One of the most powerful tools available in growing the affordable housing sector is the Federal Historic Tax Preservation Tax Incentives Program, or the Historic Tax Credit. These tax credits can be used to rehabilitate historic buildings that will be used for a business purpose, including for housing.
The National Park Service, which administers the program, recently released two reports: an analysis of tax credit data by Rutgers University and the National Park Service’s Annual Report on Federal Tax Incentives for Rehabilitating Historic Buildings. According to the annual report, the program helped finance more than 6,200 affordable housing units in fiscal year 2019. This is just slightly more than FY 2018, and slightly less than the year before that. Since the program began in 1976, it has helped create more than 172,000 affordable housing units.
Historic tax credits can help developers rehabilitate old apartment buildings, but they’re also used to turn historic buildings into housing units. One particularly interesting project highlighted in the report is Knightley’s Parking Garage in Wichita, Kansas. The garage was a privately owned garage that also housed the headquarters for its owner’s oil company, Lauck Oil. Developers converted the garage into office space and “market-rate” apartments. “Each floor contains ten units, with a parking spot at the front door and recessed balconies behind the historic four-story neon ‘Parking’ sign,” according to the report.
In fiscal year 2019, nearly half (47%) of all projects completed were in low- or moderate-income areas, and 74% were located in economically distressed areas, according to the Rutgers University study. There’s a misperception that most historic rehabilitation projects like those highlighted in the annual report are undertaken in dense urban areas. But while about 15% of projects took place in communities with populations of more than 500,000, 26% were done in communities with populations under 50,000.
Rehabilitating a historic building in this manner preserves the history of our communities while creating much-needed affordable housing. Every state and territory has a state historic preservation office, and most communities have local preservation organizations that can help you identify possible sites to rehabilitate. Also, 37 states offer tax credits that may stack with federal tax credits. Check out the National Register of Historic Places for historic sites in your area (or to apply to designate a place as historic). The report notes that 15% of projects involved properties that had not yet been listed in the National Register.
For more information on the types of tax credits that might help in the development of affordable housing, check out our primer on tax credits. If you have questions about historic tax credits work or how they may stack with the Low Income Housing Tax Credit (LIHTC) or other tax credits, reach out to us at info@sbfcpa.com.