Proposals to reform the federal tax code could end an incentive that has helped create hundreds of new apartments in downtown Dayton and that developers want to use to create hundreds of new units in the future.
The federal historic tax credit is at risk of elimination, which would jeopardize future 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.
The Dayton Arcade project, which is moving toward a closing later this year, would not be economically possible without federal tax credits, he said.
“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.”
President Donald Trump says he wants Congress to pass tax reform by the end of the year, and early versions of his administration’s proposals have not included the Federal Historic Tax Credit program.
Trump 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 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 recipients owe. Federal tax credits are usually sold for cash to investors who pay about 85 to 90 cents on the dollar.
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 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 opinion, it is one of the few government programs that has worked exactly as it was intended to work.”