Low-income housing is becoming an increasingly important issue for more and more communities across the country as localities feel the effects of reduced federal housing dollars. Traditionally, the urban areas that are the most economically depressed have the largest stock of older, historically significant houses. It is imperative that people across the nation work to make the Secretary of the Interior`s Standards for Rehabilitation effective in developing low-income housing.

The architect, developer and builder all face a challenge in trying to create low-income housing that meets the Secretary`s Standards. They must produce housing at a cost that can be supported by the rents affordable to their occupants, yet must also respect the standards set by the Secretary of the Interior in order to further the cause of preservation.

The two goals sometimes conflict. The Secretary of the Interior`s Standards require maintaining original floor plans wherever possible. In the case of a typical nineteenth-century building, such as those rehabilitated in Savannah, this means keeping the entrance hallway/double parlor configuration intact. The result of converting these buildings to two-bedroom, low-income units under the Secretary`s Standards is a large bedroom in the front parlor and a very small and awkwardly shaped bedroom to the rear.

Better, more livable conditions for the residents of these low-income housing units would result if the National Park Service allowed moving partitions between the front parlors and shortening the length of the entrance hall. Some flexibility in the application of the Standards would produce units that maintain the feel of the nineteenth-century double parlor floor plan but make far more functional use of the space available for the low-income units. It is ironic that on the long list of requirements for rehabilitation, the needs and interests of the tenant are considered last, if at all.

The critical goal of preserving the qualities of historic buildings should not diminish the quality of the homes that are created. The Park Service should apply the Standards for Rehabilitation in a manner that encourages developers to provide a financially sound housing unit that respects the needs of future tenants.

Update On Rehabilitation Tax Credits:
The Community Revitalization Tax Act of 1988

The rehabilitation tax credit and the low-income housing tax credit programs are not functioning as Congress intended, in part because the credits are regulated by the 1986 Tax Reform Act`s passive loss rules. The rules effectively restrict credit use to $7,000 for many taxpayers and eliminate the use of credits completely for others above specified income levels. These limitations have caused a sharp decline in the availability of equity capital for affordable housing projects and commercial rehabilitation, thus frustrating Congress` goals.

The Community Revitalization Tax Act of 1988 will restore the vitality of the rehabilitation and low-income housing tax credits. The bill:

• removes the rehabilitation and low-income housing credits from the passive loss rules. Losses from rehabilitation and low-income housing projects would remain subject to the rules.
• tightens the existing limitations on individual taxpayer use of all business tax credits, including the rehabilitation and low-income housing credits. Currently, taxpayers may use only $25,000 of credits to reduce their total income tax liability plus an amount equal to 75 percent of additional tax liability. The legislation tightens this restriction to allow individuals to use only $20,000 of credits plus an amount equal to 20 percent of additional tax liability.
• conforms the at-risk rules for the rehabilitation credit to those for the low-income credit in order to encourage a more coordinated use of the two credits.
• removes specific disincentives to nonprofit sponsorship of rehabilitation and low-income housing by adjusting and clarifying provisions that currently restrict the ability of nonprofits to join with private investors in initiating and financing affordable housing.

The Community Revitalization Tax Act of 1988 was introduced on March 1, 1988 in both the Senate and the House. The Senate bill, S. 2115, was introduced by Senator Danforth (R-MO) and the House bill, H.R. 4048, was introduced by Representative Kennelly (D-CT). In addition, Representative Mazzoli (D-KY) has introduced H.R. 154. The three measures are identical.

Publication Date: Summer 1998

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