The Pittsburgh Public Schools’ board of directors voted Wednesday to approve tax breaks for developers who convert vacant Downtown office space into apartments.
The city’s Urban Redevelopment Authority (URA) proposed the abatement program as a way for the school district to help strengthen and stabilize Downtown, where high rates of office vacancy persist.
Under the agreement, developers will still be required to pay taxes based on a property’s assessed value prior to construction. Any increase to that base value created through the conversion process, however, will not be taxed for 10 years unless the differential exceeds a $250,000 threshold.
That means the district won’t see any reductions to the tax revenue it currently receives. If a dozen or more projects are approved under the abatement program, however, the district would forgo at least $3 million a year in additional revenue.
Developers applying to convert Downtown office buildings will be eligible for the exemption as long as they satisfy one of three conditions:
- Setting aside at least 10% of apartments for households earning at or below 50% of the area median income (AMI), as determined by the U.S. Department of Housing and Urban Development. (For a family of four in Pittsburgh, that’s $50,200 or less.)
- Setting aside at least 60% of apartments for households earning at or below 80% AMI;
- Or, creating no fewer than 50 commercial or industrial jobs.
Given developers aren’t necessarily required to create new family housing, multiple board members voiced skepticism about whether projects would directly benefit the district’s students.
“If we really say we care about affordable housing, and we really care about good jobs, these criteria aren’t it and we have absolutely no say,” said board member Pam Harbin, the sole no vote on the plan.
But director Devon Taliaferro said the alternative would ultimately do more of a disservice to students.
“Letting buildings go dark means that we will lose more money, and I think about the long game in this scenario,” Taliaferro said.
More than 22% of downtown office space sat vacant during the first quarter of 2023, according to a presentation the URA gave board members last month. Leaders said that’s due to corporate tenants downsizing their office footprint or relocating entirely.
A combined 7 million square feet of Downtown office space is currently vacant, with another 7 million that could potentially face the same fate if property owners fail to pay off their mortgages.
“Vacant, dark buildings will continue to appeal their assessed value, and the taxes received by the three taxing bodies will decrease if we don't act. We don't want them to be owned by banks,” URA executive director Susheela Nemani-Stanger told the board. “We want to acknowledge the problem and we want to reposition these buildings for new assessed values.”
New assessed values could ultimately bring the district more money.
The URA’s board advanced the abatement program in August, though the agency has yet to receive county council’s sign-off.
If passed, developers would get a $750,000 incentive to build, with a $250,000 subsidy from each taxing entity.
The application window for the abatement will be open for three years beginning in January.
