Incentivize Adaptive Re-use (Part 2)

 

Adaptive Reuse diagramBy Ka-Chung Kwok

“The Greenest Buildings are the ones that is already Built” – Carl Elefante (Architect)

In my last article I began to discuss the importance of incentivizing adaptive re-use projects to ensure the continued viability of cities and to balance between the forces of preservation and growth.  This week I would like to continue this topic by taking a closer look at existing government incentives that are currently available and make additional suggestions in attempt to make them more accessible and mainstream.

Today if you own of plan to purchase a property that is listed in the “National Register of Historic Places”, you could benefit from two federal programs – 1. A Façade easement incentive (donation of a historic façade easement to a non-profit entity in exchange for tax deduction) or 2. Historic Rehabilitation Tax Credit (20% income tax credit on cost of rehabilitating building).

If this property exists in Seattle, it could benefit additionally through – 3. Special Tax Valuation for Historic Properties (providing a 10-year special valuation period for subtracting rehabilitation costs from property tax), 4. Zoning Code Relief (administrative conditional use authorization), 5. Building Code Relief (Allow DPD to modify specific requirements of the building code for landmark buildings), 6. TDR -Transfer of Development Rights (Authorize selling of unused development rights to other developments), and 7. Floor Area Exemption (exemption of floor area contained within a designated landmark structure from the total allowable development area in multifamily zones)

Although these incentives may seem numerous at first glance, they all contain some mutually limiting factors which prohibit Adaptive Re-use from becoming a more typical mode of development –

i.  Only buildings that are identified as “valuable” to authorities are eligible– either through the national registry or through the landmarks Preservation Board.

ii.  Incentives are unpredictable (determined by authorities on a case-by-case basis) and time consuming (through many layers of administration)

iii.  Incentives are provided as a tax relief benefit in a future date, does not provide any immediate relief for financial feasibility of projects – which in many cases are considered riskier by traditional lenders.

iv.  Additional “strings attached” – i.e. Sales and ownership limitations, development limitations.

The accumulative effects of these current incentive measures result in a “cherry picking” effect, where only a selective pre-determined number of buildings could be redeveloped by only large scale institutional developers who have the resources to carry through the administrative costs and the risk of unpredictable regulatory outcomes.  Another outcome is that authority’s current incentives and governance is heavily skewed towards “preservation” (embalming in amber) by only incentivizing portions of the building that it considers historical through strict governance of historical preservation laws.  This creates additional barrier’s to maximizing the full development potential of adaptive Re-use projects, and limits their potential by directing the allocation of resources to matters which may not benefit the project nor its neighborhood.

In order to promote a more balanced system, here are some suggestions I have that I wish to be considered:

  1. Classify multiple levels of historical significance for buildings – provide more flexibility for interacting and redevelopment of historical buildings, not all buildings need to be fully preserved. Adaptive re-use projects could be 20% new + 80% old, or 80% new + 20% old : There should be a framework to incentivize either one to differing degrees.
  1. Simplify the process and transparency of incentives – standardize incentives and make them less authority authorization based. The Floor area exemption (#7) is a great example of an incentive that is standardized, easy to understand and provides immediate benefit to a project.
  1. Provide a Source of government funding or upfront benefit to assist in project financing – By providing a government loan program or upfront tax relief (property tax, sales tax of material or construction) adaptive re-use projects will be able to finance and fund for projects that may be considered risky by traditional lenders but could other hugely benefit the neighborhood or preserve its character.

Promoting mainstream and accessible means to completing adaptive re-use projects are critical to the revitalization of neighborhoods, sustainability of the built environment and the preservation of unique neighborhood character.  Naturally, not all buildings that contribute to a neighborhood’s unique quality carry historical significance worthy of the national registry; nor is it practical or logical to continue increasing the number of landmark buildings without limits in it’s current restrictive framework that prohibits healthy growth.

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