Despite these benefits, legislators repealed the law in January 2008. Legislators cited the program’s unpredictable costs as their reason, a factor compounded by the State’s serious budget crisis. The tax credit program was not capped, so lawmakers could not predict how much the cash-strapped state would spend each year in credits. Additionally, as the credits could be sold to banks and other corporations, it was also difficult to calculate who would cash-in the credits and when they would impact the state budget. Others identified unintended consequences of the program including displacement of low-income residents and businesses as a result of increased property values.
These critiques of the program are justified, but easily surmountable – especially in light the program’s impressive popularity and benefit to Rhode Island’s economy. Placing an annual cap on the dollar amount of the credits each year could rectify the problem of unpredictable costs. The displacement aspect is a little trickier. Increasing property values is a positive for local governments and can bring needed amenities to neighborhoods in need of investment. But communities need to plan for the needs of their low-income residents – the usual occupants of underdeveloped, underutilized properties targeted by the program. There are a number of ways communities can include housing for low and moderate income households such as: 1) prioritizing projects requesting the credit that produce affordable housing, commercial and mixed-use projects; 2) streamlining the development review process for projects that include affordable units; or 3) reducing project fees with a sliding scale based on the percentage of low to moderate income units in the development. These policies, and many others, could help retain local residents and businesses while leading to increased economic gains for the community and state.
For instance, Common Ground, a New York based non-profit, used historic preservation tax credits (in part) to redevelop the historic Hollander Foundation Center in downtown Hartford, Connecticut. The development provides housing for low- and moderate-income individuals in a market where they would be otherwise priced out. The building, which had been vacant for 25 years, now provides 70 affordable and moderately priced rental units and 13,000 square feet of market-rate commercial space where there was none.
Reinstating Rhode Island’s Historic Preservation Tax Credits and prioritizing affordable developments would help to both revitalize Rhode Island’s urban communities and mitigate the negative effects on low-income people. A revised program could once again stimulate the type of development that occurred with the previous credit – and bring with it new jobs and economic growth for Rhode Islanders. A revised program could also make affordable housing projects more economically feasible, and would put underutilized properties back on the tax rolls and increase revenues for municipalities.
Read more: Rhode Island Considers Reinstating Historic Tax Credit [National Housing & Rehabilitation Association, June 16, 2011]