In a rare show of unity on the oft-divided dais, Allentown City Council members appear poised to raise the city’s deed transfer tax by 0.5%, which leaders say will generate millions in additional revenue to be funneled into affordable housing.
Members of City Council’s Community and Economic Development Committee unanimously forwarded a bill increasing the tax with a positive recommendation Wednesday night. The measure now goes to the full Council.
City Council member Santo Napoli, who sponsored the ordinance, said that it will help “level the playing field” for prospective home buyers in Allentown.
According to city data, corporations or LLCs purchased 44% of properties sold in the city in 2024, rather than individuals who intend to live in their property. Home prices in the city have risen by 63% over the last five years, and rents have increased by 44%, pricing out many of the city’s low income residents.
The tax increase is expected to create a sustainable stream of annual revenue — $3 million a year, according to city estimates — to launch a housing program that will make housing more affordable, Napoli said.
“This increase does not impact city homeowners such as seniors on fixed incomes, or vulnerable residents with mortgages,” Napoli said. “All the funds that are received from this increase exclusively go into housing funds under our [Community and Economic Development] department, to be used to address housing initiatives in the city.”
The city won the right to increase its deed transfer tax after a successful voter referendum in 2024. Prior to the vote, City Council was legally barred from raising the deed transfer tax under its city charter. Amendments to the charter require a voter referendum according to the third class city code.
According to Lehigh County’s website, any document transferring an interest in real estate —- known as a deed — is subject to a 1% state transfer tax and 1% local transfer tax, which is split between the city, township or borough, and the local school district, and based on the property’s value.
City Council committee members expressed resounding support for the move.
“We seeing a seismic shift in housing stock going to investors rather than homeowners, and that has deleterious effect on our communities, so I think this is a great way to stop it,” said Council President Daryl Hendricks. “The funds to be used for housing and for affordable housing for individuals is a good thing.”
The tax increase will take effect in January. Allentown’s community and economic development staff will create an “action plan” on how the funds will be used and present it to City Council in July.
Community and Economic Development Director Vicki Kistler said that staff will use Allentown’s comprehensive housing plan, “Welcome Home Allentown,” which was finalized in January, as a roadmap on how to spend the funds. Possible uses of the money include home rehabilitation programs, affordable housing construction, rental assistance or other initiatives, Kistler said.
“We are going to have a flexible work plan, because sometimes opportunities in housing just present themselves. And when they do, you have to be able to pivot,” Kistler said. “Property may have some terrible damage that makes it an ideal property to build something else, or we may have a … grant that comes down the pipe, or a federal funding source that gives us some flexibility. So we’ll come to you, and we’ll make sure that you know what direction we want to go and why we want to go there, and hopefully get your blessing.”
City Council will hold a final vote on the deed transfer tax increase Dec. 3. at council chambers in City Hall.
Reporter Lindsay Weber can be reached at Liweber@mcall.com.