New Legislation Would Use Tax Breaks To Spur Development In Underserved Areas

Jun 6, 2017

Legislation submitted to City Council by the mayor’s office this week would change how proposed developments qualify for public subsidy. 

Moving forward, tax breaks would be used as leverage to build greater social equity into development: lower taxes in exchange for projects that provide affordable housing, create full-time jobs, or sustainable buildings.

The current system of tax abatement isn’t working as it should, said Mayor Bill Peduto.

“It really doesn’t incentivize affordability,” he said. “And it doesn’t incentivize development in...neighborhoods that have not seen residential or commercial growth.”

Pittsburgh has very hot and very cold markets, he said, and tax breaks should be used to enable development in the latter.

The city of Pittsburgh currently offers seven different tax abatement programs. Four of the program are set to expire in June. The proposed legislation, comprising two different ordinances, would extend those programs through Dec. 31, 2017, and then cut them down to just three.

During the intervening six months, Peduto said he wants to hold public meetings in every council district to gather community input on how best to leverage tax breaks to spur development and greater affordability.

When asked if larger tax breaks over longer terms could hurt the city’s already-strapped tax revenue, Peduto said the proposed abatements would actually add to the taxes coming into the city.

“In some ways, this should be a ‘but for’ case: But for this incentive, the development wouldn’t happen," he said. 

Revamping the tax abatement system to promote equitable development was one of the recommendations from the city’s Affordable Housing Task Force. It's complicated, and just part of the much larger task of maintaining affordability in the city, said Linda Metropulos, director of housing and neighborhood development for ACTION-Housing.

“It is, I think, a really important step in the right direction, and hopefully it will really entice developers to look at the tradeoff of lower taxes for units that will generate less income for them,” she said.

In order to make the proposed changes, the city, Allegheny County, and the Pittsburgh Board of Education would have to coordinate.