RelaxNation, a 48-acre campground in Lehighton, sold for $3.8 million.
The complex at 1500 Rock Road was purchased by a group of investors, including Deepak Bhatnagar of Flemington, New Jersey, and Kuldeep Kumar of New York in early June.
The investors plan on making many improvements and updates to the year-round vacation and leisure destination that offers both traditional campgrounds and glamping facilities.
“We are adding 10 new cabins, fully renovating a house, and moving a chalet on the property to a better location,” Bhatnagar said. “We also plan to clean up the property and hire a consultant/management company to run it,” he said adding the improvements should be complete by the end of the year.
The partners also own the Hampton Inn, next door to RelaxNation. That’s how they saw it was for sale and believed it was a good investment, Bhatnagar said. The other investors are Dilbag Singh of Pennsylvania and Namrata Sharma of New Jersey.
RelaxNation is 1/2 mile off the Pennsylvania Turnpike near Jim Thorpe, Beltzville Dam, Blue Mountain Resort and more.
The gated resort offers guests a variety of amenities for all camping abilities including rustic cottages, RV sites, primitive camping and glamping sites. It also has a swimming pool, fishing, and nightly entertainment. A sky pavilion, located on the summit of the facility, is available for larger events including weddings.
The new luxury cottages will offer guests the best views overlooking the Pocono Mountains. “Our great hall will offer daily breakfast, evening reception, and nightly entertainment,” Bhatnagar said. “We will also have a general store for all your travel needs. Guests will be able to come and stay in our newly renovated historic farmhouse with a view of the Pohopoco River.”
Jeff Barber of Lehigh Financial Group LLC in Allentown arranged the financing for the investors to buy the property and make improvements to it. Shawn Bogutskie from First Commonwealth Federal Credit Union in Allentown, was the lender. Loren Speziale of Gross McGinley LLP in Allentown represented the buyers.
Air Products is teaming up with World Energy to build a $2 billion expansion at World Energy’s Sustainable Aviation Fuel (SAF) hub in Paramount, California to produce renewable fuel.
The Los Angeles County production and distribution facility, the world’s first commercial scale and North America’s only SAF production facility, will expand its total fuel capacity to 340 million gallons annually.
Seifi Ghasemi, chairman, president and CEO of Air Products and Chemicals of Trexlertown, a leading global industrial gas supplier. (Contributed Photo) –
Trexlertown-based Air Products said that the long-term, take-or-pay agreement with World Energy includes Air Products’ construction and ownership of a new hydrogen plant to be operated by Air Products and renewable fuels manufacturing facilities to be operated by World Energy.
The project is scheduled to be onstream in 2025 and continues Air Products’ leadership in driving the energy transition through world-scale projects.
“This project is another pioneering moment in Air Products’ commitment to help support the energy transition,” said
. “We are already building the world’s largest green hydrogen facility with our partners in Saudi Arabia and the world’s largest blue hydrogen facility in Louisiana. Now we are teaming up with World Energy to build North America’s largest SAF facility.”
As part of the agreement, Air Products has extended its Southern California hydrogen pipeline network to supply hydrogen to the existing World Energy facility and to further increase supply reliability for all of Air Products’ hydrogen pipeline network customers in Southern California.
The expanded pipeline network will also enable Air Products to provide low-or-zero-carbon hydrogen in the future, the company said.
Air Products and World Energy will collaborate on innovations to transition to green hydrogen inputs, further reducing the carbon intensity of the fuels it produces.
“We are very pleased to be working with World Energy, enabling another U.S. megaproject that will provide measurable sustainability benefits and advance California’s decarbonization goals by producing a renewable fuel to meet the growing demands of the aviation industry,” Ghasemi said.
“Getting real about net-zero aviation is going to require the mobilization of resources unlike anything that has ever come before,” said Gene Gebolys, CEO, World Energy.
“We are pulling together the very best companies in the world with the expertise, experience, commitment, and focus on collaborating to push the frontier of what can be done to decarbonize aviation today while building a platform for what needs to be done to decarbonize flight by 2050.” he said.
“This is an immense undertaking. But it must be done, and it requires that we move with speed, collaboration, and determination befitting the problem we aim to tackle,” he added.
The SAF produced by World Energy is a 100 percent sustainable fuel made entirely of renewable resources and contains no fossil-based feedstock.
It is not co-processed with fossil fuel in traditional oil refineries, and its carbon attributes comply with all state and U.S. federal regulations for advanced biofuels.
Its lifecycle carbon emissions are currently up to 80 % lower than conventional jet fuel. It is currently approved at a 50/50 blend level with conventional jet fuel for commercial use.
“This is another world-scale, history-making energy transition project for Air Products ― one that showcases our onsite offerings and will again demonstrate our large project construction capabilities,” said Dr. Samir Serhan, Air Products CEO. “It will also enhance the value of our existing hydrogen pipeline in Southern California as we increase our supply capacity with the connection to the new hydrogen production facility we will build in Paramount.”
World Energy is collaborating with other industry leaders to gain approval for pure 100 percent renewable SAF use in regular commercial aviation to enable a future of carbon net-zero fossil-free flight. SAF allows aviation to be powered by the sun’s energy, captured by organic materials, and converted into high-energy-density liquid fuels.
By 2050, the facility will produce fuels that will displace over 76 million metric tons of carbon dioxide, the equivalent of 3.8 million carbon-net-zero flights from Los Angeles to New York, according to World Energy. It will also significantly reduce the fine particulate emissions in the trucks, trains, and planes powered by World Energy’s fuels.
Kevin Smyth, a Master’s in Student Affairs student, and Shantal Ewell, an MBA student, won first place. PHOTO/PROVIDED –
Two Kutztown University students won the $10,000 first place prize in the annual State System Startup Challenge, sponsored by Pennsylvania’s State System of Higher Education.
Shantal Ewell, an MBA student, and Kevin Smyth, a Master’s in Student Affairs student, created a business plan for the Schedula Degree Planner, an online platform that would redefine the way college students and advisors interact.
The Schedula Degree Planner creates a personalized degree plan so students can avoid unnecessary courses to graduate in four years or less while improving the efficiency of advisors and the graduation rates of universities.
“Our State System universities are connecting with the business community more than ever before and these students are a great example of the innovation happening on campuses,” said State System Board of Governors Chairwoman Cynthia D. Shapira.
“State System graduates help to fuel Pennsylvania’s economy and competitions like this enable the next generation of business leaders to get their start,” she said. “I congratulate the team from Kutztown University for their victory and thank every student from across the System who competed this year.”
Three student teams participated in the finals of the State System Startup Challenge, which provides students the opportunity to pitch their plans to a panel of business leaders for a chance to win funds to support the start-up or growth of their business, PASSHE said. The three finalists were selected from 60 competitors across the system.
“This business plan competition gives State System students the opportunity to pursue their dreams here in Pennsylvania,” said State System Chancellor Daniel Greenstein. “These students remind us about the value of public higher education to strengthen Pennsylvania’s economy as they translate a classroom education to real-world experience. Thank you to the students, faculty and universities for making this possible.”
Judges were Laura B. Haffner, region bank president, senior vice president, Greater Pennsylvania Region for Wells Fargo; Matt Lutcavage, vice president of Team Experience and chief human resources officer for The Giant Company; Mary Oliveira, chief membership officer for Pennsylvania Chamber of Business and Industry, and Nandish Patel, an entrepreneur.
The Castel Club, Easton’s South Side -Photo courtesy of Emilio Montesdeoca –
A father and son bought The Castel Club with plans to continue and enhance the banquet hall.
Emilio Montesdeoca, of Easton, and his father, Cesar Montesdeoca, of Palmer Township, purchased the property at 270 E. Kleinhans Street on Easton’s South Side with plans to offer the facility for wedding receptions, bridal showers, birthday parties, corporate events and more starting in June, the younger Montesdeoca said.
The original club, which is more than 100 years old, is well known in the area and the owners plan to relocate. “We’d like to keep the history of this iconic building and continue serving the community,” he said. “Easton’s South Side story, we want that to live on.”
The 9,000-square-foot building holds up to 250 people, and has a wraparound bar, dance floor and off-street parking for guests.
When the younger Montesdeoca, a Realtor with Morganelli Properties, saw the listing, he was intrigued. “South Side doesn’t have a party venue and we thought this was a great opportunity,” he said.
He has been investing in the renewing of properties in the Lehigh Valley with his father since 2006. They have tentatively named their new venture El Club.
“We generally invest in properties for rental purposes,” he said. “Every property we buy we upgrade from top to bottom and create welcoming spaces we can be proud of.”
Until closing it recently, the younger Montesdeoca had been an owner of Easton Taco & Rotisserie in Easton’s West Ward.
“I am excited for the opportunity to bring my passion for food and experience in real estate together for this project,” he said.
Eleven companies and 12 business incubators from BFTP_NEPA’s 21-county service area received funding.
Among those selected, BFTP_NEPA is investing in MDS Link. Inc. Bethlehem as an early-stage company.
Ben Franklin TechVentures of Bethlehem chose the company to receive $100,000 in the form of loans with warrants to continue manufacturing and sales and marketing efforts of an inexpensive and patented hardware/software solution that enables gigabit data transmission across existing coax cable.
There is a growing market need to increase bandwidth rates in buildings like hotels and apartments that have pre-existing coax infrastructure. MDSlink’s module can be installed into modern networking equipment configurations to deliver massive increases in bandwidth at a substantially lower cost than the installation of new fiber lines through buildings, BFTP_NEPA said.
Ben Franklin will also provide 1:1 matching funds of $25,000 to Dynalene Inc., Whitehall, which is working with Lehigh University’s Center for Supply Chain Research to conduct product validation and testing for large customer specifications for manufacturing de-ionizing filter cartridges that are used in the coolant loops of fuel cells, electric vehicle (EV) charging stations, and heat-producing electronics and computers.
Dynalene develops, manufactures, and distributes industrial heat transfer fluids and related accessories. This work will allow Dynalene to improve manufacturing efficiencies and increase production yield to continue to grow in the fuel cell/automotive and electronics industry, BFTP_NEPA said.
Also, eti, Inc., Morgantown, Berks County will receive $25,000 for its work with Alvernia University’s O’Pake Institute to increase capacity to meet growing customer demand by focusing on Operational Process Excellence to improve output, Ben Franklin said.
eti manufactures chemical formulations for industrial water treatment for cooling and boiler water systems and membrane systems, as well as process, potable, and wastewater treatments. eti’s formulations are used by regional, national, and international water treatment companies.
Myers Emergency Power System, Bethlehem, Northampton County, will receive $7,500 for its work with Lehigh University’s Enterprise Systems Center to implement Lean Manufacturing processes and develop configure-to-order capabilities at this manufacturer of highly engineered emergency power backup equipment, such as emergency lighting, traffic, rail, and broadband, as well as components, Ben Franklin said.
Myers provides integrated technology solutions mandated by safety codes in industries including data centers, government buildings, and healthcare centers. The work will help Myers enhance manufacturing efficiencies and lead times, allowing the company to increase sales, the organization said.
Ben Franklin also supports business incubators, an important component of the entrepreneurial and technology ecosystem in northeastern Pennsylvania and is investing $60,000 in 12 incubators, each of which will receive $5,000.
Two of the 12 are Bridgeworks Enterprise Center, part of the Allentown Economic Development Corporation and O’Pake Institute for Economic Development and Entrepreneurship at Alvernia University, Reading, the organization said.
Rebecca Stevenson McClure and Edward O’Gorman PHOTO/PROVIDED –
River Wealth Advisors (RWA), one of the largest independent registered investment advisory firms in Central Pennsylvania and the Lehigh Valley, has entered a partnership with investment group Merchant as part of an ownership succession.
Since September, the ownership succession has grown the company’s assets to more than $1 billion.
Chief Executive Officer Edward O’Gorman, who assumes this new role after 11 years at the firm, and Chief Client Officer Rebecca Stevenson McClure, who joined the firm in 2018, have taken these expanded leadership roles along with Merchant making a minority investment to support their growth plans.
The change happened in September after majority partner, Robert Caplan transitioned his ownership shares to O’Gorman and McClure to focus soley on his clients, a RWA statement said.
“We have seen other firms in our region give up their independence through roll-up mergers. We saw an opportunity with Merchant to uphold our promise to our clients and our team members by maintaining majority ownership and day-to-day operational control at the local level,” said O’Gorman, who also serves as chief investment officer of RWA. “This strategic partnership provides growth capital and resources to galvanize the future evolution of our firm.”
RWA’s partnership with Merchant sets the stage for the firm to build on its client experience, implement formalized career development tracks for the firm’s team members, and pursue organic and inorganic growth, the company said.
Merchant’s firsthand understanding of wealth management and its long-term commitment of resources have already yielded results for RWA, according to a company statement. Since September, RWA has surpassed $1 billion in assets and has formalized a team-based service model that offers clients access to RWA’s expertise at all levels, including investment strategy, financial planning and ongoing relationship management.
“RWA has been uniquely supportive of the advisor-client relationship, working with advisor teams in central Pennsylvania and the Lehigh Valley to grow in a way that adds value well beyond the traditional wealth management offering. Also, a woman-owned, independent firm of its size is well-positioned to stand out as an attractive place for other advisors to bring their business. Our partnership is designed to help Ed, Becky and their team fully and truly capitalize on the future opportunity,” said Tim Bello, managing partner at Merchant.
The road to financial security mirrors many types of journeys. It’s filled with twists and turns, unexpected forks, and detours. This road is different for each person and even medical doctors need the right map to guide them to financial security. In fact, the traditional road to financial security for many doctors has changed in recent years. Your original set of directions likely needs an update.
How will doctors know if they’re following the best route or need a course correction when it comes to their retirement? The best place to start is by evaluating where you are in your career. There are typically four distinct phases in the careers of doctors.
The first phase of a doctor’s career begins in medical school. Soon-to-be doctors should try to secure medical school loans with the lowest rates possible because interest adds up quickly. The lower the rate locked in, the less those loans will cost in the long run.
Medical school students don’t have to rely solely on debt. Explore scholarship and grant opportunities to help decrease
debt load during medical school years. Finally, keep living expenses low. These steps will help set up a strong retirement strategy once these doctors enter the workforce.
The second phase of a doctor’s career is typically dominated by residency. As in the medical school phase of their career, it’s important to keep living expenses low during residency. Pay off high interest medical school loans as soon as possible because that debt can become overwhelming and incredibly expensive.
The third phase begins with a doctor’s first job out of residency. In this stage of their careers, doctors should continue to pay off high interest debt. This debt should always be prioritized first because it’s the costliest. Also, these doctors should prioritize paying down private loans versus those issued by the federal government. The latter are currently on deferral while private loans are not.
In addition, doctors just starting out should establish an emergency fund with three-to-six months of living expenses. This fund provides a crucial safety net that can bring financial security and peace of mind. At this stage of their career, doctors, like most individuals, are more likely to become disabled than die, so it is imperative that you protect yourself and your loved ones by purchasing disability insurance. Doctors also should consider life insurance policies — but prioritize disability coverage. This financial protection will help you create a strong foundation for future financial security.
Finally, take an important two-track approach to your early retirement planning. Pay down lower interest medical school debt (after the high interest debt is eliminated) and contribute to retirement accounts. Paying down debt and contributing to retirement accounts is vital for doctors early in their career. They’re often playing retirement catch up with peers because the additional years of school and residency mean they need to wait longer before they begin contributing to retirement accounts.
As doctors progress in their careers, they enter the fourth phase, the wealth-building years. This is the stage where they can supercharge their retirement savings and create a pathway for future financial security. There are several retirement strategies that doctors should pursue in this phase of their career. Among the most effective are contributing the maximum amount possible to employer tax-deferred retirement accounts. Utilize Health Saving Accounts for their tax benefits and be sure to invest in 529 college savings plans for children.
Diversifying your investment strategy is a powerful way to ensure long-term financial security. Doctors are well positioned for a variety of investment vehicles, including brokerage accounts, alternative investments, and cash balance plans. Finally, doctors in the wealth-building phase of their careers would be wise to save 15 – 20 percent of income annually. This money should be used to fund the retirement strategies outlined.
By the time doctors arrive at retirement, the directions may look different and the road that lies behind them is likely twisty. Yet, with the proper guideposts and adjustments during various phases of their career, medical doctors can enjoy a retirement defined by financial security.
Marilee Falco, CFP®, ChFC,is a principal and financial strategist at Agili, responsible for client financial strategy and counsel, comprehensive financial planning and investment management as well as managing the firm’s Bethlehem office. She can be reached at [email protected]
Michael Joyce, CFA, CFP®, founder and president of Agili in Bethlehem, PA and Richmond, VA is responsible for overall investment strategy, management of investment portfolios and financial planning services. He can be reached at [email protected].
As retirement gets closer, it may be time to re-think how you handle your 401(k).
Justin R. Miller
A 401(k) has proven to be a great tool to accumulate wealth over time by providing an easy way for workers to save and the ability for employers to match contributions. The investment decision has been a fairly easy one – invest aggressively while you are young and become more conservative as you get older. Strong stock and bond markets have rewarded investors and allowed 401(k) assets to top $7 trillion since the inception of the 401(k) in 1978. However, what has worked in the past may not work in the future.
As older workers transition their aggressive investments to more conservative investments, they now face historically low interest rates. Interest rates have been falling since the 1981 when the 10-year-government bond rate peaked at 13.92%. The current 10-year government bond rate sits at about 1.5%.
While low interest rates are great for borrowers, they are terrible for conservative investors, especially in times like these where we are seeing the costs of goods and services (inflation) increase at more than 5% per year. If inflation is 5% and you earn a 1.5% rate of return on your conservative investments, your money will only purchase 96.5% of the products it could the year before. This can get ugly fast.
Let’s assume you have $1 million invested in your 401(k) and because you are getting close to retirement you decide to make your investments more conservative by investing primarily in bonds. After 10 years, assuming inflation runs at 5% per year, your million would need to grow to $1,551,328 to maintain the same level of wealth. At a 1.5% rate of return, your million “grows” to $1,143,389 but now can only buy 73% of the stuff it could before.
So, what can investors do to protect against inflation? Historically, stocks are a good way to protect against inflation as well as other asset classes such as real estate, commodities and inflation-protected bonds. As investment advisers, the problem we are seeing today is the availability of these asset classes in 401(k) investment menus is severely limited.
Most 401(k) plans offer a mix of stock funds, bond funds and a money market or stable value fund. They generally do not offer exposure to real estate, commodities or inflation-protected bonds. Historically, the traditional menu of asset classes has done well and alternate options weren’t necessary. Now, we are seeing more and more 401(k) plan participants moving their assets out of their 401(k) to an IRA where they often have unlimited investment options. It is important to evaluate costs when doing so, but this may be your best bet in developing broad diversification across many asset classes.
Justin R. Miller, CFA, is the Chief Investment Officer at Milestone Financial, which has offices in Macungie, Bethlehem and Spring City. Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a Registered Investment Advisor.
Amazon has invested more than $17 billion in Pennsylvania, $3 million of which was invested in the Lehigh Valley since 2010, according to its own economic report.
The findings from its 2021 U.S. Economic Impact Report, also show that Amazon created more than 25,000 full and part-time jobs starting at $15 per hour in the state, more than 3,000 of those in the Lehigh Valley and 2,500 in the Susquehanna Valley.
Estimates from the report, produced by Keystone Strategies, show that Amazon’s investments in the commonwealth led to the contribution of more than $16 billion to the Pennsylvania economy over the last decade. Of that $16 billion, $3 billion was invested in Lehigh County, said Steve Kelley, regional public relations for Amazon.
The total investment and contribution to the economy in the Susquehanna Valley were not available, Kelly said. There are two fulfillment centers in Lehigh County, one in Easton, three in the Carlisle area and one in York, he said.
“Recovering from this pandemic, positioning our state’s economy for continued economic growth, and improving opportunity for all require a strong private sector that invests in innovation, its workers, and the community,” said Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry. “Amazon has made substantial commitments to Pennsylvania, and we look forward to working with them, our members, and leading policymakers to continue to build upon these significant investments in our local communities.”
“From Philadelphia to Harrisburg to Pittsburgh and everywhere in between, Amazon is proud to provide good jobs to thousands of Pennsylvanians while boosting the overall state economy,” said Maura Kennedy, economic development manager for Pennsylvania at Amazon. “Amazon’s success and ongoing expansion efforts in the Keystone State is a tribute to the diverse and skilled workers that call Pennsylvania home and I look forward to seeing our continued growth for years to come.”
The report analyzed Amazon’s 2020 U.S. investments in areas including infrastructure and compensation. On top the company’s investments and direct employment, Amazon’s investments have supported the creation of more than 39,000 indirect jobs across the state. These are jobs in supported industries including construction, transportation, retail, healthcare, food services and more.
It is fairly obvious that successful business owners must be good at what they do, or they would probably not be successful. But can a small business owner really expect to learn and know how to do all things related to running their company?
In most cases, the business owner is very good at running the business in a fashion that provides significant profits but there may be opportunities to be even better or more effective. Challenges that business owners may face include finding new employees and training them, obtaining financing, offering a retirement plan for their employees and succession planning to name a few.
Unfortunately, many business owners are so busy with the day-to-day business they forget to take time to work on the business and look ahead to plan for six months or two to three 2 -3 years down the road. If they are not working on the business, they may miss potential opportunities or get in such a routine that they become less efficient and lose their competitive advantage.
Many of the areas mentioned above are complicated and ever-changing as federal and state administrations attempt to enact new proposed changes.
Business owners should do what they do best and “Team Up” with experienced partners for the rest.
If an owner is spending too much time trying to hire new associates and train them (and this takes time way from growing the business), they might consider teaming up with an employment agency and let them focus on finding and interviewing applicants to get a qualified group of solid candidates. This way the business owner is not spending time outside of the business and not planning for the future.
Determining if and how to finance an expansion, a new program or an acquisition can be complicated as there could be multiple financing options available. The business owner needs to have a great relationship with two or more financial sources so they get to evaluate various options and aren’t limited to just one solution which may not be the best solution for their current situation.
Incorporating a retirement plan for the associates is a great benefit to offer and can help reduce turnover while also potentially offering the business owner some significant tax advantages. Implementing a retirement plan can be complicated and time-consuming. Teaming up with an experienced retirement plan adviseor who can handle the bulk of the details and make sure all the regulatory requirements are met allows for the business owner to be involved in the process and make the ultimate decisions while they remain focused on running their business to the best of their ability.
As successful business owners near the end of their careers, they need to plan for their exit from the business, either through a sale or some sort ofa succession plan. This process is not a weekend decision. It can take several years to develop the successor or make changes in the company to make it
more valuable. Finding advisors advisers who specialize in these activities can make a big difference in the success of the transition and a major difference in the selling price of the company.
Certainly, there is a cost to “Teaming Up,”, but what might be the cost or benefits lost if you don’t?
Just like most great organizations have a team of associates working together and utilizing the strengths of each member, teaming up with experienced advisors in their field can provide a business owner with solid advice and options to consider. Doing so will allow the owner the ability to remain involved in the decision process without having to learn every intricate detail of the process. By doing this the owner can remain focused on running their business to keep the business successful.
Brian Fields is a vice president,–Financial financial Advisor adviser with Merrill Lynch in Camp Hill. He has with nearly 20 years of experience in financial services!.
Ben Franklin Technology Partners of Northeastern Pennsylvania (BTFP/NEP) said it is taking $1 million it received from the Pennsylvania Department of Community and Economic Development for COVID-19 relief efforts and putting it towards $1.4 million in emergency investments it is making in 18 regional startups.
It is also investing $404,000 in 17 established manufacturers as part of its Return to Health investment program for a total of more than $1.8 million in investments supporting a total of 35 companies.
The program includes different types of company investments including Portfolio Protection Investments, which will help secure its existing investments in pre-COVID-19 viable and growing early-stage clients.
BFTP/NEP said these are clients that were performing strongly in job and revenue growth and loan performance or were developing promising product or patent portfolios.
The loans made in its 21-county service territory were all zero interest loans.
Some of the investments were made to companies directly working to help in the fight against COVID-19.
Among the recipients were LifeAire Systems LLC of Allentown, which is receiving $100,000 to help it commercialize its Aire-PPE Decontamination Unit that is currently pending FDA approval. The unit kills COVID-19 and other bacteria, viruses and fungi on the surface of N-95 masks allowing them to be quickly and safely reused.
$75,000 is going to U.S. Specialty Formulations LLC of Bethlehem to support the logistics and purchase of equipment to expand an analytical lab to meet the demand for pre-clinical materials for use in a COVID-19 vaccine.
Most other investments were to support the continued growth of the companies that were impacted by the pandemic.
This graph shows the rising gap between higher median home sale prices and lower median household incomes across the U.S. SOURCE: U.S. CENSUS BUREAU –
The topic of housing affordability is dominating the industry, yet some question whether affordable housing is still a worthwhile investment.
Experts point to a phenomenon that’s happening today where the cost of housing, particularly in the rental market, is continuing to push past levels of affordability for many. The rise in construction costs and drop in government subsidies, coupled with stagnant wages and low inventory are combining to create an affordable housing crisis where there’s not enough new product becoming available.
Construction of market-rate apartments is surging across the nation in both urban and suburban areas, while construction of units for low to moderate-income renters has declined dramatically.
Affordable housing is typically housing for low and moderate-income renters who do not spend more than 30% of their monthly income on rent.
“It’s a pretty robust market today,” said Jeff Arrowsmith, senior director of affordable housing for CBRE, a global real estate firm, with a local office in Upper Macungie Township. “Originally, there was a lot of activity by the private sector and they made their money through the development fees. As properties aged, there’s a robust market that’s emerged.”
Arrowsmith said there is a booming opportunity that investors see in affordable housing although there has not been a lot of new affordable housing construction since 2008. That’s part of what’s driving the conversation about the lack of affordable housing across the nation.
Nationally, the CBRE team sells about 25,000 affordable housing units per year, Arrowsmith said.
Over the last 10 years, the affordable housing market has been steady, with about 63,000 units built. Prior to that, the figure was 80,000 to 100,000 units under the low-income housing tax program. Under the federal Housing and Urban Development program, there is no increase in supply, he said.
“There’s no new program emerging federally that’s going to solve the problem,” Arrowsmith said. “A lot of the initiatives are taking place at the local and state level.”
One examples is be inclusionary zoning, which would compel developers to include affordable housing in their developments.
“There are efforts to provide housing authority loans for construction of affordable housing,” Arrowsmith said.
Possible solutions
Sometimes, the private sector contributes to the loans to support the work.
The jury is still out on whether the federal Opportunity Zone program, a tax incentive, will enhance the ability to provide affordable housing. So far, Arrowsmith has not seen investors using the program to develop a significant amount of affordable housing.
“One solution is to increase the pool of available tax credits …so there’s more equity to facilitate development,” he said.
Another issue affecting development of affordable housing is how to bring down building costs. Doing so would enhance developers’ abilities to put together successful projects, Arrowsmith added. In some cases, it may be more effective to redevelop, rather than build new affordable housing.
The other challenge is how to prevent older units from being transformed out of affordable housing once the 30-year cap on rents expires and they become eligible for market-rate conversion.
About 850,000 units across the country that could be at risk for market conversion over the next 10 years.
“There needs to be efforts made that create an incentive for the owners of those assets to protect their properties into the future,” Arrowsmith said. “There’s a vast under supply of affordable housing and there aren’t really programs in place to create affordable housing.”
For property owners, it could be better to upgrade their rental properties rather than build new affordable housing, according to one official.
“Less landlords today want to deal with HUD housing,” said Jeff Barber, president of Lehigh Financial Group, a mortgage lender in Allentown. “They can get better rates today just by doing basic upgrades. I’m finding today that more landlords are fixing up their properties and making them better quality.”
Rents have risen tremendously in the Lehigh Valley and today, it’s all about market rate housing.
Investors buy a property to get a return on investment and have to charge more for rent, he added.
“The days of affordable housing are gone,” Barber said.
Blight occurs when the money those property owners get from a low-income housing unit is so low that they can’t afford to take care of the property, he added.
“There’s more people that want affordable housing but these are the same people who want $15 per hour, which is fine, but the cost of living is going up,” Barber said. “You can’t have cheap housing in a booming housing market.”
Many challenges
There’s a housing shortage today because people aren’t moving around as much in search of jobs. It’s the opposite, now: the jobs are moving to where the workers are, resulting in fewer homes coming onto the market.
Add to that the high cost of construction and the rising level of student college debt, and the problem gets worse.
Construction costs have risen about 6% to 8% per year, across the nation, said Claude Hicks, director of real estate development for HDC Mid-Atlantic in Lancaster, a nonprofit that specializes in building and managing affordable housing communities
“There’s all these economic things going on,” Barber said. “There’s no economic programs that make it worth anyone’s while to look at affordable housing as a real estate investor.”
Furthermore, interest rates have fed into the housing shortage and it’s helping the economy grow by keeping interest rates low.
One way that Allentown could see more affordable housing is through a partnership with City Center Investment Corp. and Lafayette College’s Dyer Center for Innovation and Entrepreneurship. They’ve launched The Real Estate Lab, a program designed to teach at-risk youth how to invest and manage properties. One of its goals is to create financially attainable housing in downtown Allentown, with rents within the affordability standards set by HUD for households at the 70-percent area median income level.
However, time will tell whether the program works as intended.
Alan Jennings, executive director of Community Action Committee of the Lehigh Valley, a nonprofit in Bethlehem, is one of the members of The Real Estate Lab’s advisory board.
“You can’t make any money on affordable housing,” Jennings said. “That’s why there’s so many subsidies to make it work.”
Jennings said his organization tried to develop two vacant lots in South Bethlehem, cul-de-sacs left over from a private developer who bailed on a $6 million project that called for building 36 units of affordable housing. Jennings said his organization raised $1 million in grant money and tried to buy it. After working on it for three years, his organization gave up on it, Jennings said.
“That’s why we have government subsidies,” Jennings said. “But we don’t have much government subsidies anymore. If you can’t afford a mortgage and you are in the private market for a rental, you aren’t going to find anything.”
The fair market rent in the valley requires a person to earn at least a $19 per hour wage to afford a two-bedroom unit, where monthly rents typically go for nearly $1,200, he added.
The federal government does offer a low-income housing tax credit.
“This is typically the only subsidy the federal government provides for private developers to provide affordable housing,” Jennings said.
However, for a developer to take advantage of it, there needs to be a state financing agency that can administer it, and that process takes a minimum of two years, he said.
“It is a problem that has no solution until we recognize that the public sector has some responsibility for making housing affordable for low to moderate-income people,” Jennings said. “There’s no other way to do it. It’s most challenging in the most robust market.”
In a robust market, the demand for housing outstrips supply, which is what drives up pricing.
“Allentown is not exempt from the challenge because the NIZ [Neighborhood Improvement Zone] is causing developers to speculate and raise rents,” Jennings said. “People aren’t being displaced yet but that could happen eventually.”
HDC Mid-Atlantic built South Side Lofts, an affordable housing community that opened in South Bethlehem in 2014. PHOTO/SUBMITTED –
High demand
Meanwhile, one affordable housing developer is at work in Easton. In 2019, PIRHL Developers LLC of Cleveland, received tax credits from the Pennsylvania Housing Finance Agency totaling more than $2.3 million to help pay for an affordable-housing project on Easton’s south side.
The developer is turning the blighted Stewart Silk Mill property on Coal Street, also known as the Black Diamond factory, into a 55-unit, two-building apartment complex called The Mill at Easton.
Though there are signs of progress, the need is increasing.
“Our waiting list is equal, typically, to the number of apartments we have,” said Dana Hanchin, president and CEO of HDC.
“Right now, what we are facing is an affordable housing crisis where you have increasing construction costs. In addition, you have stagnant wages and lower incomes. It’s placing an increasing amount on us to provide.”
Overall, affordable housing projects need subsidies to make them work, Hanchin said, adding the private market would figure out a way to supply it if the subsidy wasn’t needed.
While there are some for-profit companies in the affordable housing industry, the nonprofit HDC has a made it its mission. It owns or manages 3,742 properties across three states, including the Lehigh Valley and Berks County.
The Lehigh Valley is a primary affordable housing market for the organization. HDC completed South Side Lofts in South Bethlehem in 2014, and River Run Meadows Apartments in Birdsboro in 2018. It also has some potential new projects in the works.
In downtown Allentown, HDC has a project in the pre-development stage that will offer affordable housing for seniors with a set-aside for people with Down syndrome, said Claude Hicks, director of real estate development for HDC.
In addition, not far from its South Side Lofts project in Bethlehem, HDC has a project it expects to finalize a deal for within the next 90 days, he said.
Lawmakers in the state Senate are considering legislation that would increase the subsidy to each state. While such legislation could help, it won’t fix the problem, Hicks said. “…For every one unit we build, there are three to four families waiting,” he said.
Hicks said the low-income housing tax credit is a great, stable investment that has been around for a long time.
Hanchin said HDC has many banking partners that provide them with some financing for affordable housing. HDC competes for the tax credits and, if awarded them, sells them to investors, she said. However, relying solely government to solve the affordable housing crisis is not the answer, according to Hanchin.
Low household income contributes to the issue.
“If we are having incomes where they are, and incomes are stagnant, we will still be challenged,” she said. “We have to begin to move the needle on that side as well.”
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
Sign In
Free Newsletter
In most cases, the business owner is very good at running the business in a fashion that provides significant profits but there may be opportunities to be even better or more effective. Challenges that business owners may face include finding new employees and training them, obtaining financing, offering a retirement plan for their employees and succession planning to name a few.
