The last few decades have been tough on middle-income Americans. Wages have remained relatively flat and many good-paying factory jobs have disappeared overseas. In this economic climate, a lot of people consider themselves fortunate simply to have work, a job with family health insurance and a roof over their heads.

The cost of gas may be down — at least temporarily — and there are bargains at Walmart and the Dollar Store, but the cost of housing has risen significantly. According to a report by the U.S. Census Bureau, the median price of a new home in July 1996 was $144,000. If that number would have risen with inflation, the study said, the average American home would cost roughly $232,000 now. Instead, it stood at $363,400 in January, more than 46 percent higher than the cost when figuring for inflation alone.

And wages? The typical American family income was $53,657 in 2014, down slightly from $54,462 a year earlier, according to the Census Bureau. Median family income remains lower than it was in 2007, the Census report said, though precise comparisons are difficult to determine because the Census changed its methodology last year so it could provide a more detailed look at the sources of Americans’ income.

This one-two punch of stagnating wages and rising home costs makes it difficult for lots of middle-class Americans to afford housing. Other than the mortgage interest and state and local tax deductions, public policies and subsidies are not directed to the middle class. Federal historic tax credits only apply to income producing property.

But state programs can help. One tool is historic tax credits.

Renee Kuhlman, a tax credit specialist with the National Trust for Historic Preservation in Washington, D.C., said the number of states with historic tax credits has grown dramatically in the past 20 years. In 1986, there were three. By 2004, the number had grown to 24 and by 2016, 34 states had some kind of historic tax credits, with at least 23 of them offered to residential homeowners to reduce their state income taxes.

“These programs are great preservation tools,” she said. “But legislators really like them because they can revitalize their downtowns. They are a true catalyst for that and they’ve multiplied because people see them working in nearby states.

“You need to have housing for people to support your downtowns. That’s often the key to making a successful revitalization. When people use historic credits to fix up a house, then other people on the block do the same. It often has a ‘halo’ effect, regardless of whether the neighbors are getting credits themselves.”

Kuhlman said the state income tax credits can lower the cost of homeownership and lower renovation costs for residences that qualify under National Park Service standards and are deemed to be “certified historic structures” or are part of historic neighborhoods.

“The state tax credit for individuals is one of the few incentives we have for encouraging the rehab of personal property,” she said. “The federal government doesn’t do it. So if it weren’t for states offering income tax breaks for historic residences, there are very few financial incentives for owners to maintain their historic properties.”

She said Iowa, Maryland, Missouri and Colorado all have excellent state historic tax credit programs. Colorado’s was upgraded in 2015 and gives up to a 25 percent income tax credit for the first $2 million in qualified rehabilitation expenses and 20 percent for the remaining qualified costs.

“I like this one because they make sure that 50 percent of the program goes to smaller, Main Street programs,” she said. “And while middle-income folks wouldn’t use $2 million, it could still save them a lot on, say, a $150,000 rehabilitation project.”

And in Maryland, she said the state allows local governments to give homeowners property tax abatements for historic restoration projects for up to 10 years, “which means they wouldn’t have to pay taxes on the improvements for some time and save money that way.”

In St. Louis, Mo., REALTOR® Eric Friedman said his state’s historic tax credits program was initially passed in 1997 “because we have a low-housing-cost market in St. Louis, but high construction costs. 

“That means we had a lot of beautiful buildings in the downtown — old loft buildings — and lovely residential buildings in neighborhoods. But the high cost of renovation didn’t work, particularly for the large buildings and it didn’t work particularly well for the smaller buildings or homes, either, so there was a big gap. Rehabilitation of owner-occupied housing is directly linked to economic development, especially in distressed areas.”

He credits St. Louis attorney Jerry Schlichter for championing the cause and developing the legislation. Missouri REALTORS® then became part of the coalition that helped to pass the tax credit program for Missouri. Initially, the initiative did not include homeowners, but Schlichter added them when residents of Benton Park — which dates to the 1860s — approached him at a neighborhood meeting and asked to be part of the law.

“If you are trying to rebuild neighborhoods and downtowns, you want to have homeowners there and not just renters,” said Friedman, who said some homes in distressed areas were sold for $1 by the city. “This helps do that and it makes all the sense in the world. A Brookings Institution report said we need to support these urban areas because they are the economic engines of our country.

“Besides, a lot of people from millennials to boomers want to live in or near revitalized downtowns in walkable, bikable neighborhoods. Our historic income tax credit law has helped make that happen. Over the years, I think hundreds of middle-income families have benefited.”

Once the program got going, he said it took off rapidly and has resulted in more than 43,000 jobs and literally billions of dollars in redevelopment, especially along Washington Avenue and in many of the city’s beautiful, historic neighborhoods. Washington Avenue, he noted, has been described as one of the country’s “Great Streets” by the American Planning Association.

A key aspect of the state tax credit, Friedman said, is the ability of homeowners (and commercial developers of larger properties) to sell the credits. That means if someone spends $100,000 to renovate a historic home, he or she would only have to borrow roughly $75,000 because of the 25 percent state credit they can sell to banks or some other entity.

Friedman said the ability to sell the tax credit was essential to the program’s success. Without that transferability, the tax credit would not have been so effective an incentive for development. He said the credits usually sell from 87 to 92 cents on the dollar, so a $10,000 tax credit would be worth $8,700 to $9,200 to a homeowner.

“This is a great program because it creates capital for positive public policy,” he said. “It stimulates investment and that’s why the Wall Street Journal called Missouri’s program a ‘model for the nation.’

“I believe this could be replicated in any community in the United States where you have similar kinds of problems,” Friedman said. “It’s been used in over 66 Missouri communities. And in downtown St. Louis alone, the program has been used to rebuild over 100 historic structures. It’s also added over five thousand new residents — many of them college graduates — and it’s benefitted lots of neighborhoods, too, because St. Louis is a city of neighborhoods.”

Tim Vogt, co-owner of Millennium Restoration and Development Corp., said since 1999 his company has restored more than 50 city properties using historic tax credits.

“These were both our own development projects that were for sale and also properties that we served as the general contractor for our customers,” he said. “Without the tax credits, these properties would probably have never been redeveloped and would not have been able to be sold at affordable market prices. Many of our buyers are moderate-income to middle-income households.”

He said his company has rehabbed homes in numerous St. Louis neighborhoods, including Tower Grove East, Benton Park West, Gravois Park, Benton Park, Soulard, McKinley Heights and Lafayette Square. The projects ranged from single-family rehabs; to two-family conversions to single family; four-family conversions to townhomes; six-family conversions to townhomes; and storefront buildings into residential homes.

“Many of our projects were market-rate developments, and some were affordable developments utilizing Community Development Block Grant funds along with historic tax credits,” explained Vogt, who said prices started at $95,000; while most have been below $250,000.

Lucas Delort, a 25-year-old graduate student at Washington University in St. Louis, bought a rundown, 1912 Tudor Revival-style house to restore — with the help of his contractor father — in the Gravois Jefferson Streetcar Suburb Historic District in 2014.

They purchased the 2,400-square-foot home for $50,000, have put $60,000 — and countless hours of sweat equity — into the rehab and figure they’ll spend another $8,000 before the project is finished.

“I always knew I wanted to buy and renovate a house,” said Delort, who is getting his degree in social work and economic development. “Once I learned that this was a national historic district, I applied for the historic tax credits, which makes it more affordable for me. I may even restore another home in the area after this. I could have gotten another house for less than $30,000, but this one is unique and worth it.”

He moved in April of 2015 before the home’s kitchen was complete and now has several roommates.

“It’s been an experience,” he said. “But I like the neighborhood, which is slowly being redeveloped. I’m just one block from Cherokee Street, which has a lot of art studios. And there are a number of good Mexican restaurants around here, too.”

In Kansas City, homeowner Rachel Nugent said she recently completed a renovation of her house using the Missouri historic tax credit program. She lives in Squier Park, a small turn-of-the-century neighborhood developed as a streetcar suburb just east of Troost Avenue in Midtown, Kansas City.

She described Squier Park as a working-class/middle-income neighborhood that “had witnessed the effects of decades of disinvestment in the area. It is filled with large and modest houses that are in need of a little (or a lot of ) TLC. Our house wasn’t eligible for individual listing, so we got the whole neighborhood listed in the National Register.”

She said a core group of neighbors invested in their properties and worked hard to maintain the neighborhood over the years, but she called it a “constant struggle.” The historic tax credit available to all the contributing properties in the district is now one more tool neighbors can use to help bring this neighborhood back to a thriving community.

“The availability of substantial, affordable historic homes coupled with this financial incentive to fix them up has attracted young families to the neighborhood. 

My family and I could not have been able to rehab our house without the tax credits to help offset the $100,000 project.

“Since we completed our house, three other neighbors have begun historic tax credit projects. Two neighbors are longtime residents who had done some work on their houses but did not initiate major rehabilitation projects until the tax credit was available. I don’t know exactly what their income brackets are, but these neighbors are teachers, nurses, contractors, assistants at a local church, and these rehabs are all around $100,000 projects.”

The program can also be used to develop low-income and workforce housing.

In Delaware, Historic Tax Credit Coordinator Joan Larrivee said her state’s program started in 2001 and has been used by many middle-income homeowners.

“These credits can be a tool for middle class folks like state government employees and teachers who want to buy or renovate historic homes,” she said. “Certainly some I’ve met fall into that category and I’m always trying to reach out and make people aware of this program through the talks that I give celebrating the federal National Historic Preservation Act that got this all going 50 years ago. That was the seed and a lot of good things have grown out of that legislation. Unfortunately, federal tax credits are not available to homeowners, so state programs are the key.”

In Delaware, she said the homeowner income tax credit is equal to the costs of rehabilitation work. Participants can qualify by spending as little as $5,000 on a project and can receive up to $20,000 in credits, which equals roughly $67,000 in work.

“That’s the limitation, but it’s still a lot of money for most middle-income folks,” she said. “If you do have someone who is able to spend more money, they can reapply every two years. If you have a state income tax liability of $3,000 in a certain year, you can apply part of your $20,000 credit. Then you can carry forward unused tax credits for 10 years until they are gone.”

Like Missouri, the other option in Delaware is to sell tax credits, she said.

“There are brokerages that will do a deal and make an arrangement with a company that owes Delaware income taxes to buy your tax credit,” she explained. “They won’t buy them dollar for dollar, but for a discount. For someone who is elderly and doesn’t have a lot of income tax liability, and is living on social security but has used some of their savings to make required repairs to their historic home, this is a feature that is a good thing for them. I have a lady now who doesn’t owe anything in state income taxes. She has a credit and she can benefit by getting some income that might be helpful to restore savings she had to use to make these repairs.”

In New Mexico, historic tax credit manager Harvey Kaplan said his program for “registered cultural properties” has been around since 1984 and was the first of its kind in the country.

“It yields — for projects that are approved in advance — tax credits of 50 percent of eligible expenses against New Mexico state income taxes of a maximum generally of $50,000 — which results in a credit of $25, 000.

“If the property is in a state-approved arts and cultural district, the caps are doubled. If people don’t use the credit to wipe out their tax debt for the tax year of the project completion, they can spread it out over an additional four years.” Kaplan explained.

He said the program has been used for hundreds of properties and “we get applications for everything from $500 to $1,000 stuff all the way up to milliondollar projects. The limits could be higher, but it’s better than getting poked in the eye with a stick. And we do get a lot of middle-income homeowners who benefit from this.”

Many residents in the small town of Las Vegas, N.M., have used the program because of all the community’s historic homes, some of which are adobe dwellings that date back to the middle of the 1800s. The town, which is on the Santa Fe Trail, has a population of around 15,000. It has eight historic districts and more than 800 properties listed on the National Register of Historic Places.

Kaplan said movie and television production companies often use the town for shoots. He estimated that some “fixer-uppers” in Las Vegas could be purchased for less than $50,000.

“I’d love to live there, but it’d be an hour commute to my work in Santa Fe,” he quipped.

The tax credit program also has been popular in the Huning Highlands neighborhood, which is on a rise above downtown Albuquerque.

“It’s been in use for about 20 years there and a lot of middle-class people have bought older homes and fixed them up using tax credits,” Kaplan said. “We have two in that neighborhood now. It’s made a difference in a lot of places.”

Unfortunately, New Mexico does not allow the tax credits to be sold or transferred — as in Missouri and Delaware — which limits the program.

“That’s kind of a shame and people are pushing for the change, so we’ll see,” he said. “But still, a lot of neighborhoods and homeowners have benefited from this program, like historic Silver Hill south of the University of New Mexico campus, Santa Fe and Las Cruces.”

Colorado updated its historic tax credit program last year to make it easier for residents to use, said Joe Saldibar, the architectural services manager for History Colorado. It also clarified what kinds of homes and other structures are qualified.

“One of the downsides of the old credit was that if you sold the property within the first five years, you had to give back a portion of the credit,” he said. “People don’t always know where they will be in five years, if they are going to be transferred or if they might lose their job in a recession and have to pay back money in taxes.”

Though owners of historic commercial properties can sell their state income tax credits, homeowners in Colorado cannot. But he said the program is still attractive, allowing residential property owners to write off up to $50,000 in state income taxes over 10 years.

“If you do $100,000 worth of work, you could get 20 to 25 percent of that back in tax credits, depending on where you live,” he said, noting the higher rate goes to regions that have been declared disaster areas.

“The credits could mean an offset of $20,000 to $25,000 for that $100,000 project, which is another tool to pay for preservation. And it also makes historic homes a little more attractive to homebuyers. We won’t know for sure if changes in the law have bumped up interest in the program until a review is done, but anecdotal evidence suggests it has.”

Kuhlman, with the National Trust for Historic Preservation, and Friedman, the St. Louis REALTOR®, both stressed that they are convinced state tax credit programs are a valuable tool to homeowners. Better yet, they added, these credits not only make ownership of historic homes more attractive, but they are key to building a base for economic revitalization throughout a community.

Brian E. Clark is a Wisconsin-based journalist and a former staff writer on the business desk of The San Diego Union-Tribune. He is a contributor to the Los Angeles Times, Chicago Sun-Times, Milwaukee Journal Sentinel, Dallas Morning News and other publications.

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