ALLENTOWN, Pa. — Voters will go to the polls this fall to elect a president, senators, representatives and state lawmakers.
And in Allentown, they’ll be asked whether to remove a tax cap set in 1996.
City Council unanimously voted Wednesday to approve a ballot question that could open the door for the deed-transfer tax to be raised for the first time in decades.
Increasing the city's deed-transfer tax from 2% to 3% would see homebuyers pay an additional $2,500 in deed-transfer taxes for a $250,000 home.
The deed-transfer tax is among several revenue sources for which council can't raise rates, under the city’s home rule charter.
Members are barred from increasing taxes beyond the rates set in 1996 on deed transfers, earned income, business privileges and amusement devices, among other sources.
Allentown Finance Director Bina Patel this month urged council members to approve the ballot question and send it to voters in the fall.
People who buy and sell real estate — houses, buildings and land — in Allentown are required to pay a 2% deed-transfer tax, with 1% going to the state while the city and school district split the other 1%, Patel said.
Increasing that to 3% would see homebuyers pay an additional $2,500 in deed-transfer taxes for a home bought for $250,000.
Tough budget season ahead
City officials seem to be preparing for another tough budget season after council members clashed with Mayor Matt Tuerk late last year and shot down his requests for tax increases to fund new positions and services.
And council's move during Wednesday's meeting to hire an attorney to explore a lawsuit against Tuerk has likely further strained their relationship.
"The deed-transfer tax is “one more asset, one more item that we can tap into.”Allentown Finance Director Bina Patel
Council late last year passed two budgets that included no new taxes in 2024; Tuerk vetoed the first but let the second become the city’s annual spending plan without his signature.
Allentown now faces a $6 million “gap” between its revenues and expenses, Patel said this month.
Removing the 1996 cap on deed-transfer taxes would give the city “more opportunity to collect revenue,” Patel said.
Property taxes and earned-income taxes — which council can increase by a simple majority vote during the annual budgeting process -- are the city’s primary sources of funding.
The deed-transfer tax is “one more asset, one more item that we can tap into,” Patel told council members during a July 17 committee meeting.
Opportunity to address housing crisis
Councilman Santo Napoli urged his colleagues to support the ballot question.
He suggested council earmark any new revenue from an increase down the line for programs to support homeowners and first-time homebuyers in the city.
Raising the deed-transfer tax by just a half-percentage point could generate more than $2 million each year for Allentown, based on recent property sales data, Napoli said.
“Homeowners are being squeezed out of this market."Santo Napoli, City Council vice president
That would give the city “a reliable source of revenue” to fund those programs and “actually get some of this work done,” Napoli said.
“I believe this is an opportunity to really address those issues, along with affordability,” he said.
And much of any additional deed-transfer taxes would be paid by businesses, not individuals, according to council’s vice president.
LLCs and corporations bought 46% of all properties sold in Allentown last month, Napoli said.
“Homeowners are being squeezed out of this market,” he said.
Realtors vow to fight referendum
Asher Schiavone, who started this month as director of government affairs for the Greater Lehigh Valley Realtors, said members of his organization are “100% opposed” to removing the cap on deed-transfer taxes in Allentown.
The housing market in the Lehigh Valley is “very tough,” and even a small increase in deed-transfer taxes could push prices up by thousands of dollars, he said July 17.
“How is increasing the cost of home ownership, especially for low-to-moderate-income individuals, making housing more affordable?”Asher Schiavone, director of government affairs for the Greater Lehigh Valley Realtors Association
“How is increasing the cost of home ownership, especially for low-to-moderate-income individuals, making housing more affordable?” Schiavone said.
And any future hike in deed-transfer taxes could drive up rents throughout Allentown, he said Wednesday.
“We would be willing to bet that [LLCs] are going to pass those costs on the tenants,” he said. “We don't think developers can eat that cost.”
Schiavone urged council to ensure the wording of the ballot question is not “misleading” and clearly states that approving the referendum would make it possible for deed-transfer taxes to increase.
Lehigh County Board of Elections will examine the proposed referendum and determine whether to place it on November ballots.
