Traditional Building Portfolio
Period Homes Magazine



Filling in the Gaps: Creating an Historic District Infill Tax Credit

By Bryan Clark Green

One thing advocates of "smart growth" and those of historic preservation agree on is the importance of concentrating development where existing infrastructure is already dense, and where houses, businesses, schools, hospitals, rail lines, bus stops and utilities are already located. Each time a new housing development is located in outer-ring suburban or outlying rural areas, local government is burdened with constructing and maintaining new roads, schools, hospitals and police stations to serve their expanding suburban and exurban populations. Use fees applied to these new developments only partially mitigate these new costs, as these new developments will require these new services for decades to come. These new developments, as a result of their distance from existing city centers, rarely connect with existing public transportation systems; public transportation is available to approximately 25% of new housing units.

Because it takes advantage of existing infrastructure, concentrating new construction and rehabilitation in our existing downtowns is the most environmentally and economically sustainable development possible. Much urban building stock is historic, and one of the greatest economic engines driving the rehabilitation of these areas is historic preservation. Building and rehabilitating in historic contexts require sensitivity, and it is generally more expensive (by measures focusing exclusively on immediate cost) than simply building anew. Recognizing this, the federal government established a rehabilitation tax credit in 1976 to incentivize careful rehabilitation of income-producing (i.e. commercial) historic buildings.

This program has become a powerful financial engine driving rehabilitation of historic buildings. It has become so successful that 30 states have added complementary state rehabilitation tax credit programs, and 25 of these have extended their programs to non-income-producing properties (i.e. homeowners). Federal and state tax credits are available to leverage private money to rehabilitate historic buildings and return them – and surrounding areas – to productive use. The National Park Service approved 1,045 projects in fiscal year 2007 alone; these projects represent a staggering private investment of $4.34 billion, all of which cost the U.S. Treasury less than $868 million in tax credits.

These tax credits are widely available, as the definition of "historic" broadens every day. The National Register of Historic Places generally considers resources over 50 years old for inclusion; as of now, even postwar suburban housing may qualify. The tax credit program is the federal government's largest effort to encourage the preservation and adaptive reuse of historic buildings. This funding stimulates both public and private preservation efforts, as state and local tax incentives can often be attached to the federal credit – all of which lead to greater public awareness of the benefits of historic preservation. This public awareness, in turn, can serve as an incentive for private investment in historic neighborhoods. Even taking the rate of new construction into account, the federal Rehabilitation Tax Credit program averages over 5 to 1 in private to public investment in historic preservation and adaptive reuse. Perhaps the most important possible extension of this program would be to enact complementary state legislation to encourage compatible infill in historic districts – an Historic District Infill Tax Credit (HDITC).

The HDITC recognizes that rehabilitation of historic buildings alone is not enough to rehabilitate entire neighborhoods. What about the "missing teeth" in our urban fabric? How do we fill those gaps? Nationwide, there are some 14,000 historic districts, many of which are plagued by two separate problems: demolished buildings creating vacant lots and the equally important problem of inappropriate infill. According to the Urban Land Institute, by the year 2050 the U.S. urban population will grow by 300 million people. This population will require housing, schools and places for business – needs that cannot always be met by existing, historic building stock. In these cases new construction, or infill, may be necessary.

As people return to historic downtowns to work and live, examples of poorly planned and poorly designed urban infill abound. Every city has them, and every city is damaged by them. We have been astute about crafting public policy to promote the reuse of historic resources, but lousy at crafting public policy about what is built next to it – and the urban fabric as a whole suffers badly. In an effort to further stimulate our economy, state and local governments should consider the idea of expanding the existing historic preservation tax credit programs to include new, compatible infill development within existing state historic district boundaries. This action would further focus development within our already successful state historic districts and encourage the completion of many of our empty blocks. The Secretary of the Interior's Standards for Rehabilitation, as it considers new construction, should be used as the guideline for this work.

What would this HDITC program look like? Kentucky's HB500, proposed in the 2002 session and unfortunately not passed, may present the best model. It could be slated for existing and newly created National Register-listed historic districts, ensuring broad access to the program as well as an entry point for new districts. The tax credit could be made available for qualified construction expenses for residential and commercial infill in an historic district. The certified buildings should meet historic infill design guidelines, and be constructed on a property vacant for at least 24 months or in place of a previous structure of no significant historic value. The credit should be limited to 15% of expenses incurred, with a maximum credit of $500,000, to ensure homeowners broad access to the program, instead of focusing on individual large developments. The credit could be applied to the individual income tax, corporate income tax, corporate license tax, public service corporation property tax or bank franchise tax and could be sold or transferred. There should be a penalty equal to 100% of the tax credit for any disqualifying work performed on the structure.

To encourage development in economically challenged areas, HDITC legislation could add a multiplier so that those developing certified infill could see the value of their credit rise by 10%. The credit could be applied to the individual income tax or corporate income tax and the amount of credit would be equal to the amount of approved awards. The resulting tax credit could be carried back one year, and forward 10. To further make the credit available to lower income users, the credit could be sold or syndicated to investors.

What would the design standards for HDITC look like? The Secretary of the Interior's Standards would be the most logical foundation on which to build. The standards are, in many respects, a fine set of guidelines to follow when working with historic buildings. The potential conflict comes with Standard Three and Standard Nine – the most frequently misinterpreted of the standards. The first sentence of Standard Three reads: "Each property shall be recognized as a physical record of its time, place, and use." Standard Nine reads: "New additions, exterior alterations, or related new construction shall not destroy historic materials that characterize the property. The new work shall be differentiated from the old and shall be compatible with the massing, size, scale, and architectural features to protect the historic integrity of the property and its environment." The clear intent of these standards is to establish that an alteration, addition or adjacent construction should be age-appropriate, and be, as the standard reads, "of its time." Furthermore, new work should be "differentiated" from the old. Nothing in the standards specifies style, level of detail or anything of the sort.

So, in the spirit of federal legislation, perhaps a "signing statement" is in order to specify the intent of the legislation. Modeled in part on the implementation program for Bel Air, MD, I would suggest five caveats to the proposed program. First, retention or adaptive reuse of historic buildings is encouraged. Second, demolition of historic buildings is discouraged; moving historic buildings to make way for new construction is likewise discouraged. Third, sensitive and appropriate infill construction is encouraged in historic districts, and the intent of this infill is to sensitively fill the gaps in the urban fabric. Fourth, evaluation must place primacy on the larger urban fabric, not the individual infill project. The impact on adjacent buildings, the street and the district as a whole are more important than building-specific evaluation. Fifth, the historic rehabilitation tax credits and the infill tax credit should be viewed as tools of economic growth, not just historic preservation.

An HDITC would build on the success of the Rehabilitation Tax Credit Program while addressing the need for augmenting the urban fabric of our towns and cities. This program would focus development in the most economically and environmentally appropriate location – existing urban areas, where the long-range environmental and infrastructure impacts would be minimized. And, finally, it would provide a positive incentive for owners to build compatible infill in historic districts, further enhancing the very qualities that make them special places. An HDITC would give us the tools to make our historic neighborhoods the viable, vibrant places that many used to be, and could be again.  


Bryan Clark Green is an architectural historian and associate with Commonwealth Architects in Richmond, VA.
Advertising Information | Privacy Policy

Traditional Building Period Homes Traditional Building Portfolio traditional product galleries traditional product reports
rexbilt Tradweb Traditional Building Conference Palladio Awards

Copyright 2014. Active Interest Media. All Rights Reserved.