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Politics Federal Historic Tax Credits build community character in brick and mortar

21:20  08 april  2021
21:20  08 april  2021 Source:   thehill.com

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Preservation is at the heart of the NHP Foundation's mission. As one of the nation's largest not-for-profit developers of affordable housing, we know that investments in preserving such housing have an outsized impact on communities. Preservation of historic buildings in particular is crucial, because their preservation brings numerous intangibles to communities: architectural history and aesthetic value, which is a testimony to those who lived before; and historic appreciation of their communities for future generations.

a train traveling over a bridge: Federal Historic Tax Credits build community character in brick and mortar © Getty Images Federal Historic Tax Credits build community character in brick and mortar

Unfortunately, historic buildings can prove to be among the most difficult and expensive projects to bring to fruition because of embedded neglect, previous renovations (which may have been slipshod), the presence of hazardous materials, and the numerous updates required to bring historic projects up to modern building codes.

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This year marks the 45th anniversary of the creation of the Federal Historic Preservation Tax Incentives Program, known as Federal Historic Tax Credits or FHTC for short. As the CEO of an organization whose mission is to preserve affordable housing, I know firsthand how important the tax credit can be. Since the program's inception in 1976, these credits have helped to preserve more than 178,000 units of housing set aside for those with low and moderate incomes.

The program is administered by the National Park Service in partnership with State Historic Preservation Offices. These tax credits - 20 percent of qualified expenditures on the rehabilitation of any certified historic building listed on the National Register of Historic Places - were designed to incentivize the substantial rehabilitation of historic buildings for new, income-producing uses while maintaining the buildings' historic character and significance.

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In its 45 years, the program has made a dramatic impact on the American landscape: $109.18 billion in private investment poured into rehabilitation of 46,372 projects in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Perhaps most notably in an increasingly scarce housing market, the Federal Historic Tax Credit program has led to the rehabilitation of more than 600,000 units of housing. Recent high-profile projects utilizing tax credits include the conversion of the Eero Saarinen-designed TWA Flight Center at JFK International Airport to a hotel, the renovation of Wrigley Field in Chicago, and the rehabilitation and preservation of Cincinnati Union Terminal.

Architectural historian Alisa Augenstein says the tax credit program "has impacted communities nationwide and the results are consistent: the tax credit works. The program is an important catalyst for economic development, preserving community character, and protecting the architectural integrity of our historic built environment." Without such an economic tool for preservation, Augenstein says, "countless historic buildings would have been lost due to neglect and demolition."

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Our foundation alone has utilized Federal Historic Tax Credits to preserve affordable multifamily buildings such as St. Luke's Plaza, a 216-unit property in St. Louis that once housed nurses of St. Luke's Hospital; the Mark Twain Hotel in Chicago, an architectural gem that never would have been restored to its former glory without more than $5 million in Federal Historic Tax Credit equity; and the acquisition and renovation of Blue Mountain Apartments in Roxbury, Mass.

The breadth of projects to which the Federal Historic Tax Credits can be applied makes the program an ideal tool for use in affordable housing projects. However, the seemingly limitless need for more affordable housing means we cannot afford to rest on our laurels. As we seek to develop and preserve more and more projects, this vital source of financing cannot be taken for granted.

During 2017 tax reform, the tax credit initially was to be eliminated. However, with lobbying, the program was kept - but not without some reductions. Reforms include requiring taxpayers to take the 20 percent rehabilitation credit spread out over five years and eliminated the 10 percent credit for rehabilitation of pre-1936 buildings, among other changes.

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Currently, efforts are under way to attach legislation to the infrastructure bill to enhance the tax credit to 30 percent for a short period, to help with COVID recovery efforts and to provide financial incentives to allow projects with smaller qualified rehabilitation expenses to utilize the tax credits. Advocacy efforts continue at the state level to either create or enhance existing state historic tax credit programs, which are often paired with the federal tax credit to produce a strong financial incentive to rehabilitate historic buildings.

Over the 45 years of preserving America's historic affordable housing, the Federal Historic Tax Credit has helped to preserve some of our nation's architectural history. Saving such treasures demonstrates the program's reputation as an invaluable tool in the crusade to preserve America's cultural heritage.

Richard F. Burns is president, CEO and trustee of the nonprofit affordable housing organization, The NHP Foundation, with offices in New York, Washington and Chicago. He has more than 40 years of experience as a real estate investment professional.

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