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Governor Signs Tax Credit Bill for Preservation and Affordable Housing

Carol Kay

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SACRAMENTO — On October 9th, Governor Gavin Newsom signed SB 451, the California Historic Rehabilitation Tax Credit, adding California to the list of more than 35 states that have passed such incentives.

The bill, which passed both the Senate and the Assembly with unanimous approval, will enable the renewal of aging structures and communities throughout the state, and promote the development of affordable housing.

The bill will create a 20% state tax credit for the rehabilitation of historic structures listed on the California Register of Historic Places.  An additional 5% bonus can be granted for certain projects, such as affordable housing for lower-income households and projects in transit-oriented developments or regions with high unemployment and poverty rates.

All projects must be approved by the California Office of Historic Preservation and the California Tax Credit Allocation Committee to determine if a project qualifies. The tax credit goes into effect on January 1, 2021.

The State Historic Tax Credit will help to address the critical need for affordable housing in underutilized historic buildings by providing an important financial incentive. Between 2007 and 2017 over 38% of all federal historic tax credit projects in California created new housing units or improved existing units. Of that amount over half were affordable housing projects, and SB 451 will make even more of these projects feasible.

Since February, the California Preservation Foundation (CPF) and the American Institute of Architects, California Council have led a major coalition to shepherd the bill through the legislature, working directly with California Senate President pro Tempore Toni G. Atkins.

The bill received broad support from organized labor, affordable housing groups, historic preservation organizations and local governments.  This effort built on the work CPF did in 2014 to pass AB 1999, the first version of this legislation. While it passed both houses of the California legislature, it was ultimately vetoed by then Governor Jerry Brown.

From 2002 to 2016, $468.1 million in Federal Historic Tax Credits catalyzed 169 projects in California, totaling $2.8 billion in qualifying rehabilitation expenditures. This activity has generated:

  • 39,279 jobs
  • $2.8 billion in Gross State Product
  • $160 million in state and local taxes
  • $493.3 million in federal taxes
  • $468.1 million in federal tax credits

SB 451 will provide further incentive for historic rehabilitation, increase the supply of affordable housing, support growth through infill development, and encourage property rehabilitation and maintenance in economically depressed areas. It will encourage meaningful investments in communities across the state such as Hollenbeck Terrace, Los Angeles.

Image result for hollenbeck terrace photo
Photo: Apartments. com

Hollenbeck Terrace is an adaptive reuse project that transformed the Santa Fe Coast Lines Hospital and Nurses’ Dormitory in Boyle Heights into low income housing for senior citizens. The project utilized federal incentives for both historic preservation and affordable housing. The site was a natural fit for adaptive reuse into housing.

With generously scaled corridors preserved, historic patient rooms were easily redesigned as apartments because of their essentially residential-scaled spaces, with windows providing ample natural light. Through the federal historic preservation tax credit process, the property was converted to 100 quality apartments for low-income senior citizens, along with common rooms and outdoor spaces for its new residents. SB 451 makes projects like this more economically feasible, so that historic structures can be put back to work in the communities that need them most.

Photo: Sacramento Bee

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