Priming the Pump: Historic Tax Credit Creates Substantial Economic Benefits
By Caitlin Jones
3 min read
The federal historic rehabilitation tax credit is a powerful incentive that has produced substantial economic benefits at the national, state, and local levels, as well as other positives, according to a new study prepared by the Rutgers University Center for Urban Policy Research.
Commissioned by the Historic Tax Credit Coalition, the study is the first national analysis of the economic benefits – direct and multiplier – of the federal historic tax credit (HTC) program. Historic preservation advocates are using its findings in support of their efforts to seek enactment of pending legislative proposals – crafted by the Coalition – that would enhance and strengthen the rehabilitation tax credit.
Available in different forms since the late 1970s, the tax credit currently is equal to 20% of the amount of qualified rehabilitation costs incurred for renovating a certified historic building or a “contributing” building located in an historic district. Rehabilitation plans must be approved in advance by the state historic preservation office (SHPO) and the National Park Service, and the plans and the completed work satisfy federal rehabilitation standards.
“The federal HTC is a “˜good’ investment for the nation, states, and local communities,” says the study. “The benefits that accrue from the investment in the federal tax credit-aided historic rehabilitation projects are extensive and almost all sectors of the nation’s economy see their payrolls and production increased.
The report provides figures (all in inflation-adjusted 2008 dollars) showing that the historic tax credit has more than paid for its cost in terms of lost federal tax revenues. During federal Fiscal Years 1978-2008, the tax credit cost the U.S. Treasury about $16.6 billion while producing $21 billion in federal tax receipts. Moreover, total aggregate investment in completed historic projects was $85 billion, including $3.6 billion in 2008 alone.
In addition, according to the study, the historic tax credit has produced an enormous number of jobs, the largest share in construction but also hefty shares in manufacturing, services, and retail. Some 1.8 million full- and part-time jobs have been created.
Furthermore, the historic tax credit has also generated substantial income for households and businesses, including from wages and salaries; contributed heavily in terms of gross domestic product; and generated nearly $29 billion in tax revenues for federal, state, and local governments.
Additional Benefits
The tax credit has been a powerful catalyst that has resulted in the renovation and preservation of historic buildings nationwide. The National Park Service has issued pre-rehabilitation (Part 2) approvals for a cumulative 45,000 projects.
In addition, the study points out that the historic tax credit has been a powerful catalyst for revitalizing communities and poor neighborhoods, and for helping to create and preserve thousands of affordable apartments. Much of this has resulted from the “twinning” of the historic tax credit with the federal new markets tax credit (NMTC) or the low-income housing tax credit (LIHTC) in individual projects.
About two-thirds of all approved HTC projects since 2002 have been located in NMTC-eligible low-income census tracts. “Anecdotal evidence suggests that as much as 15% of all LIHTC affordable housing projects are adaptive reuses of historic properties that also generate HTCs.”
Since the inception of federal historic preservation tax incentives, 405,385 housing units have been completed, of which 25% have been affordable to low-income and/or moderate-income (LMI) families. In FY 2008, 5,220 LMI units were produced under the federal HTC. According to the study, the share of HTC-generated housing units that are low- to moderate-income is growing annually, averaging 37% for the period FY 2000-2008.
The study, First Annual Report on the Economic Impact of the Federal Historic Tax Credit, is available at http://www.ntcicfunds.com.
