The Historic Tax Credit (HTC) Program is often used not only to preserve historic buildings, but also to develop affordable housing. If one building in a development is deemed “historic,” the tax credits help fund the entire project. The program has become an important tool in the creation of low-income housing, and is often used to make development projects more financially viable by providing additional funding, but also by encouraging private investment. A bill introduced into the House of Representatives aims to make the program even more effective.
H.R. 2479, the Creating American Prosperity through Preservation (CAPP) Act, amends the Federal Tax code to make more HTCs available to smaller projects and those that prioritize energy efficiency.
If passed in its current form, the bill would amend Section 47 of the tax code to include provisions for “smaller projects.” It would increase from 20 percent to 30 percent the project costs that can be funded with HTCs, as long as the total credit doesn’t exceed $1.5 million. For the purpose of this amendment, a “small project” is defined as one whose total cost is $7.5 million or less, and which received no tax credit funding under Section 47 for the previous two tax years.
In addition, the bill seeks to amend the subsection on energy efficiency to include rehabilitated structures. The amendment would allow for a credit not to exceed 2 percent of the total rehabilitation costs for any qualified project that reduces energy usage by 30 percent. In order to qualify, the rehabilitation and its 30 percent energy reduction must be certified. In addition, any building that is certified must be at least 75 percent occupied during the period in which energy usage is monitored and calculated.
Congressman Aaron Schock (IL-18) introduced the bill in July. It was referred to the House Committee on Ways and Means, where it awaits a mark up and a vote.
This bill is just the latest in a string of attempts by Congress to spur growth in the housing industry and encourage affordable housing development. Elected officials continue looking for creative ways to fund not just new construction but also the rehabilitation of existing structures, especially because there are currently so many foreclosed homes on the market. Many housing experts agree that home values are not likely to recovery until available housing stock decreases significantly. One of the best ways to make foreclosed homes attractive to potential buyers is by offering things like tax credits to developers who are willing to purchase and rehabilitate residential properties.