Are Warehouses Causing the Lehigh Valley’s Rising Housing Costs?
If you were to visit the Lehigh Valley in the late 1800s, you would find an emerging epicenter of American industrial production, focused on the manufacturing of steel and concrete. For over a century, the region’s dominance owed to a key factor: location, location, location. With Allentown, Bethlehem, and Easton as its centerpiece cities, the Valley isn’t far from numerous major metropolitan areas, including Philadelphia, Harrisburg, and New York City. The industrial dominance of the region extended into the late 20th century; thereafter, foreign competition, international trade deals, and the rising price of U.S. labor priced out booming manufacturing industries.
As the steel mills closed at the turn of the century, the dot-com bubble was emerging. West Coast tech firms were laying the groundwork to change the future of employment in the country. One startup, Amazon, founded in 1994, was as geographically far as possible from the Valley but has come to play an essential role in the region. Based in Bellevue, Washington, Amazon, with its small West Coast presence as an online bookstore, initially seemed irrelevant to the lives of those in Pennsylvania. However, today, Amazon and its warehouses are the third-largest employer in the Lehigh Valley. Amazon’s dramatic rise was part of a regional shift toward warehousing and logistics.
The e-commerce industry found a major benefit in the Lehigh Valley – access to one-third of the American population within one truck shift. Distribution centers have proliferated across the Valley. A recent Lehigh Valley Planning Commission report observed that in 2021 alone, 13.5 million square feet of industrial-zoned properties were approved for development. The development approved last year is almost equal to the projects approved over the previous five years. The logistics and distribution gold rush has led to the creation of over 35,000 jobs in the region. Despite the closure of some warehouses, the industry has still shown regional year-over-year growth of 9.4% over the past five years.
As newcomers arrive in the Valley for employment opportunities, they, alongside longtime residents, are experiencing the strain in the housing market. While rising prices are not unique to the Valley, they are felt more acutely in comparison with many other areas nationwide. The monthly rental in Allentown has increased 38% for a one-bedroom and 41% for a two-bedroom. Compounding the rising housing costs is a historically low vacancy rate. While the national average for apartment vacancy is 6.5%, the Valley vacancy rate reaches only around 1.3%. As Becky Bradley, executive director of the Lehigh Valley Planning Commission (LVPC), stated, “more jobs meant more people, which meant more growth, but that didn’t necessarily mean more homes.”
Many point to the distribution warehouses themselves as the cause of the rising rental costs, but Bradley believes that “warehouse proliferation is one of the smallest causes.” Market stress, in her view, owes to “a myriad of causes and real complexity.” She outlined two of the causes, one nationwide and one regional.
The first is the massive underproduction of housing following the 2008 financial crisis. Mike Kingsella, CEO of Up for Growth, says that “America’s fallen 3.8 million homes short of meeting housing needs” in both rentals and ownership. The second factor has been reported by the Lehigh Valley Economic Development Corporation: during 2020, Lehigh and Northampton Counties saw a 14% population increase through the migration of young workers out of the New York metropolitan area.
In tandem, both these factors are causing what Bradley describes as a market squeeze, where “massive underproduction on the higher end [of housing] pushes those earners into middle market housing.” This causes friction between lower, median, and upper-income earners for the same home. Amid a regionwide housing shortage, new residents of varying income levels are increasing the market pressure for all residents. With this in mind, local developers are working to add additional housing stock. Projects are already underway. The LVPC’s 2021 Organizational Report states that 2,200 housing units were approved last year, the most since 2008. Still, developers are facing labor and material shortages, hindering additional productivity and causing price increases and production overruns.
To sustain the growing warehouse industry and regional migration, the Valley is looking to turn the tide against rising rental and housing costs. Earlier this month, Lehigh County officials met with the LVPC to discuss creating a county-specific “Housing Production Plan.” While specifics have not been announced, it is expected that participants will begin formulating the plan in January. The hope is that with a concerted effort, housing development will catch up with the region’s growing job market.
Jarrett James Lash, a recent New York University graduate, focuses his writing on East Coast housing issues.
