The nation's current economic downturn creates a two-fold challenge for the affordable housing market. On the one hand, demand for affordable housing has risen significantly in the past two years, as more people take pay cuts and lose jobs. Unfortunately, those very job losses simultaneously decrease city and state tax revenues, reducing the availability of tax credits that are used to develop affordable housing. Historic rehabilitation credits can help.
In April, Minnesota became the 40th state to offer Historic Rehabilitation Tax Credits. Though the credits aren't specifically intended for use in the creation of affordable housing, developments may qualify if certified historic structures are being restored. Both state and federal credits are available and can be used to pay for as much as twenty percent of the total rehabilitation costs.
Requirements vary by state. Some stipulate that the buildings themselves be designated as "historic." Others allow approval for buildings that are located in an already-designated "historic district." Not all states allow historic rehabilitation tax credits to be used for residential property, and some prohibit their use for the development of single-family homes. Others, like the policy in Minnesota, also require an application to be filed with the state's historic preservation office before construction begins.
Developers interested in Historic Rehabilitation Tax Credits should contact individual state historical preservation offices regarding state-specific policies. Information is available through most city and state Housing Development or Finance Authorities as well. Information about historic rehabilitation tax credits at the federal level are available through the National Park Service, which oversees and administers the national program.
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