Team from Quinn Evans Architects Expresses Support for Bills to Increase Funding for Heritage Structure Rehabilitation Tax Credits
Two architects from the Baltimore office of Cho Benn Holback, a Quinn Evans Company, recently testified in support of several bills under consideration by the Maryland state legislature: Maryland SB481/HB954, Heritage Structure Rehabilitation Tax Credit – Reserve Fund-Mandated Appropriation, which proposes an increase in funds available for the state historic tax credit limits from $9 million to $15 million; and SB967/HB1454, Heritage Structure Rehabilitation Tax Credit – Commercial Rehabilitations – Transferability and Affordable Housing, which increases the state Historic Tax Credit to 25 percent (an additional 5 percent) for large commercial historic tax credit projects that result in affordable housing. The bill also allows the credit to be transferred outside of partnerships, and allows the credit to be used for the rehabilitation of multiple structures that are functionally related, making it easier to rehabilitate large-scale and campus-wide projects.
According to Preservation Maryland, the recent changes to the federal tax code have increased the cost of rehabilitation projects due to slower vesting of the federal Historic Tax Credit. The Maryland bills are designed to reduce costs to offset this negative impact on community redevelopment and continue to address the need for more affordable housing in the state.
Anath Ranon, AIA, LEED AP BD+C, and Brandon Schultz, AIA, LEED Homes, LEED AP BD+C, together with Nicholas Redding and Elly Colmers Cowan from Preservation Maryland, testified in support of the tax credits. Regarding SB481, increasing the state’s cap on historic tax credits from $9 million to $15 million for FY 2019, Redding and Colmers noted that several states bordering Maryland have either no cap or much higher annual caps.
“From the perspective of historic preservation and economic development, it is incredibly important to adequately fund the commercial Heritage Structure Rehabilitation Tax Credits, Maryland’s historic tax credit program,” Redding stated. “Since 1996, these job-creating credits have fueled real and lasting economic growth across the entire state…Increased funding for state historic tax credits would result in more projects across Maryland, while returning more to the state treasury than it would cost.”
Redding pointed to an Abell Foundation report that noted that for every $1 invested by Maryland in the program, approximately $8.53 in economic activity has been generated. Since 1996, the state’s investment of more than $400 million has generated more than $3.4 billion in economic activity.
Ranon and Schultz have seen firsthand the positive impact of the program, having completed a number of rehabilitation projects in the state that include affordable housing. “Unfortunately, since 2002, investment in this critical source of tax credit funding has been drastically reduced,” Schultz stated. “Today, the program is funded at a mere $9 million for the entire state, while the need grows exponentially every year and outstrips available funding by millions of dollars.”
Testifying in support of HB954, Ranon shared examples of recent projects receiving state historic tax credits that have benefited communities, including the Barbara Ingram School for the Arts in Hagerstown, which rehabilitated and expanded a circa-1904 downtown theater into a nationally recognized high school for the arts. “The project would not have been undertaken without the historic tax credits,” Ranon said.
Ranon also pointed to the Lion Brothers Building in Baltimore as another successful case study. Nearly complete, the project spans seven buildings in the Hollins Market area, with the oldest structure dating to 1885. The redevelopment has drawn a dynamic mix of tenants, including the University of Maryland, Baltimore County’s intermedia and digital arts program, the University of Maryland, Baltimore’s Graduate Research Innovation District (GRID); Culinary Architecture, a catering company; and a number of other businesses and organizations. “Without the historic tax credits, this building would have remained empty and abandoned,” Ranon stated. “Its tenants would not be actively contributing to the renaissance of this neighborhood.”
With regard to SB967, Schultz testified that affordable housing projects can help transform blighted communities. “Many of these projects end up being a catalyst for future development,” he says. He pointed to the 2014 conversion of the former Columbus School, a historic elementary school in Baltimore, into 50 affordable housing units as an example. “This project has acted as a catalyst for this long-neglected part of Baltimore resulting in additional investment throughout the neighborhood, which has further helped to stabilize the community.”
Schultz noted that the Alexander House in Hagerstown is an example of a project that would benefit greatly from a 25 percent historic tax credit. Currently, the rehabilitation, which would retain 95 units of affordable senior apartments, has not been able to move forward due to a gap in financing. Schultz said that the extra 5 percent tax credit could in this case be used to help cover the additional costs associated with rehabilitation projects such as lead paint and asbestos tile abatement.
“Given changes to the tax code last year, the market for both historic and low income housing tax credits has changed dramatically how developers are able to put deals together,” Schultz said. “The demand for both historic and low income housing tax credits has decreased with the reduction of the corporate tax rates, which has lowered the price at which these credits are sold resulting in a gap in financing on many projects. Couple that with pending steel and aluminum tariffs and the gap has only proven more difficult to fill. With the state currently needing 119,000 affordable housing units to simply meet the current demand, historic rehabilitation and the state historic tax credits are strong tools to address this crisis in Maryland.”
Barbara Ingram School for the Arts