Pontiac Mill: An abandoned mill in extremely poor condition, Pontiac Mill (Warwick) is now home to 133 apartments and almost a dozen commercial tenants.
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 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 by PlaceEconomics 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.
Ashton Mill Village: A former mill village, Ashton Mill Village (Cumberland) is now home to affordable housing units thanks to RI’s Historic Tax Credit.
So what’s wrong with Rhode Island’s Historic Tax Credit program?
A lack of predictability and funding. Converting large mills and other historic 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. 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. Maine does not cap its historic tax credit program.
Impractical rules and restrictions. Rhode Island’s Historic Tax Credits incentivize investment to convert historic structures often 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. Rhode Island requires a fee of 3% of qualified rehab expenditures — the highest in the nation. This fee can amount to hundreds of thousands of dollars, is due upfront, and is non-refundable, making participation in the program risky. For comparison: Massachusetts and Maine do not charge a fee, and while Connecticut may charge up to only $1,000, the fee is usually waived.
-
A Lack of Transparency. In Rhode Island, projects wait in line until funding is available. However, a project’s position in line is not shared with participants, which makes it difficult for projects to plan and meet deadlines. Projects have no way to determine when they might be offered credits and can wait in line for years with no information on how close they are to receiving an allocation.
-
Unrealistic and Inflexible Timeframes. Rhode Island awards funds based on timelines that are inflexible, even in the face of understandable delays due to changing market conditions. These timelines are often impractical given the unclear schedule of funding allocations, complexity of financing, unexpected conditions in old buildings, and supply chain and workforce scarcity issues.
-
Designed to Disadvantage Housing Creation. Despite Rhode Island’s housing supply and affordability crises, the program currently disadvantages housing projects. While commercial projects receive a 25% credit, housing projects are limited to a 20% credit. Neighboring states give higher incentives to housing projects, not lower ones.
-
New Wage Requirement. In 2023, Rhode Island amended the law to require that all Historic Tax Credit projects over $10 million comply with new wage requirements. It is estimated that the provision can add 25-40% to the costs of the project, while the tax benefit is just 20%. While adding costs, the new provision did not address the need for increased funding. The new requirement has effectively frozen large rehabilitation projects such as mill conversions, the very projects that will most help RI’s housing crisis. Only one other state, New Jersey, has this requirement. To keep their program viable, they offer a 40% tax benefit, doubling the cost of the program to taxpayers. In Rhode Island, the only large projects that are able to move forward are those with substantially more governmental subsidies pouring into the project.
It’s time to act. At least 54 projects are waiting in line right now seeking $90 million in Historic Tax Credit funding. These projects would generate $467 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, many 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, but what is required is political will. We welcome the opportunity to help navigate a solution that works for all Rhode Islanders.