Getting Credit

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Tips for Selecting Historic Projects  

The most powerful tool in the last 40 years of the historic preservation movement has been the Federal Historic Rehabilitation Tax Credit. Since beginning in the 1970s, this program has led to the renovation of countless buildings and neighborhoods in big cities and small towns all across the country. Having originally been part of the Tax Reform Act of 1976, the current version of the Historic Rehabilitation Tax Credit is rooted in Reagan-era tax reforms of the 1980s. In support of the program, President Ronald Reagan said in 1984, “Our Historic Tax Credits have made the preservation of our older buildings not only a matter of respect for beauty and history, but of course for economic good sense.”

Not every historic building is considered a good candidate for the historic credit. In addition to the basic requirements for eligibility, such as the age of the building and listing on the National Register of Historic Places, intended use and economic factors play a large role in the viability of these projects. It is important for developers of historic properties to consider the history of the property and the physical suitability of a building when evaluating whether to utilize the Historic Tax Credit.

Age and significance
The first consideration for any Historic Tax Credit project should be to determine if the building or complex is, in fact, historic; that is, is it located in a historic district or individually listed in the National Register of Historic Places. The National Register is a program administered by the National Park Service (NPS) with help from State Historic Preservation Offices (SHPOs). To qualify for the National Register, a property must be at least 50 years old and be proven through architectural integrity and a detailed history to be historically significant. Buildings can be significant because of their architectural features, important architects who designed them, historic events or historic figures that are inherently linked to them. Understanding the language and the case for significance from the National Register nomination is an important component of planning for a rehabilitation. This will be the basis for review of the design for intended use and will signal the important historic features to maintain.

Buildings that are individually eligible for the National Register often have significant and specific historical importance in their communities. More commonly, however, credit-eligible properties are part of a National Register or locally-designated historic district. Significance in historic districts often speaks to architectural styles, periods of economic growth in the community or important historical events that cannot be represented by any individual property, but rather as a collection of places that have some relevant proximity. In addition to being easier and quicker to get historically designated, buildings in these districts usually don’t receive as thorough a design examination by the reviewing agencies as individually listed buildings.

While many buildings over 50 years old may be historic, many are not. Consider though that in 2017, buildings built in the 1960s are now in the window of eligibility. More and more mid-century design and Civil Rights-era buildings, for example, are being recognized for their historic significance and are being creatively rehabilitated. The building techniques of these times require special considerations—from mass-produced building materials to cutting-edge curtain wall construction—but afford a great deal of flexibility and unique opportunities for adaptive design.

The Standards and intended use
After eligibility, either individual or in a district is determined, the next factor in feasibility is whether the rehabilitation design meets the Secretary of the Interior’s Standards for Rehabilitation. These are ten criteria that the NPS reviewers responsible for certifying a project for the Federal HTC make their determinations. In general, the imperative is to retain as much historic fabric as possible, within reason, and that any new design elements be respectful of the most important historic features of the property, including new construction. (Visit to read all of the Standards.)

Some buildings work well for new use vis-à-vis the Standards. Others do not. The new intended use is central to a favorable historic rehabilitation outcome. Examples of good uses include:

  • Historic textile mills or manufacturing plants converted to residential use: The width of the building is often conducive to accommodating double-loaded corridors and adequate depth for units to be laid out. Additionally, secondary buildings and large flexible floorplans are ideal for amenity spaces.
  • Historic church sanctuary converted to an open congregate use: The interior volume of church sanctuaries is a character-defining feature and important to maintain. An appropriate use for these spaces would be programming for commercial or gathering use where complete horizontal or vertical subdivision is not required and partial mezzanines can be utilized.
  • Historic commercial business towers converted to residential or hotel use: The large amount of square footage in former office buildings allows for many design possibilities for new use. Special attention to important architectural features in public spaces in the building—such as historic lobbies, ballrooms, elevator corridors and hallways—allow for a greater flexibility for new design schemes in secondary spaces, such as hotel rooms or residential units.

Of course, rehabilitations that continue the current use of a historic building or complex are less complicated than adaptive use. An imminently feasible project type is an acquisition-rehabilitation of existing affordable housing. In these cases, the unit count and layouts usually stay the same, corridors and stairways usually stay in place and the rehabilitation primarily involves modernizing unit interiors so that saving significant historic features is not an issue.

Buildings that have been previously altered with significant architectural features already removed generally allow for more flexibility in design review. The Historic Tax Credit program requires that owners be responsible for proper treatment based on the condition of the building when it is acquired, but excludes work done by previous owners. If important historic features were already altered or removed, the new owner will not be required to replace the missing features to meet the Standards, therefore allowing for more design options.

Economic benefits
The fundamental principle behind the Historic Tax Credit program is the ability of historic rehabilitation projects to create catalytic and economic benefits for a community. While those factors are important to the developer, economic success is a vital goal as well.

Like any other real estate project, prospective historic projects need to be close enough to population and employment centers so market demand is present. This is especially true for places, like historic mills in small towns.

Another important factor to consider is having enough floor area in the building to make it financially feasible in its new use. For example, if the rehabilitation is a residential project, an essential consideration is if the space allows for the achievement of the needed unit count while maintaining public spaces that are important for approval by the NPS. In some cases, the need for more units could mean that new additions or unorthodox design schemes would violate the Standards and disqualify the project from the HTC program.

State Historic Tax Credit programs can play an important role in site selection when evaluating historic properties across state lines. Currently, 34 states have tax credit programs. (See Talking Heads) Factors such as credit certification, transferability and project and aggregate program caps are to be considered when evaluating these programs for a rehabilitation project.

Current considerations
We know from decades of success that the Federal Historic Tax Credit and many other state programs are effective incentives to preserve old buildings and to create opportunities for economic development. Unfortunately, that does not exclude these programs from facing tough policy scrutiny. In particular, the Federal Historic Tax Credit is facing a real and present threat with federal tax reform that could cause sweeping changes to tax credit programs regardless of their merits. Historic building developers and industry professionals are watching anxiously and participating vigorously to retain the program in any tax reform legislation. In fact, Historic Tax Credit proponents have widely encouraged a new bill that aims at improving the law (aptly named the Historic Tax Credit Improvement Act) to incentivize further preservation of smaller projects in more economically strained communities.

There is an ongoing need to advocate for Historic Tax Credit programs. That can only be done with smart and innovative examples of successful rehabilitation projects, illustrating through economic impact studies and community acceptance that this is a vital use of government dollars. Hopefully, as tax reform efforts move forward, the administration and Congress will agree.

Bill MacRostie is based in the MHA DC office where he advises clients on historic rehabilitation tax credit design and regulatory issues. From 2000 to 2003, Bill was the Washington, DC principal of a national historic consulting firm. From 1997 to 2000, he was National Director of Historic Property Services for Ernst & Young LLP where he advised developers, institutional investors, and equity syndicators on historic certification matters. While at E&Y, Bill originated historic credit investments for the firm’s corporate and institutional clients. Bill has also worked for Langelier Historic Properties, Inc., an equity syndication firm specializing in rehabilitation development, and served as an architectural historian on the staff of the Technical Preservation Services Division of the National Park Service in Washington, DC where he performed historic tax credit project review. In private practice for more than 30 years, Bill has advised clients nationwide on projects ranging in size and type from the multi-phased $175 million mixed-use Stroh’s Riverplace project in Detroit, Michigan to a $1.5 million hotel rehabilitation in Santa Rosa, California. He has represented clients in over two dozen tax certification administrative appeals in Washington, DC. For the 14 years that NPS certification project review was conducted in regional offices, Bill worked extensively in every regional office and most major states around the country. Bill has lectured widely on the subjects of historic rehabilitation and real estate development. His speaking credits include the nationwide, 21-city “Rehab for Profit” seminar series on historic rehabilitation development co-sponsored by the National Association of Realtors and the National Trust for Historic Preservation, as well as testimony before the Committee on Ways and Means of the US House of Representatives. Bill’s recent publications include articles in Urban Land Magazine, Multi-Housing News, Affordable Housing Finance Magazine, and the Section 42 Report. Bill serves on the board of directors of the National Housing & Rehabilitation Association and is a past treasurer of the board of directors of Preservation Action, the national lobby for preservation and rehabilitation. Bill holds a Bachelor’s degree in History from Lewis and Clark College in Portland, Oregon and a Master’s degree in Historic Preservation Studies from Boston University.