To solve Rhode Island’s housing crisis, state leaders must fix the State Historic Tax Credit program

Rhode Island’s Historic Tax Credits are a proven tool to create more housing stock—approximately 20% of all new housing comes through the program, including 20% of all affordable housing. But unlike neighboring states which are expanding their programs to address their housing crises, Rhode Island’s Historic Tax Credit program has been stymied through lack of funding, onerous fees, and impractical rules and restrictions. Just when the program is needed most, and elected officials are focused on fixing the housing crisis, a critical housing and community development program is left broken and out of funding.

Historic Tax Credits not only generate much-needed housing stock, they are also a proven economic and community development engine. Over the last 22 years more than 300 historic buildings have been rehabilitated, using $445.6 million in Historic Tax Credits to catalyze more than $2.2 billion in direct investment in twenty-four cities and towns throughout Rhode Island. In addition to those direct investments, a 2017 Economic Study showed that every $1 invested in the program results in over $10 in economic activity. Moreover, Historic Tax Credit projects have rejuvenated neighborhoods, cleaned up brownfield sites and improved Rhode Islanders’ quality of life.

So what’s wrong with Rhode Island’s Historic Tax Credit program?

First, a lack of predictability and funding. Converting large mills and other structures into housing takes years of planning and construction. Projects need to be confident the program will be around, and funded, when it’s their turn. Currently, Rhode Island’s Historic Tax Credit program will sunset in two years. Similar programs in surrounding states don’t have sunsets. Worse, there is no additional funding earmarked for Rhode Island’s program. Currently, there are no plans to add funding even while there is less than $1 million available—an amount insufficient to cover the next project in line. All projects are stalled. By comparison, Connecticut makes $31.7 million available each fiscal year. Massachusetts recognized the program’s importance in generating housing, and recently doubled its allocation to $110 million per year through 2030 as part of their Affordable Homes Act.

Second, impractical rules and restrictions. Rhode Island’s Historic Tax Credits incentivize investment to convert historic structures in blighted areas rather than building new construction in greenfield sites. The credits were designed to cover the additional costs involved in historic rehabilitation (asbestos and lead paint removal, environmental cleanup, structural repairs, etc.), putting these projects on a level playing field with new construction. Instead, over time Rhode Island has added fees and restrictions that outweigh the tax benefits of the program. These include:

- An exorbitant filing fee of 3%--the highest in the nation
- A lack of transparency of where projects stand on the waitlist for funding, making it difficult to plan and meet deadlines
- Unrealistic and inflexible timelines to meet milestones for eligibility
- Disadvantages housing creation by offering only a 20% credit for housing projects while commercial projects receive a 25% credit
- Requires large projects to pay prevailing wages across the board which is both impractical and adds 25-40% to the project cost, negating the value of the tax credit

It’s time to act. At least 61 projects are waiting in line right now seeking $96.5 million in Historic Tax Credit funding. These projects would generate nearly $500 million in rehabilitation investments. A group of developers have identified more than 500 housing units that could readily be created if only the Historic Tax Credit program were functioning. Instead, with Rhode Island’s program so disadvantaged, developers are doing projects out-of-state, taking their investments and jobs along with them.

We are calling for the Governor and leaders in the State Senate and House to meet with developers, union leaders, preservationists, smart growth advocates, and other stakeholders to work out a solution. The ways to fix Rhode Island’s Historic Tax Credits are obvious, what is required is political will.