentown property for $200,000 would cost $4,000 in deed-transfer taxes today; if Napoli’s measure passes, that tax bill will be $5,000, with $1,000 from that sale deposited into the new housing fund.

'Residents getting squeezed out'

Napoli spent more than a year working on the proposed legislation after championing the measure to remove the decades-old cap.

His effort was given further fuel when the city’s comprehensive housing plan — “Welcome Home Allentown,” published in January — identified a need for a steady stream of funding.

The total annual costs for homeownership and repair programs, eviction prevention, emergency assistance and more were projected at about $6.6 million.

Funding from the U.S. Department of Housing and Urban Development covers about $3.6 million. That leaves the city to find $3 million each year if it wants to implement a laundry list of initiatives and programs suggested in the housing plan.

“That's where the deed transfer tax [increase] comes in,” Napoli told LehighValleyNews.com. “We can actually start accomplishing some of our goals.”

Allentown’s current cut of deed-transfer taxes amounts to about $3 million, so the city can aggressively build up a new housing fund by doubling its share of revenues, Napoli said.

And in almost half of all sales, corporations will pay that tax, according to the councilman.

He said 46% of properties that changed hands in June 2024 were purchased by corporations. That figure has only climbed since, Napoli said Wednesday.

“The fear of investors acquiring this much real estate in the city, and the fact that Allentown residents are getting squeezed out, was really concerning,” Napoli said.

Well-funded corporations can “come to the table with cash offers,” waive inspections and offer “fast settlements to entice sellers,” he said.

“Allentown residents get stuck paying high rents instead of acquiring home ownership and building generational wealth,” Napoli said.

He called his bill “an opportunity to level the playing field for our residents.”

Climbing costs

A housing fund is overdue in Allentown, where much of the city’s housing stock is more than a century old, Napoli said.

“It’s definitely showing its age,” the councilman said.

“It’s time for our stock to get some TLC,” he told LehighValleyNews.com.

And the “Welcome Home Allentown” study provided statistics to illustrate the growing sense that affordability has hit crisis levels.

Rent for a typical one-bedroom apartment cost about $900 in 2019, meaning its tenant had to earn at least $36,000 per year for the unit to be considered affordable, according to the study.

The same apartment rented for $1,200 in 2024; a tenant would need a salary of $48,000 to meet affordability metrics.

A person with an income of $36,000 in 2019 could have purchased the “typical” home for $174,000, using a mortgage with a 4.5% interest rate, the study says.

A person would need an $80,000 income — and a mortgage with a 7.5% interest rate — to afford the same home last year. The “typical” home in 2024 cost $284,000, according to the study.

‘Contagious’ benefits?

Allentown’s Department of Community and Economic Development would administer the fund and its programs.

DCED officials expect to spend the first six months of 2026 accumulating new tax revenues and developing a “flexible” plan for how to spend them, according to Deputy Director Mark Hartney.

The legislation would require those officials to provide annual action plans and reports on how funding was spent the previous year. It also mandates a comprehensive review of the housing fund after five years.

That will help a future council determine “whether to continue the program going forward,” Napoli said.

Council President Daryl Hendricks, whose 12-year run on council soon will end, credited Napoli for including those “transparency” measures in his proposal.

Hendricks said the housing fund would be “a great way to stop” what he called a “seismic shift” in who buys properties in recent years.

Too many properties being bought by “investors rather than homeowners … has a deleterious effect on our communities,” Hendricks said.

Councilwoman Ce-Ce Gerlach called housing “the No. 1 issue” in Allentown.

“If you address housing, you’re decreasing crime, you’re increasing quality of life, you’re increasing performance at schools,” she said.

She touted the proposed housing fund’s potential “ripple effect” in communities throughout the city.

Vicky Kistler, who leads the city Department of Community and Economic Development, echoed Gerlach.

City-supported home repairs and improvements could be “contagious” and spur privately funded projects, boosting whole blocks, Kistler said.

CORRECTION: A previous version of this article stated the deed-transfer tax increase would cause buyers to pay $500 more per $100,000 in property value. Deed-transfer tax obligations are often split between buyers and sellers, meaning buyers would see a $250 increase per $100,000, in most cases.