Part 2 in a series discusses how making it easier to build more, smaller houses would bring down home prices and help bring back the starter home. Read Part 1: “How re-legalizing starter homes cuts new house prices.”

Legalizing “missing middle housing” allows homebuilders to “make it up on volume”: sell a higher volume of units, each at a lower price, by lowering the cost of inputs per unit. Those lower costs come from both dividing land and materials between multiple units, and building smaller units that use fewer materials.

Much has been written about how Houston reduced minimum lot sizes, spurring a wave of moderately-priced townhouses. Yet Houston’s famously unusual land use regulation may make comparisons difficult. Instead, let’s look at three growing (but conventionally zoned) cities that have changed their zoning codes recently to allow smaller houses, and seen homebuilders respond with hundreds of new, lower-priced homes.

Petite prices in Portland

In 2021, Portland passed a controversial zoning reform called the Residential Infill Program, or RIP; in 2022, it followed with “RIP2,” which ended its 1950s minimum lot size rules. This allowed homebuilders to profitably build smaller houses on smaller lots that sell for less money, and builders enthusiastically responded by building “starter homes” in both size and price.

Builder magazine profiled homebuilder Eric Thompson, who pivoted his business from Oregon HomeWorks, which sold million-dollar teardown mansions, to Snug Homes, which sells cottages and townhouses at half the price. Despite cutting prices in half, Thompson “is seeing the same profit margins as before but on more revenue, resulting in a healthier bottom line.”

A recent city report reviewing RIP’s effects included this pair of graphs, showing new house prices and sizes in established residential neighborhoods in Portland in 2024. Detached houses on conventional lots (which would have been legal before RIP) are shown on the left, and denser “middle housing” (which was legalized by RIP) on the right.

With houses, more money buys more house; after all, “price per square foot” is a common unit price for homebuyers. Yet even for conventionally sized houses, the demand is greatest for smaller and cheaper houses; note that the house dots on the left graph cluster around 1700 square feet and $600,000. Yet it’s difficult to sell a new house on a conventional Portland lot for less than $500,000.

What’s surprising is the graph on the right, which shows that the zoning change resulted in many new, smaller units that actually sell for less: “In 2023-24, the average sales price of a new market-rate middle housing unit was about $250,000 to $300,000 less than that of a new market-rate single detached house, mostly due to size difference.” New houses on unconventional lots almost all sold for less than $500,000, the citywide median house price.

As homebuyer Josie Cantu enthused to NBC News, “these kinds of buildings being put in place opens up so much opportunity for people like myself.” Many of the new houses (the light blue dots) are even priced low enough to qualify for pre-existing affordable homeownership programs, greatly expanding those programs’ reach and making homeownership even more attainable for moderate-income and middle-income Portland residents.

Another finding of the city’s report is that there has not been a significant increase in residential demolitions. The pace of demolitions has remained roughly steady, but the city now sees twice as many units built per demolition.

Durham bent the curve

Similar new zoning rules enacted in 2019 also re-legalized the starter home market in Durham, North Carolina. Local homebuilder Aaron Lubeck writes in Southern Urbanism that “the most unprecedented and transformative reform in EHC is the introduction of the Small Lot Code,” which allowed existing city lots to be subdivided for small houses on small lots, and effectively allowed new houses on what were unused back yards and front yards.

The Small Lot Code was quickly embraced by builders; by 2022, small lots accounted for the majority of new-construction houses sold in central Durham. It’s no surprise that they’re popular: some new small-lot houses sell for less than $300,000, compared to the city median of over $400,000. Lubeck points out that the explosion of new small houses caused new-home sales prices citywide to plateau in 2022, even as prices in neighboring Raleigh and Chapel Hill (and nationally) continued to climb.

Recent sales near the corner of Hanover and Drew streets, one mile from the center of Durham, illustrate how small lots have transformed the city’s new housing market and created more housing choices. These sales include:

• a new, large detached house for $915,000;
• a new, mid-sized four-bedroom house for $515,000;
• a new small, two-bedroom house for $345,000; and
• an older house for $362,000.

The $345,000 two-bedroom house – effectively an accessory dwelling unit sold separately – is comparable in price to the nearby $362,000 house from the 1950s, but with the advantages of new construction (better efficiency, more usable interiors, newer systems). That price was possible because they split the large lot with the larger, $515,000 houses in front. Together, the $515,000 and $345,000 houses add up to $860,000 of house on one lot – about as much as the $915,000 new house on a full-sized lot a block away, but divided such that two families can combine their purchasing power to buy that one city lot.

Twins win in Raleigh

Durham’s success later inspired the city council down the road in Raleigh toward two broad zoning text changes in 2021 and 2022 that have been among the most productive “missing middle housing” reforms in America, with nearly 4,000 formerly impossible units permitted to date.

One of the most notable early changes was allowing duplexes on every residential lot, a change urged by city councilor Jonathan Melton: “If someone can build a mansion next to my house and I have no say…because that’s their property and that’s allowed by right, why do I have to weigh in if someone can build a duplex or a quad or some townhomes? What message are we sending about the types of people that live in big, single-family, expensive homes, and the types of neighbors we welcome into multifamily living?”

The results were very quickly seen in neighborhoods which were already seeing teardowns and mansionization. Because duplexes can be built and permitted almost exactly like detached houses, some teardowns that had already happened went back and reapplied for permits as duplexes instead.

On Sheffield Road in east Raleigh, a few blocks from where I went to high school, two neighboring new houses sold in 2024. On one side, a new four-bedroom detached house sold for $865,000; next door, a four-bedroom duplex unit sold for $660,000 – over $200,000 cheaper. The duplex even sold at a lower price per square foot than the $585,000 “fully-renovated with designer upgrades” 1955 four-bedroom across the street.

The same math could work here, if we would let it

The experience of cities like Portland, Durham, and Raleigh shows that in the real world, zoning that encourages small houses on small lots also results in small price tags. They have quickly cut the cost of new houses by hundreds of thousands of dollars, putting new houses in close-in, transit-rich neighborhoods within reach of middle-income and even moderate-income households.

The effects are clear in Arlington, where courtroom battles over the “Expanded Housing Choices” zoning reform have resulted in a few projects moving forward and others reverting to conventional teardowns. The first new duplex units to deliver under the new zoning are priced a full one million dollars less than new detached houses on sites where developers had pursued attached houses.

These cities have found that small lot houses cumulatively save local residents millions of dollars, make existing housing subsidies go further, do not threaten “neighborhood character” with additional demolitions, and cost local governments almost nothing extra. These homes’ lower prices make them more resilient to interest rates.

Instead, Greater Washington’s jurisdictions have deemed the vast majority of the region’s neighborhoods off-limits to small lots and small houses. Instead of listening to a handful of “supply skeptics” who refuse to believe that homebuilders will sell less land for less money, our local governments should make better choices and legalize more housing choices in more neighborhoods.

Top image: Three small new houses share what was one lot in Durham, North Carolina. They all sold for less than $300,000 in 2023. Photo by the author.

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This is, as a Delaware poet once said, a big fuckin’ deal:

California lawmakers on Monday sent Gov. Gavin Newsom two bills to roll back a landmark law that was a national symbol of environmental protection before it came to be vilified as a primary reason for the state’s severe housing shortage and homelessness crisis.

For more than half a century, the law, the California Environmental Quality Act, has allowed environmentalists to slow suburban growth as well as given neighbors and disaffected parties a powerful tool to stop projects they disliked.

The changes, which were written by Democrats but had rare bipartisan support in California’s divided State Capitol, would allow many development projects to avoid rigorous environmental review and, potentially, the delaying and cost-inflating lawsuits that have discouraged construction in the state.

Democrats have long been reluctant to weaken the law, known as CEQA, which they considered an environmental bedrock in a state that has prided itself on reducing pollution and protecting waterways. And environmentalists took them to task for the vote.

But the majority party also recognized that California’s bureaucratic hurdles had made it almost impossible to build enough housing for nearly 40 million residents, resulting in soaring costs and persistent homelessness. In a collision between environmental values and everyday concerns, Democrats chose the latter on Monday.

“We’ve got to get out of our own damn way,” Mr. Newsom, a Democrat, said last week.

Discussions about changing the environmental law have repeatedly surfaced at the State Capitol over the past decade, only to be thwarted by opposition from environmentalists and local governments. This year was different.

Mr. Newsom threatened to reject the state budget unless lawmakers rolled back CEQA, which is pronounced SEE-kwa. Democrats were also aware that voters nationwide had blamed the party last year for rising prices.

To call CEQA “environmental legislation,” as the headline does, is at best incomplete. It was frequently used as a barrier against building infill housing that is clearly a net positive for the environment, for reasons that had nothing to do with environmentalism. And even to the extent that it has genuine environmentalist purposes, it was a 70s-style aesthetic/pastoral environmentalism that did not put nearly enough emphasis on climate change. It also came to represent one of the worst traits of late-20th-century liberalism — the idea that lawsuits and courts are better forums for policy than democratically accountable legislatures.

This is a major win and hopefully a harbinger of a west coast liberalism more dedicated to increasing state capacity than creating arbitrary veto points for wealthy property owners and work for lawyers.

The post California Dems finally beat back the NIMBYS appeared first on Lawyers, Guns & Money.

Unfortunate isn’t the word most people would use to describe elections, but that’s one prevailing sentiment in Ward 8, where a hotly contested special election for a vacant seat on the D.C. Council is pitting the expelled former incumbent against three challengers hoping voters can move past him.

“It’s unfortunate that we’re having this election right now,” said Mike Austin, one of the candidates, at a debate in Anacostia late last month. “The fact that we’re even hosting an election is an embarrassment to the city and Ward 8.”

“We are in an unfortunate situation, yes,” echoed Sheila Bunn, another candidate.

“Unfortunately we are in the situation we are,” conceded Trayon White, the incumbent-of-sorts who was expelled from the council in February over federal bribery charges. (He has pleaded not guilty, and goes on trial in January 2026.)

Misfortunes aside, for the last two months the four candidates have been knocking on doors, attending debates, and making their pitch to voters ahead of an unexpected election whose outcome is unpredictable. 

White touts the “unfinished business” he has on the council, arguing that his experience on the city’s legislature would make him best-positioned to reclaim the seat and fight for Ward 8’s priorities. But his challengers are uniformly asking voters to turn the page, arguing that while White is still presumed innocent, the ward’s significant problems could better be handled by someone who doesn’t have possible prison time hanging over their head.

“We have to move forward and go in a different direction,” said candidate Salim Adofo at the Anacostia debate. “Do we want to continue to deal with issues in the past? This is an opportunity to get some things moving forward.”

Moving forward, though, could be an unsteady slog.

White enjoys the power of incumbency; he served two full terms on the council, attracting periodic controversy while also being recognized as an effective communicator of his ward’s challenges. His federal indictment is a liability, but also an asset: Some of his supporters see it as yet another example of the government unjustly coming after a Black leader. Others are perturbed by the allegations that he agreed to accept $156,000 in bribes to help a D.C. businessman extend government contracts.

The challengers

The three challengers have all dramatically outraised and outspent White, largely because White hasn’t raised any money at all for his campaign. (Austin, Adofo, and Bunn are using the city’s public financing program.) White has also been a scant presence at candidate debates, appearing only twice. The former councilmember may be confident that despite a loss of some public support, he faces a fractured opposition that will divide up the vote against him.

Austin, Bunn, and Adofo don’t dwell on White’s legal troubles, in part because their campaigns haven’t crossed paths all that often. But at the recent debate in Anacostia, which White attended, Austin called the charges against the incumbent “deeply disturbing,” while Bunn said they were a “distraction from the real issues in our community.”

And those real issues are many. While the ward has seen development at the St. Elizabeths campus and the arrival of the new Cedar Hill Medical Center, unemployment stands above 13% – much higher than the citywide average of 5.8%. The median household income is roughly $50,000, half that in the rest of the city. In 2024, there were 53 homicides with a gun in Ward 8, accounting for one-third of the total across the city during the year.

Austin, an attorney who served as a staffer to former Ward 8 Councilmember LaRuby May (who herself lost to a vastly out-spent White in 2016), has put an emphasis on public safety, but not just on policing. “A lot of our crimes stem from economic insecurity,” he tells The 51st. “I want to create the jobs of tomorrow. That ties into public safety. If we can solve our economic challenges, we can drive down our public safety issues.”

He adds that one key element is strengthening enforcement of D.C.’s First Source law, which mandates that a certain number of jobs on city-funded projects be set aside for residents. “On paper they say they have all these jobs, but where are they going? They’re not always going to Ward 8 residents,” he says. “That’s why our residents feel disconnected from the progress in the city. First Source is the primary tool we have. I want to be creative and strengthen it.”

Bunn has worked in and around D.C. politics for decades, with stints in the office of D.C. Del. Eleanor Holmes Norton, former mayor Vincent Gray, and Gray’s Ward 7 council office. She says she will prioritize ending Ward 8’s “food apartheid” by focusing on attracting more grocery stores, farmers markets, and sit-down restaurants. Bunn also wants more diverse housing in the ward.

“Ward 8 is oversaturated with affordable housing, so there are communities where there is a desire for market-rate housing. I want to make sure we are developing smartly but being intentional about protecting residents so we don’t don’t displace them when development happens,” she tells The 51st.

Bunn and Austin say that while they want to attract more amenities to the ward, they also understand that measures have to be taken to ensure that residents aren’t displaced once neighborhoods start revitalizing. Bunn wants to consider targeted property tax caps, an idea Austin says would be included in anti-displacement legislation he plans to introduce early in his term. (May, the former councilmember and his former boss, had a similar bill when she was in office.) 

“Development has always been the boogeyman, but it’s not a bad thing if we do it the right way,” Austin says.

Adofo, an ANC commissioner who unsuccessfully challenged White in the 2024 primary (he got 28% of the vote in a three-way race), agrees that bringing mixed-used development and amenities to Ward 8 is a significant issue – and one that will take educating residents about the benefits and drawbacks.

“We want to see more amenities, which means more people traveling, more parking restrictions. That’s just part of the development process. Because it hasn’t happened here there’s going to be a lot of political education so we can prepare people for that,” he tells The 51st.

Like his fellow challengers, Adofo says that public safety is top of mind in his campaign, but like Austin, he believes it encompasses more than police presence. He wants to ramp up enforcement of housing conditions so that residents have safe places to live. “A lot of folks are in apartments that are neglected and falling apart. People want a quality place to live that they can afford,” he says. “I want to see more inspections at the buildings we have. There’s an attitude you can get away with what you want in Ward 8 because there’s no enforcement.”

Trayon White’s pitch

White, for his part, has leaned heavily on his two terms in office as the reason Ward 8 voters should send him back. He says he helped secure funding for schools and rec centers, and played a role in bringing the Cedar Hill Medical Center to Ward 8. (Bunn says she was also instrumental in building the new hospital when she was a staffer for Gray.) 

“There are people talking the talk. If you look at my record, I’ve walked the walk,” he said at the Anacostia debate. (He did not respond to a request for an interview.) He also said that his past relationships with his council colleagues would pay dividends in pushing the ward’s priorities forward. “I know my colleagues very well,” he said.

But those relationships could remain strained if he returns to the Wilson Building. If White were to win on July 15, the council could move to expel him again, or otherwise keep him from chairing any committees – a critical position that allows lawmakers the power to control the flow of legislation and public dollars. At least one of White’s former colleagues seems unprepared to see him back on the dais: At-Large Councilmember Christina Henderson introduced a bill this month that would prohibit lawmakers who are expelled from the body from serving again for five years.

Still, a proposal this week from Chairman Phil Mendelson to move more swiftly towards an expulsion vote if White is re-elected (largely by skipping the need for a formal investigation, and relying instead on the one done late last year) drew concerns from some lawmakers, who worried that it was coming too close to the actual election date. White made the same argument himself in an Instagram post.

“What the D.C. Council is trying to do to silence/persuade the voice of the voters by putting forth legislation days before an election is a clear case of election interference,” he wrote. “Is this not America? So one is not entitled to due process?”

Whether White gets back on the council will be left to Ward 8 voters. Mail ballots have already been sent to voters (and 2,465 have been returned as of July 2), and early voting begins on July 11 at four vote centers.

For other great coverage, make sure to read the Washington Informer’s profiles of Adofo, Austin, and Bunn; Hill Rag also has good blurbs on each of the candidates.  

You know the drill: You see one, you step on it. Or smoosh, squash, smush. 

Nearly a decade after a spotted lanternfly was first found in Berks County, Pennsylvania, the invasive species has become public enemy number one. State-sanctioned “stomp it out!” campaigns have people committing bug murder on-sight as though it’s their civic duty, akin to recycling a yogurt container or voting in a local election. 

But as the insect continues its spread – evidenced by a banner egg-laying season in D.C., according to local biologists – it’s clear that puny human efforts to eradicate the polka-dotted creatures aren't doing much. In a classic tale of man versus nature, nature appears to be winning. 

“I see them all over the place,” says Damien Ossi, a wildlife biologist with the D.C. Department of Energy and the Environment, noting that the population of nymphs is much bigger than last year’s. “It's kind of surprising … how many adults we're going to see this year.” 

Once they’re here, they’re here. They’ve become a part of the landscape in states from New Jersey to Virginia, where officials’ mission is one of management rather than eradication. But in D.C., there’s another invasive organism aiding the species' rise to power: the tree of heaven, or Ailanthus altissima. Known for its stubbornness, it’s a tree that grows pretty much anywhere the wind blows it – literally — and a favored host of the spotted lanternfly. 

“The tree of heaven population in the District is growing, and it has been growing mostly because of its biology — I mean, it produces a lot of seeds and they're wind-blown seeds,” Ossi says. “It’s an incredibly hard tree to manage.” 

While spotted lanternflies don’t need the tree to reproduce, they’re seven times more productive if they have a heavenly host. As Michigan State University researchers put it, this is a “tale of two invaders.” 

So what are we average citizens supposed to do about this? What is our city doing about it? And are all of these efforts for naught?

To smoosh or not to smoosh? That is (not!) the question 

Originally from Asia, the spotted lanternfly feasts on the sugary sap of trees. Inside their mouths, they have what Georgetown biology professor Martha Weiss likens to a hypodermic needle. They stick their tiny mouth-straw deep into the “phloem” tubes of the tree, where the fluid is much sweeter than the “xylem” tissue near the roots, and take big swigs. (Cicadas, a less destructive “cousin” of spotted lanternflies, are xylem-feeders, and use their straws to drink from the tissue in the roots and stems of a tree.)

Aside from the tree of heaven, spotted lanternflies will get their fill from maples, willows, and birches. They’re also particularly drawn to grapevines, causing headaches for winegrowers and other agricultural producers in rural areas. 

The flies’ sweet tooth creates excrement called honeydew, which you might see on the sidewalk or car windshields. It’s a sticky, sugary poop that coats surfaces in a black sooty mold, attracting bees, ants, and various forms of fungi. 

We’re told to murder lanternflies on sight because the bugs — and their poop — can wreak costly havoc on crops. But in an urban environment like D.C., the bugs will be more of a pest — covering patio furniture in their moldy secretions or buzzing around your picnic –  than an existential threat to our ecosystem, according to Ossi. 

“They're more of a nuisance to people and their property,” he says. “They won't really disrupt the natural ecosystem.” 

And you can get to stomping all you want, but it’s a bit like draining a swimming pool one cup at a time. Weiss says “my feeling is, if they have arrived in an area, then squishing them is not going to make that big of a difference, because there's going to be thousands more where that one came from.” 

Instead, keep an eye out for their egg masses. In the fall, adult flies lay eggs in waxy clumps on a tree. They’ll stay cocooned until hatching into black-dotted larvae in the spring. These “nymphs” then turn red in late spring and early summer, before maturing into the gorgeous/menacing adults we’re used to seeing around July. 

Because the nymphs are so good at jumping around, you’ll be hard pressed to squish them. Ossi says it’s best to get a vacuum and suck them up if you spot the larvae in your yard. (You can also report nymph and adult sightings to D.C.’s Department of Urban Forestry.)

Ali Schneiderman, the coordinator for the University of the District of Columbia’s Master Gardener Program, says some people have also made traps for their backyards by wrapping sticky paper around the base of a feeder tree. (You can then put the paper in a bag with some alcohol to kill the bugs.) 

While she’s seen more nymphs in D.C. than in previous years, Schneiderman says they’re not posing much of a threat to local gardeners. They really only kill grapevines and maple saplings; in your backyard, they may just weaken already unhealthy plants. She advises watering the plants you care about really well so they’re stronger and better able to defend themselves. 

Reaching for the heavens 

No matter how much we suck and squash, the real battle against spotted lanternflies might be waged on the tree of heaven. And it’s a fight D.C. (and most urban areas) has lost time and time again. 

The story of how the tree, native to China and Taiwan, ended up in the Mid-Atlantic is (you can probably guess) one of colonialism. Western landscape designers were fascinated by the “exotic” gardens of Asia and brought the tree over to Europe and later colonial America for ornamental purposes in the 18th century. By the 1800s, urban planners were planting the tree across Northeast cities, both for its looks and its resiliency to pollution and urbanization – it could grow even in the crappiest of soils. Of course, it was this same resiliency (and the funky smell) that eventually made it a nuisance to urban foresters. Congress put a stop to all tree of heaven planting in D.C. in 1853, and landscape architects began calling it a “usurper” of the natural environment. (You make a bed…) 

More than 150 years later, we’re still dealing with the plant. It’s less common in undisturbed forest areas like Rock Creek, and instead thrives in alleys and sidewalks, according to Ossi. Like maple trees, tree of heaven seeds spread through flying-saucer-looking leaves, and they can grow pretty much wherever they land: cracks in the sidewalk, along roadways, at the base of a fence, and, unfortunately, our backyards. (Ossi says the tree is so plucky, it’s even grown out of a crack in the Great Wall of China!)

“It takes advantage of these disturbed areas — even a little crack in the cement, if the seed gets there, it’ll grow,” Ossi says, adding that the city is currently working to address a large mass of the trees along Suitland Parkway.

Aside from hosting spotted lanternflies, the plants (which can grow up to 80-feet tall!) also secrete chemicals that prevent other, native plants from growing and germinating, disrupting our natural ecosystem. 

To identify tree of heaven, look for smooth oval leaves with a sharp point, and give them a sniff. Tree of heaven has a curious odor that’s been compared to spoiled peanut butter or Cheerios. 

But removing it is difficult thanks to an extensive root system, which spreads wide rather than deep. If you cut down one seedling, the root system is likely to just sprout up another one somewhere else. 

“Pretty much the only way you can kill it is either to dig it completely out or use an herbicide,” Ossi says. 

DOEE and D.C. Department of Urban Forestry officials don’t endorse the use of herbicides and insecticides for invasive species control, though Ossi notes that spraying an exposed surface of a tree of heaven stump could be enough to kill it, should a resident choose that route. Instead, city efforts largely focus on digging up mass growths. If you do spot one, you can report it to D.C.’s Urban Forestry Department.

We don’t need to freak out 

The language around tree of heaven and spotted lanternflies is dramatic and militaristic; we’re enlisted to kill the “non-native” “invaders.” But Ossi and Weiss both say the best advice in this seemingly never-ending mission is to remember that, at the end of the day, we’ll probably be okay. 

“I don't think we need more fear-mongering of bugs that are going to hurt us,” says Weiss, who in speaking to The 51st, admitted that as an entomologist, she approaches these things with a particular bias. “We don't necessarily want them in our backyards or our urban parks –  in part because they do disrupt ecosystem processes and because the honeydew can be a mess —  but they're not going to bite us, they're not going to sting us. They're not like mosquitoes or ticks that can give us diseases.” 

Ossi says that the first thing he tells people when they encounter spotted lanternflies and tree of heaven is: don’t panic. Remove any eggs you see, and sure, give a stomp. But we may just have to put up with the pests for a while. 

Ongoing research suggests that in areas where the spotted lanternflies first landed, nature itself may be stepping in to do some population control. Predators like birds and bugs are adapting to their presence in the ecosystem and learning to like their taste, the longer the spotted lanternflies feed on the local ecology. 

“What has been seen over the course of the last couple of years up in Pennsylvania and places where they've been for almost a decade now, is that the more they feed on other species of plants, they’re more palatable,” Ossi says. “Predators start to recognize them as a prey item, and the populations eventually get reduced again, mostly by natural predation.” 

So we may be up against a buggy few months, but it won’t be the end of the world. While we tempted fate with the tree of heaven centuries ago, this time, we may have to let nature do its thing. 

Amazon, the tech and online retail juggernaut, is expanding its physical footprint, with a little help from Pennsylvania taxpayers.

"Amazon plans to spend $20 billion to build two data centers in Pennsylvania, a move that state officials say will generate thousands of jobs over the next decade and stoke considerable economic activity," wrote Stephen Caruso and Kate Huangpu of Spotlight PA, an independent media outlet. "But many key details, like the centers' full impact on electricity supply and prices, and the amount of tax revenue the state will forfeit to Amazon, are still unknown."

"In March 2024, Talen Energy sold its 960-megawatt (MW) data center to Amazon Web Services (AWS) for $650 million," Jeff Luse wrote in November 2024 for Reason. "The data center is a co-located facility, meaning it will draw electricity directly from Susquehanna Steam Electric Station—a nuclear power plant that generates 2.5 gigawatts of power annually—rather than from the grid." The other facility will be located in a former U.S. Steel mill and hook into the state's existing power grid, and there is the possibility of a third facility later on.

The data centers will support Amazon's artificial intelligence and cloud computing, which require substantial processing power. Rick Siger, secretary of the Pennsylvania Department of Community and Economic Development, said the project "will drive enormous positive tax impacts for our Commonwealth, counties, and municipalities, and will create at least 1,250 high-paying, high-tech jobs as well as thousands of construction jobs."

Unfortunately, that's not a guarantee. "The data center industry has grown rapidly in recent years, and state governors have touted the jobs it would create," Ellen Thomas wrote at Business Insider. But "once built, data center facilities don't employ large numbers of permanent employees, and the economic development contracts they sign in exchange for tax incentives often reflect that."

Data centers do initially create plenty of work for construction crews, but once operational, they require only a small permanent staff for general upkeep. "Most permanent data center jobs are in security and landscaping, alongside a handful of technicians who monitor the facilities' computers," write Caruso and Huangpu, citing Greg LeRoy of public subsidy watchdog organization Good Jobs First.

In fairness, Pennsylvania is spending considerably less taxpayer money than most states do to attract new businesses. Officials in St. Joseph County, Indiana, voted last year to give Amazon tax breaks and incentives worth $4 billion or more, to build a data center in the area. Arlington County, Virginia, offered Amazon as much as $750 million to build its second corporate headquarters there.

On the other hand, Pennsylvania's "only direct financial investment" in its Amazon data centers will come in the form of "$10 million for 'targeted workforce development efforts,'" Caruso and Huangpu write. But that doesn't mean Keystone State taxpayers are otherwise off the hook: "Pennsylvania didn't offer a new, targeted incentive package to Amazon, but the tech giant has already been approved for a tax break that the commonwealth gives to companies that build data centers here."

A state program exempts large data centers from paying sales tax on any purchases of certain "computer data center equipment." Any company that spends at least $75 million of "new investment" to create a data center that "creates 25 new jobs" in a county with no more than 250,000 residents, and pays at least $1 million in annual payroll at the site, can apply for an exemption from all sales taxes paid to purchase equipment to operate servers, including software, cooling systems, and security and monitoring equipment.

"The law requires neither the buyer nor the seller to report the cost of exempt transactions to the state," Caruso and Huangpu add. "That means the exact cost is unknown. Still, the state estimates the lost tax revenue in budgets." In his budget proposal for the 2025–26 fiscal year, Gov. Josh Shapiro estimated $43.1 million in lost tax revenue from the program, growing to $51.1 million by the end of the decade. Former Gov. Tom Wolf predicted in his proposal for the 2022–23 fiscal year that by 2025, the program would cost nearly $75 million in lost revenue. "Jeffrey Johnson, a spokesperson for the Department of Revenue, said the original projection was reduced after lower-than-expected use in early years," Caruso and Huangpu write.

Still, it's worth remembering that Amazon—the world's second-largest company by revenue, behind only Walmart—committed to spend $20 billion on data centers in Pennsylvania alone. Clearly, the tech giant is not hurting for cash, and Pennsylvania taxpayers should not be on the hook for a potentially unlimited cash giveaway to a private company.

The post Pennsylvania Gives Amazon Potentially Unlimited Sales Tax Exemption appeared first on Reason.com.