Finding a Balance: The Rehabilitation of Historic Buildings for Low-Income Housing

Abstract

Historic buildings are being converted into low-income housing all over the United States. These projects serve two long-established public policy objectives at once since they provide needed low-income housing while at the same time they preserve historic buildings which contribute to a community’s sense of its past. Most projects which convert historic buildings into low-income housing take advantage of two Federal incentives: the Historic Rehabilitation Tax Credit (HRTC) and the Low-Income Housing Tax Credit (LIHTC). In order to be eligible for the HRTC, the rehabilitation work must meet the Secretary of the Interior’s Standards for Rehabilitation (the Standards). This thesis research explores the question: Which specific problems involving the cost of satisfying the Secretary of the Interior’s Standards for Rehabilitation most often arise in projects that use both the Historic Rehabilitation Tax Credits and the Low-income Housing Tax Credits and how have they been solved? This research finds that the HRTC in combination with the LIHTC can provide the majority of the financial equity needed to fund a project. It also finds that historic rehabilitation can be accomplished within the budgetary restraints of the LIHTC process. The HRTC and the LIHTC and their history are described and the advantages and disadvantage of combining them are discussed. The Standards and their history and application are also discussed. Two case studies which combine the two tax credits are analyzed. Conclusions are reached based on the application of the Standards in the two case studies and recommendations for further study are made. This research finds that this process works. Historic buildings, provided that they can physically accommodate housing, can be converted to low-income housing while preserving most the building’s architectural integrity and historic significance. It finds that successfully combing the HRTC and the LIHTC is extremely complex process and that combining these programs requires a dedicated and experienced development team. This study also shows that the policy goals of historic preservation and an increased supply of low income housing could be better served if the HRTC and the LIHTC were redesigned to improve their compatibility.