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Pennsylvania House approves malls-to-apartments tax abatement

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(The Center Square) — Some of Pennsylvania’s shopping malls may become mixed-use housing in the future.

This week, the Pennsylvania House passed House Bill 1799, which would offer tax credits and abatements, along with creating a Mixed-Use Redevelopment Advisory Committee, to transform unused and shuttering malls into housing, among other things.

Proposed by Rep. Josh Siegel, D-Allentown, the bill is part of an effort to make it easier to build much-needed housing across the commonwealth. It could also help turn a liability into an asset.

Shopping malls in many parts of the commonwealth have gone from a magnet for retail to eyesores, with hopes for revitalization sliding into the dread of blight.

Democrats like Siegel have championed “gentle density” reforms to address a housing shortage that hits urban, suburban, and rural Pennsylvania. Republicans, too, have warned of unfair burdens and restrictions on homebuilding that drive a shortage of affordable places to live.

Bipartisanship, however, was thin: it passed narrowly by a vote of 106-95, with the help of a half-dozen Republicans. Some concerns were raised in previous discussions about the abatement offering too generous terms in some cases.

“I think there’s a good chance they run it; it’s a redevelopment bill, it’s about creating jobs,” Siegel said. “It’s a pro-growth, pro-development, pro-business bill.”

Siegel argued the terms need to err on the side of generosity to alleviate the risk that developers face in taking on a mall challenge.

“The ROI is you’re gonna take this derelict, blighted property and you’re going to turn it into a hub of economic prosperity for your community,” he said.

If HB 1799 makes it through the Senate and gets Gov. Josh Shapiro’s signature, localities could grant 10-year tax exemptions to developers for economic development or mixed-use development of empty malls.

“These are really nostalgic, very painful remnants of a prosperous past,” Siegel said. “This is an opportunity to incentivize and attract unprecedented levels of private-sector investment to communities that haven’t seen that kind of investment in decades.”

Developers could then get an additional two- or five-year exemption if they meet criteria related to attainable housing, energy efficiency, renewable energy installation, access to public transit, green spaces, and other qualifiers.

Municipalities could also claw back some of the exempt taxes if projects have a “serious violation” of state law, a code violation, get a permit denial due to neighborhood blight, or if developers don’t meet state requirements.

Properties that already receive tax abatements or state tax relief would not qualify under the bill, nor any owners with delinquent taxes on other properties.

Using the tax abatement won’t be required — it’s up to localities. Siegel hoped the advisory committee would show local leaders “just how powerful this legislation is and how much capacity it has to transform one’s community.”

“It’s about restoring hope and prosperity to communities that feel left behind and left out,” he said. “The story for a lot of Pennsylvania has been population loss, decline — and I think rightfully so, a lot of frustration about this feeling that some parts of the state just don’t matter anymore. This is about making sure that we can bring private-sector development, we can create jobs, create housing, and create opportunities in communities and municipalities that have felt left behind.”

Malls-to-mixed-use changes aren’t unheard of in Pennsylvania; suburban Philadelphia’s Middletown had a 600-apartment complex planned for its Oxford Valley Mall, with first units expected to be completed in 2024.

Siegel previously argued that the status quo for housing has failed and it’s time for “strategic investment” to revive towns statewide. His other housing-growth proposals remain in progress in the General Assembly

“Hopelessness is a choice, we can do something differently. We don’t have to continue to wait for this crisis to get worse,” he said. “This is a chance for us to be proactive in the commonwealth.”

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