Historic Tax Credits and Historic Schools
2018/1/8 – We just finished up performing some construction inspections at the Norman School Lof renovation project in Kansas City. The project is about 70% complete at this point, but already looks amazing. Across the country developers are realizing the potential in old abandoned schools, hospitals and other properties, utilizing historic tax credits to transition the buildings into functionally useful properties once more. If you’ve been following the news, these tax credits have remained largely intact following the recent tax changes, however tax credits must now be spread over 5 years, rather than taken in 1 year. Great job to the Developer Del Properties and Architect, NSPJ.
If you think you’d like to develop a project utilizing historic tax credits, talk with us and we can help you get started.
Downtown areas can be great locations for small developers to invest in upper level housing projects. However, these types of projects can be costly, making it difficult for small developers to finance them. One way to finance these projects is by using historic tax credits. In this blog post, we will explore how small developers can use historic tax credits to finance upper level housing in downtown areas.
What are Historic Tax Credits?
Historic tax credits are incentives provided by the government to encourage the rehabilitation of historic buildings. The federal government provides a 20% tax credit for the rehabilitation of certified historic buildings, and some states offer additional tax credits. The credits can be used to offset federal income taxes and can be carried forward for up to 20 years.
How to Qualify for Historic Tax Credits
To qualify for historic tax credits, the building must be a certified historic structure, meaning it is listed on the National Register of Historic Places or is located in a historic district. The building must also be used for income-producing purposes, such as commercial or residential rental units.
Using Historic Tax Credits to Finance Upper Level Housing
Small developers can use historic tax credits to finance upper level housing projects in downtown areas by following these steps:
Find a Historic Building
The first step is to find a historic building in a downtown area that has upper level space that can be converted into housing. The building should be in need of rehabilitation and eligible for historic tax credits.
Determine the Eligibility for Tax Credits
Once a building has been identified, the small developer should determine if the building is eligible for historic tax credits. This involves working with a historic preservation consultant to evaluate the building and ensure that it meets the criteria for certification.
Develop a Rehabilitation Plan
The small developer should work with an architect and contractor to develop a rehabilitation plan for the building. This plan should include the scope of work, the cost estimates, and a timeline for completion.
Apply for Historic Tax Credits
The small developer should apply for historic tax credits by submitting an application to the State Historic Preservation Office (SHPO) or the National Park Service. The application should include the rehabilitation plan and documentation of the building's historic significance.
Secure Financing
The small developer can secure financing for the project by using the historic tax credits to offset federal income taxes or by selling the tax credits to an investor. The small developer can also secure financing from traditional sources, such as banks and private lenders.
Complete the Rehabilitation
Once the financing has been secured, the small developer can begin the rehabilitation work. The work should be completed according to the rehabilitation plan and in compliance with all relevant building codes and regulations.
In conclusion, historic tax credits can be a valuable tool for small developers looking to finance upper level housing projects in downtown areas. By following the steps outlined above, small developers can use historic tax credits to rehabilitate historic buildings and create much-needed housing in vibrant downtown areas.
