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Historic
Preservation
Historic rehab investing jumps 20%
by Donna Kimura
Savvy
apartment and mixed-used developers continue to beat their competitors
even in a down market by creating unique historic rehabs.
Investment in historic preservation tax credits rose 20% in fiscal year
2002.
National Park Service (NPS) officials report that the program raised an
estimated $3.27 billion in private investment during the year ending Sept.
30, 2002, up from $2.73 billion in 2001.
The number of housing units created or rehabilitated increased from 11,918
to 13,886 last year, according to NPS. The 2002 total includes 5,615 low-
and moderate-income housing units.
“It’s a very solid number,” said Sharon Park, chief of
the agency’s technical preservation services, noting that housing
continues to be a major use of the rehabilitated properties. About 41%
of the projects certified last year involved housing.
NPS officials report that they are seeing larger projects being undertaken.
The average cost of the projects certified last year was $2.77 million,
an increase from $2.16 million the year before.
Use of historic tax credits does not preclude the use of other funding
sources. Park said many projects are using a combination of historic and
low-income housing tax credits.
For example, there were 47 projects in Ohio that combined both credits
last year, generating approximately $106 million in investment.
National Trust targets economic development
The National Trust for Historic Preservation has received a $127 million
allocation of New Markets Tax Credits (NMTC). The award will allow the
organization to create several unique investment products aimed at stimulating
new economic activity in low-income neighborhoods, “Main Street”
communities and enterprise zones.
“The New Markets Tax Credits will enhance our ability to become more
deeply committed and involved in low-income communities where so many
of our historic resources are located,” said Richard Moe, president
of the Trust.
The allocation comes on the heels of recent Internal Revenue Service guidance
that NMTCs can be used in combination with historic tax credits.
“We think this is going to direct a higher percentage of capital
that’s invested in historic tax credits to low-income census tracts,”
said John Leith-Tetrault, director of the National Trust’s Community
Partners program.
There’s a natural connection between the NMTC and historic credits,
said Leith-Tetrault, explaining that many historic buildings are located
in low-income neighborhoods. In addition, there’s a strong relationship
between community development and historic preservation.
Trust urges revisions to historic credit
The historic tax credit has undergone few changes in recent years. Officials
at the National Trust, however, have begun to float several possible amendments
to the program.
They want to see the historic tax credit become even more effective, especially
when it comes to housing. Almost a third of American households below
the poverty line live in older and historic homes.
The tax credit is the largest federal program supporting historic preservation.
The historic credit incentives are available for buildings that are national
historic landmarks, that are listed in the National Register, and that
contribute to National Register Historic Districts and certain local historic
districts. Properties must be income-producing and must be rehabilitated
according to standards set by the Secretary of the Interior.
Participants can receive a 20% tax credit for the certified rehabilitation
of a certified historic structure, or a 10% tax credit for the rehab of
nonhistoric, nonresidential buildings built before 1936.
The historic credit is a relatively shallow subsidy compared to the low-income
housing tax credit, and it’s been difficult for small projects to
use. The National Trust is lobbying for the credit to provide a deeper
subsidy of 40% to make the program more feasible for smaller historic
projects that total under $2.5 million in development costs.
National Trust leaders also hope that lawmakers will open up the 10% credit
to residential projects, said Kitty Higgins, vice president of public
policy. Right now, the 10% credit is restricted to nonresidential commercial
projects. Furthermore, the group supports amending the 10% credit to include
all eligible buildings that are 50 years old or older instead of the current
1936 cutoff date.
The National Trust would also like to see the program be amended to allow
for a greater eligible tax credit basis for projects in difficult-to-develop
areas or qualified census tracts. This would greatly expand the use of
the credit in neighborhoods facing higher than usual development costs,
Higgins said.
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