![Sample our Health and Social Care journals, sign in here to start your FREE access for 14 days]({"type":"image" , "src" : "/sda/5938/TOC-Subject-Sample-2021-Health-Social-Care.jpg"})
Abstract
Since the program’s inception in 1976, the Federal Historic Rehabilitation Tax Credit (RTC) has supported more than 42,000 projects and $84 billion of rehabilitation work. Through 2016, this tax incentive created or retained nearly 550,000 housing units. Despite its role as an important housing redevelopment incentive, the effects of Historic Tax Credit projects on neighborhood change are largely unknown. This research uses data from Federal Historic Tax Credit projects between 1998 and 2010 to examine the neighborhood-level effects of these investments in six legacy cities (Baltimore, Cleveland, Philadelphia, Providence, Richmond, and St. Louis). The difference-in-differences regression model reveals minimal significant changes in socioeconomic characteristics and no significant changes in racial or housing composition. Although neighborhood change is limited overall, RTC housing activity does significantly increase median household income. There is also evidence of significant increases in the share of low-income households where the RTC creates or rehabilitates affordable units.
Acknowledgments
I am grateful to Stephanie Ryberg-Webster, George Galster, Brian Mikelbank, Rosie Tighe, and Nick Zingale for helpful feedback on earlier versions of this manuscript. Ned Hill also provided very useful comments on this work, and Matt Ruther was extremely helpful in sorting through data issues. Finally, I would like to thank Vincent Reina, John Landis, and all the participants in the University of Pennsylvania’s symposium “U.S. Housing Policy: The Future of What Works.”
Notes
1. The data cited in this paragraph are sourced from the National Parks Service Annual (2004–2016) and Statistical (2009–2016) Reports for the RTC program, available from https://www.nps.gov/tps/tax-incentives/reports.htm.
2. This research focuses specifically on the federal RTC program. State-level RTC programs exist in 32 states, and are being proposed in three additional states (Novogradac, Citation2017). Data on these programs are not analyzed here.
3. Local historic districts are usually (but not always) tied to an ordinance that regulates exterior changes in the designated area, although the extent of regulation and types of changes reviewed may differ by city and within each district. In the six cities analyzed here, local designation generally requires the approval of exterior changes including alteration, demolition, additions, or new construction by a historic preservation board or similar entity (these bodies have slightly different names in each city). The major exception is St. Louis, where historic district ordinances only cover rehabilitation or new construction. Demolition review is governed through a separate ordinance and review body. Additionally, the Philadelphia Historical Commission has some purview over building interiors when explicitly designated.
4. There are direct connections between historic districts and RTCs. Designation as a contributing building in a National Register Historic District satisfies the requirements of Part 1 of the federal RTC process. The RTC can also be used on an individually listed historic building that is not in an historic district.
5. A substantial rehabilitation is one that is greater than $5,000 or exceeds the building’s adjusted basis value.
6. For instance, since fiscal year 2012, the majority of all projects (45% or more) had costs exceeding $1 million (NPS, Citation2012a–2017a).
7. Owner-occupied residential structures and public uses are not eligible for the federal RTC program (NPS, Citation2017a).
8. The Tax Reform Act of 1986 actually scaled back both the RTC (from a 25% credit that was instituted with the Economic Recovery Tax Act of 1981) and the existing nonresidential/nonhistoric credits (from 15% or 20% credits to 10%; Ryberg-Webster, Citation2015). In December 2017, Congress passed the Tax Cut and Jobs Act, which eliminated the 10% credit, and required the credit be spread out over 5 years. The effects of these changes and the reduced federal corporate tax rate on the RTC program are yet to be determined.
9. This is based on the author’s calculations of the federal RTC projects listed within the Novogradac Historic Tax Credit Mapping Tool (Novogradac, Citation2017). Included in the calculations are all projects with a Part 3 decision date. Total project investments were converted to constant dollars.
10. Although the NPS data are self-reported, meaning errors or reporting bias may be present, there is no incentive to under-report and there are penalties for over-reporting costs.
11. The only other source of publicly available disaggregated data on federal RTC projects is the Novogradac & Co., LLP Historic Tax Credit Mapping Tool (Novogradac, Citation2017), a recent addition to the accounting firm’s Historic Tax Credit Resource Center. This data set does not include information on the number of housing units associated with RTC projects. As the focus of this article is the RTC’s connection to housing policy, the author elected to use the data set provided by NPS, which includes housing unit information, despite its geographic limitations.
12. Table shows the annual rate of projects pairing RTC and LIHTC, from 2009 to 2016. The RTC could also be paired with other sources of affordable housing subsidies such as the Department of Housing and Urban Development’s (Citation2017) 202 Supportive Housing for the Elderly Program or project-based Section 8.
13. Two of these cities (Cleveland and Providence) are not coterminous with counties or independent cities. The analysis only includes tracts within the municipal boundaries, not those within the larger counties of Cuyahoga and Providence, respectively.
14. Approximately 30 states offer companion historic tax credit programs that mirror the federal RTC in its mission to support preservation, but have varying provisions in terms of value of the credit and building eligibility (Schwartz, Citation2013).
15. Following others in the neighborhood effects literature, I assume a minimum 3-year lag between the time of investment and potential impact (Galster, Walker, Hayes, Boxall, & Johnson, Citation2004). Thus, I include the 1998 and 1999 observations, assuming their effects are not yet captured in the Census 2000 data.
16. The Neighborhood Change Database standardizes 2000 Census Bureau data based on the 2010 census tract geographic boundaries, ensuring spatial continuity over the period of analysis. The 2015 ACS data are also reported in 2010 tract boundaries. The ACS 5-year estimates reflect data collected during each month of the 5-year period (i.e., 2011–2015), and are not considered proxies for the middle year of the data set. The larger sample sizes included in the multiyear estimates improve the reliability of the data (Jacobsen & Mather, Citation2008). Tracts excluded from analysis because of insufficient data include Baltimore (250600, 100300), Cleveland (980100, 980500), Philadelphia (005000, 980300, 980400, 980500, 980600, 980700, 980800, 980900, 989100). For tracts with no reported median household income or median gross rent in 2000 or 2015, the citywide median was used.
17. Data on RTC projects that occurred earlier in the 1990s or in previous decades (1970s or 1980s) were not available to the author for all cities in this analysis.
18. Cleveland is omitted from the model.
19. Since location in a local historic districts requires additional regulatory review in these cities, I include this as a control variable (only for when projects intersect with a local historic district and are within an RTC tract) as these regulations could affect the observed neighborhood change patterns.
20. In the nonrace regressions, I include the share of non-Hispanic blacks as a race/ethnicity control; in the nonsocioeconomic regressions, I control for the share of residents with a bachelor’s degree or more and median household income; in the nonhousing regressions, I control for the share of renter housing units.
21. I also examined changes in all tracts with RTC activity (not just housing) but there were no significant results for any of the dependent variables in this model specification.