Progress Update: Tax Abatement Program Opens Opportunities to Transform Downtown into a Dynamic Neighborhood for the Future

A 2020 study by the International Downtown Association concluded that established downtowns account for about 25% of a city’s assessed value and property tax revenue and more than 40% of hotel tax revenue.​Pittsburgh stands to lose millions of dollars in tax revenue as vacancies rise and buildings go dark. ​

Downtown Pittsburgh has long been a corporate center for much of its modern history and among the most powerful in the nation. In fact, the Pittsburgh metro, 28th largest in the nation, possesses the fifth highest concentration of downtown office space. As a result, and as we’ve seen since the COVID-19 pandemic, our downtown is evolving as commercial properties adjust their footprints to accommodate fewer commuting workers or relocate to other submarkets, often as nearby as the Strip District and the North Shore.

Office vacancy rates are high in downtown Pittsburgh and our real estate stock is being reassessed at significantly lower values, which poses a pressing concern. There is much at stake regarding tax revenue for building owners with reduced rent and for the City of Pittsburgh, Allegheny County and the Pittsburgh Public Schools – recent policy action by these three taxing bodies are positioning downtown to avoid lost tax revenue.

The recent passage of the downtown LERTA program marks a critical step forward to propel the revitalization of our city center. According to the Urban Redevelopment Authority of Pittsburgh (URA), “This innovative initiative provides a regional incentive to stabilize the tax body and prevent downtown’s economic downturn. The tax abatement incentivizes individuals and entities that contribute to affordable housing or job creation within downtown Pittsburgh.”

The URA structured the 10-year Downtown Tax Abatement Program to expand the existing City of Pittsburgh LERTA and Enhanced LERTA program, making it accessible across all three taxing bodies. This comprehensive initiative combines a robust local incentive pledge with the Downtown Conversion Program, a pilot that provides funding to developers for the creation of new affordable housing in the city’s central business district through the conversion of fallow and underutilized office space.

The LERTA program offers a three-year application window, allowing the 10-year abatement term to commence after the application is approved, along with annual tax abatements of up to $250,000 per taxing body for each 10-year period based on the value of improvements created by each project (existing taxes are not abated). To qualify, applicants must create at least one of the following:

• A commercial residential development with at least 10% of total residential units affordable to and occupied by households earning at or below 50% of the Area Median Income (AMI), or
• A commercial residential development with at least 60% of total residential units affordable to and occupied by households earning at or below 80% of AMI, or
• Commercial and industrial developments that increase the net number of full-time equivalent positions by at least 50 jobs.

The hope of the many public and private sector partners revitalizing downtown is that tax incentives will encourage accelerated redevelopment of commercial properties to realize downtown’s full potential to become a diverse, dynamic neighborhood for the future.