Before the new legislation was passed, Pennsylvania had one of the lowest historic tax credit caps in the country, particularly compared to neighboring states.
Pennsylvania legislature recently passed H.B. 2358 to increase the value of the state’s historic tax credit to $20 million, up from a previous limit of $5 million. First established in 2012, the state’s historic tax credit program supports developers in the renovation of buildings listed on the National Register of Historic Places. Although this register includes historic buildings worthy of preservation, it doesn’t legally restrict non-federal building owners from doing what they want to their properties, including demolition. As the new legislation has now significantly raised the aggregate annual tax credit cap, far more of Pennsylvania’s historical buildings will be able to be saved from destruction and instead repurposed into functional ones that generate income.
Higher cap will encourage developers to renovate historic buildings
Before the new legislation was introduced, the state’s historic tax credit previously covered the cost of about 15 projects per year, which equates to only 50% of the applications submitted in total. Most of these projects were allocated under $500,000, which is the limit awarded to each project. Previously, developers were often put off applying as the money offered was so small compared to overall project costs. The same limit of $500,000 still stands, so it’s not going to make a huge difference for large, expensive projects. But for small projects like apartment blocks in financially-poorer areas, the program will be a huge boost to urban development.
Philadelphia Register of Historic Places grants legal protection
Currently, local buildings have to be listed on the Philadelphia Register of Historic Places in order to have legal protection against being destroyed or significantly altered. Under Section 14-1005 of the Philadelphia Code, “a property owner or authorized representative must obtain a permit from the Department of Licenses and Inspections before altering or demolishing a historically designated building, structure, site, object, or public interior portion of a building or structure”. Developers submit permit applications to the department, which are then reviewed by a committee (under Section 14-1005(2) of the Philadelphia Code), who are committed to keeping historic preservation in the urban planning and development process.
Historic buildings preserve cultural heritage
“One of the reasons we love Pennsylvania is we love our historic fabric. And we hate to lose it. And we hate to lose it for lack of support. And I think that’s pretty widely felt,” said state Senator Nikil Saval (D-Philadelphia), main sponsor of the bill. Indeed, as historic buildings reflect cultural identity and heritage across cities, states, and countries, they’re an integral reminder of the past and historical events that shape the present. In Philadelphia, one of these buildings is an iconic brick brewery in Brewerytown, one of the oldest breweries in Pennsylvania. Constructed in 1870, the brewery was used to make beer until it went out of business during the Prohibition. Although it was used on and off throughout the years, the building had been empty for almost two decades and faced risk of demolition — until it was recently renovated with help of the state’s historic tax credit.
Local brewery renovated with $200,000 in tax credits
Developer David Waxman, founder of real estate company MMPartners, successfully transformed the brewery into apartments and commercial space (called Poth Brewery Lofts) with $200,000 in tax credits in 2019. Although this covered just a fraction of the restoration’s total cost ($42 million), Waxman said the project couldn’t have been completed without it. “[The building] was blighted, and another year or two of sitting it probably would have been beyond repair and torn down. And so then you would have had this gem that spoke to the history of the neighborhood gone and replaced with what we like to call spaceship buildings — these new build mid-rises with 10 materials on the facade and built badly,” Waxman said.
Before the new legislation was passed, Pennsylvania had one of the lowest historic tax credit caps in the country, particularly compared to neighboring states. New York, for example, has no cap at all. Although companion legislation (S.B. 1259) to raise the state’s historic tax credit cap to $50 million a year hasn’t yet received legislative approval, the new $20 million limit is still set to be a positive step forward for preserving historic buildings within urban development.
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