Bethlehem Could Use 85 Apartments, But Not In the Suburbs

With what I am hearing about a too-tight, too-expensive rental market in Bethlehem, 85 new apartment units are exactly what the city needs right now.

Taking a market-wide view, it’s a real tragedy that Bethlehem planners rejected them. But taking a more narrow view of the proposed site on Center Street, it’s clear that this would be a very stupid place for Abe Atiyeh to build apartments.

Putting apartments on a site with bad transit connections, far outside of walking distance to people’s basic needs ensures that everybody who rents there will be a car owner. It would create a lot of unnecessary traffic congestion on Center St, and would blight the neighborhood with a big ugly surface parking lot.

That said, Bethlehem city planners need to be asking themselves why nobody’s seizing the proverbial $20 bill on the sidewalk, when the tight rental market and two popular central business districts present a clear opportunity for developers to make some money building apartments.

Why is demand for apartments just turning into price inflation instead of new construction?


  1. Most real estate forecasts reflect the belief that apartments, while strong now, have about a 3-5yr window before turning. That’s a very short window for a long term investment.

    Couple that with Obama’s bank regulators requiring at least 35% cash down on new projects like apartments, and you have a situation where developers can’t afford to build no matter how strong the market might be.

  2. From Bloomberg today:

    The gap between U.S. bank deposits and loans is growing at the fastest pace in two years, providing lenders with more funds to buy bonds and temper the biggest sell-off in Treasuries since 2010.

    As deposits increased 3.3 percent to $8.88 trillion in the two months ended July 31, business lending rose 0.7 percent to $7.11 trillion, Federal Reserve data show. The record gap of $1.77 trillion has expanded 15 percent since May, the biggest similar-period gain since July, 2010. Banks have already bought $136.4 billion in Treasury and government agency debt this year, more than double the $62.6 billion in all of 2011, pushing their holdings to an all-time high of $1.84 trillion.

    A few things here – Banks aren’t lending, they’re buying Treasuries. And that they’re buying Treasuries has helped keep rates low.

    Funny, Obama’s regulators forcing banks to not lend, and they buy Treasuries instead, helping to cover Obama’s trillions in deficit spending with money that’s cheap now and will strangle us when it rolls over (but that’s someone else’s problem).

  3. Jon Geeting says:

    More apartments in Bethlehem will continue to be a good investment going forward. It’s the fundamentals driving this trend. Young people need to live somewhere, and aren’t looking to take on mortgage debt. So do older people who don’t need a big single family home after their kids move out. Going forward, downtown housing only looks better and better.

    Wonder how big of a role the Fed paying interest on reserves has to do with the lack of lending.

  4. The people who are investing their own money are not as certain as you are on the long term viability of additional apartment construction.

    You’re also missing another point – let’s say you want to build 100 apartments – it costs approx $75k/unit to build, plus land acquistion, off site improvements that will be required, etc. So call it a $10 million project. Obama’s bank regulators will require you as a builder to put at least $3.5 million in CASH into the deal. Not equity in another property or other collateral – CASH. That requirement alone will kill development.

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