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Photo By Jymi Bolden
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Jim Downton says Ohio’s pending House Bill 463 will
help people like him save and renovate a lot more
historic buildings.
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Owners of historic or older Ohio buildings could be eligible for a state income tax break if a new bill successfully navigates the Ohio Legislature.
Ohio House Bill 463, sponsored by Rep. Nancy Hollister, R-Marietta, would refund 25 percent of the money a building owner invests in the restoration or renovation of a structure either built before 1900 or listed on the National Register of Historic Places. The money would return to the building owner through state income tax credits, with a limit of $50,000 per property.
The tax credit applies whether or not the home is producing income for the owner. Similar existing state and federal tax programs mandate that renovated properties must generate income to qualify.
The bill is timed to coincide with Ohio's bicentennial in 2003. It would create a 51-member Ohio bicentennial commission, which would select projects based on historic preservation criteria on a first-come, first-served basis. The bill would last five years.
Hollister's intent is to provide an incentive for people to buy and renovate older homes and buildings and therefore preserve the history and character of Ohio and its cities.
The tax credit might have led Marge Hammelrath and her husband, who bought and rented two houses on Broadway in Over-the-Rhine CHECK, to live in one of the buildings instead. But the buildings, built in the mid-1800s, were eligible for tax credits only if they produced income.
"(The bill) could be great for the return of the people to the cities," said Hammelrath, the director of the Over-the-Rhine Foundation. "So many of the buildings here are apartments that could be homes."
Work in Progress
Introduced in September, HB 463 has received two proponent hearings and has generally been well received by Hollister's colleagues and by local government officials. In February, Cincinnati Mayor Charlie Luken wrote a two-page letter supportive of the bill but added that the bill should also apply to buildings in locally designated historic districts. Cincinnati has 21 local historic districts, many of which overlap with the city's 26 national historic districts, according to Cincinnati Urban Conservator Skip Forwood.
The main difference between the two is that local governments -- under locally written preservation laws -- select their districts, while the U.S. Secretary of the Interior grants national designations.
Beth Sullebarger, executive director of the Cincinnati Preservation Association (CPA), also supports the concept of tax breaks for preservation work. And, like Luken, she thinks the bill should include local historic districts. Also, she said, not all 19th-century buildings are worth subsidizing.
Hollister's colleagues were concerned about the bill's potential cost. State officials estimated the bill might consume a total of $20 million in income taxes over its life span.
To satisfy the concerns, Hollister is preparing to introduce a second version of the bill with a $6 million cap on tax refunds.
"The original (bill) is obviously one I prefer," Hollister said.
"There's a lot of money needed (for these projects)," Hammelrath said.
Ohio collects more than $7 billion each year in income taxes, according to Tim Keen, assistant director of Ohio's office of budget and management. But that doesn't mean state legislators take Hollister's bill lightly.
"Generally, the (Ohio) General Assembly moves cautiously on this type of legislation," Keen said.
Although Hollister was disappointed the original bill stalled in the Ways and Means Committee, she considers the revised bill a "foot in the door" that could lead to a larger historic property tax credit program later.
Ohio Rep. Donald Mottley, R-West Carrolton, who chairs the Ways and Means Committee, likes the odds of a scaled-back HB 463. Cost was the major stumbling block on the original bill, he said.
"It could conceivably get through the (legislative) process this year," Mottley said.
In the new version, however, the modified bill was changed to include all buildings built before 1900, but not buildings in local historic districts.
Exiting the Cities
For years, the economic cards have been stacked against the restoration and maintenance of older buildings inside cities -- and against cities in general.
After World War II, the Federal Housing Administration guaranteed loans for new homes, which were mostly built in the suburbs, encouraging developers to pursue these projects. Local and federal government built a massive highway system, enabling people to commute from these new homes into the established cities, while cities demolished building after building to provide room for these new roads and commuter parking.
And, perhaps most significantly, the U.S. Department of Housing Urban Development (HUD) encouraged the conversion of existing city property to public housing through tax credits and low-interest mortgages. HUD also built shoddy "project" apartments inside cities, creating a new concentration of poor, which gave those concerned about their property values an excuse to flee to the suburbs.
Today, many people still shy away from the risk and potential renovation work of an old home to buy a new home, according to Comey and Shepherd Realtor Gregory Thompson, who has 30 years of experience in the Tristate housing market.
Even in Greater Cincinnati, with its significant stock of older housing in established neighborhoods, 75 percent of Thompson's clients buy new homes. People who want new homes want control over what their living space will look like, such as being able to pick the color of the home's exterior, without having to do any renovations, he said.
"It really becomes their home in their mind," Thompson said.
Home buyers also want to worry less about the heating and cooling systems and the other guts of the house, and most get a one-year builder's warranty that calms those worries.
On the other hand, buyers of older homes can get more for their money. For example, Thompson is preparing to list a 3,000-square-foot home in Price Hill with hand-laid parquet floors, stained glass windows and other high-quality features for about $160,000. That much money wouldn't buy a new home with nearly as many of those features, he said.
In any case, Thompson wishes more people would consider buying older homes; many don't give it a first thought.
"It's a market that many people don't tap into, and it's too bad," he said.
Unstacking the Deck
The advantages to historic home ownership are increasing -- slowly. The city of Cincinnati guarantees home buyers will not face an increase in city property taxes for 15 years. Add existing federal and state tax credits, Hollister's potential tax break and ever-worsening traffic congestion in the suburbs, and buying an older home closer to the city seems like a better and better deal.
"(The proposed tax break) creates a whole new playing field," said Jim Downton, who has lived with his wife in a Federal-style home near the intersection of Broadway and 14th Street for two years.
Still, restoration projects usually contain surprises, and limited cash flow can be a project stopper.
"A lot of this restoration stuff is done by people who don't have a lot of money," Downton said. "You get stuck. That's why there needs to be some incentives -- because passion will not get them beyond that point."
Renovating old structures so they meet today's building codes is one thing, but doing so without altering their character is a loftier goal that isn't easily met.
The Downton's house is a classic example. They're the third couple in the last few decades to invest significant time and money in the home, which was built in the late 1820s or early 1830s. In the 1970s, the first restoration-minded couple lived in the home's basement for 18 months while the upstairs was gutted and renovated.
And even though a majority of the home was restored before the Downtons bought it, they still spent $35,000 on its exterior and heating and cooling systems. And they didn't expect to spend money on the furnace and air conditioning.
Also, the materials needed to restore an older home can be hard to find, according to Ken Jones, an architect in Over-the-Rhine who worked on the Downton's home.
For example, buildings built before the 1920s are usually made of low-fired bricks, which are less dense than newer, high-fired bricks, Jones said. But the newer bricks can't be used on older buildings because they would change the buildings' structural balance. And that's just one of the issues that come up in a historic renovation job.
But, one way or the other, if we value the character of our older neighborhoods, the economic deck needs to be restacked.
"Unless we're going to continue to build new neighborhoods and abandon them over time, we've got to change the system," Downton said. "There's real potential here." ©
