Loss of key tax credit could hit rehab projects
Incentive used to create downtown housing in Dayton at risk.
Current proposals to reform the federal tax code have not included an incentive that has helped create hundreds of new apartments in downtown Dayton and that developers want to use to create hundreds more units in the future.
The federal historic tax credit is at risk of elimination, which would jeopardize efforts to rehab many historic buildings in Dayton and elsewhere in Ohio and the Rust Belt, according to multiple development leaders interviewed by this newspaper.
Federal historic tax incentives have helped finance some of the largest and most celebrated housing and renovation projects in downtown in this century, including the Cannery Loft Apartments, the St. Clair Lofts, the Delco Lofts, the Wheelhouse Lofts and the former Dayton Power & Light steam plant building.
If the incentives go away, it will no longer be financially feasible to rehab and restore many beautiful and iconic structures that are in state of decay and empty or underutilized, said Dave Williams, urban design director of Miller-Valentine Group, which is working to redevelop the Dayton Arcade.
“Look at all the projects in Dayton, Ohio, that used those tax credits — without those credits, they would not have moved forward,” Williams said. “It takes those credits, as part of the capital stack, to bring these projects forward.”
The Dayton Arcade project, which is moving toward a closing later this year, would not be economically possible without federal tax credits, he said.
President Donald Trump said he wants Congress to pass tax reform by the end of the year. He has pushed to simplify the tax code, and incentives to rehab historic buildings so far have not been part of the proposals, according to policy groups.
The state of Ohio is one of the largest benefactors of the federal historic tax incentive program, which has been around for more
than 30 years and provides a 20 percent tax credit to developers who rehab historic buildings.
The credits provide dollar-for-dollar reductions in the amount of taxes recipi- ents owe. Federal tax cred- its are usually sold for cash to investors who pay about 85 to 90 cents on the dollar.
Joyce Barrett, executive director of Heritage Ohio, said the tax credits help cities build up their payroll and property tax base by restor- ing buildings and drawing in businesses and employees.
“Get rid of tax credits that don’t work. But historic tax credits have consistently show a positive return,” she said.
Ohio and other states with rich industrial histories have large numbers of vacant and underused buildings that can be restored and re-purposed as housing and new office spaces that meet the needs of today’s tenants, local developers say.
But the cost of rehabbing the structures tends to exceed the revenue developers can get from tenants, and federal and state tax credits help close that financing gap, said Williams, who is on the board of Heritage Ohio, which has advocated for keeping and enhancing the incentives.
Federal historic tax credits have helped finance much of the housing that has come downtown in the last two decades, including the more than 435 apartments spread across the Cannery Lofts, the St. Clair Lofts, the Delco Lofts and the Wheelhouse lofts.
The Wheelhouse Lofts, which began leasing its 40 apartments in August, benefited from about $2 million in federal tax credits, and the project would not have been viable using only traditional financing since they would have had to charge much higher rents, said Barry Alberts, a partner with Weyland Ventures, which is developing the Wheelhouse Lofts
“This is very serious,” Alberts said. “In our opin- ion, it is one of the few government programs that has worked exactly as it was intended to work.”
The federal historic tax credit program is critical to redevelopment in any mature city such as Dayton, said Jason Woodard, principal of Woodard Develop- ment, which helped develop the Delco Lofts, next to Fifth Third Field.
Dayton has multiple build- ings on the National Register of Historic Places or that are in historic districts that are eligible for the historic tax credits, and losing that financ- ing tool would disadvantage urban areas compared to undeveloped “greenfield” sites, Woodard said.
“Delco Lofts could not have happened without the his- toric tax credit program,” he said.
Rep. Mike Turner, R-Dayton, will be signing a bipartisan letter to the Ways & Means Congressional committee supporting federal historic tax credits in any comprehensive tax legislation considered by the group, said a spokesperson. Contact this reporter at 937225-0749 or email Cornelius. Frolik@coxinc.com. Contact this reporter at Kaitlin. Schroeder@coxinc.com.