[Congressional Record Volume 145, Number 43 (Thursday, March 18, 1999)]
[Senate]
[Pages S2947-S2948]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CHAFEE (for himself, Mr. Graham, Mr. Jeffords, and Mr. 
        Breaux):
  S. 664. A bill to amend the Internal Revenue Code of 1986 to provide 
a credit against income tax to individuals who rehabilitate historic 
homes or who are the first purchasers of rehabilitated historic homes 
for use as a principal residence; to the Committee on Finance.


               the historic homeownership assistance act

 Mr. CHAFEE. Mr. President, all across America, in the small 
towns and great cities of this country, our heritage as a nation--the 
physical evidence of our past--is at risk. In virtually every corner of 
this land, homes in which grandparents and parents grew up, communities 
and neighborhoods that nurtured vibrant families, schools that were 
good places to learn and churches and synagogues that were filled on 
days of prayer, have suffered the ravages of abandonment and decay.
  In the decade from 1980 to 1990, Chicago lost 41,000 housing units 
through abandonment, Philadelphia 10,000 and St. Louis 7,000. The story 
in our older small communities has been the same, and the trend 
continues. It is important to understand that it is not just buildings 
that we are losing. It is the sense of our past, the vitality of our 
communities and the shared values of those precious places.
  We need not stand hopelessly by as passive witnesses to the loss of 
these irreplaceable historic resources. We can act, and to that end I 
am introducing today the Historic Homeownership Assistance Act along 
with my distinguished colleagues, Senator Graham of Florida, Senator 
Jeffords, and Senator Breaux.
  This legislation is patterned after the existing Historic 
Rehabilitation Investment Tax Credit. That legislation has been 
enormously successful in stimulating private investment in the 
rehabilitation of buildings of historic importance all across the 
country. Through its use we have been able to save and re-use a rich 
and diverse array of historic buildings: landmarks such as Union 
Station right here in Washington, DC, the Fox River Mills, a mixed use 
project that was once a derelict paper mill in Appleton, WI, and the 
Rosa True School, an eight-unit low and moderate income rental project 
in an historic school building in Portland, ME.
  In my own state of Rhode Island, federal tax incentives stimulated 
the rehabilitation and commercial reuse of more than three hundred 
historic properties. The properties saved include the Hotel Manisses on 
Block Island, the former Valley Falls Mills complex in Central Falls, 
and the Honan Block in Woonsocket.
  The legislation that I am introducing builds on the familiar 
structure of the existing tax credit, but with a different focus and 
a more modest scope and cost. It is designed to empower the one major 
constituency that has been barred from using the existing credit--
homeowners. Only those persons who rehabilitate or purchase a newly 
rehabilitated home and occupy it as their principal residence would be 
entitled to this new credit. There would be no passive losses, no tax 
shelters and no syndications under this bill.

  Like the existing investment credit, the bill would provide a credit 
to homeowners equal to 20 percent of the qualified rehabilitation 
expenditures made on an eligible building which is used as a principal 
residence by the owner. Eligible buildings are those individually 
listed on the National Register of Historic Places or on a nationally 
certified state or local historic register, or are contributing 
buildings in national, state or local historic districts. As is the 
case with the existing credit, the rehabilitation work would have to be 
performed in compliance with the Secretary of the Interior's Standards 
for Rehabilitation, although the bill clarifies that such Standards 
should be interpreted in a manner that takes into consideration 
economic and technical feasibility.
  The bill also allows lower income homebuyers, who may not have 
sufficient federal income tax liability to use a tax credit, to convert 
the credit to mortgage assistance. The legislation would permit such 
persons to receive an Historic Rehabilitation Mortgage Credit 
Certificate which they can use with their work bank to obtain a lower 
interest rate on their mortgage or to lower the amount of their 
downpayment.
  The credit would be available for condominiums and coops, as well as 
single-family buildings. If a building is rehabilitated by a developer 
for resale, the credit would pass through to the homeowner.
  One goal of the bill is to provide incentives for middle- and upper-
income families to return to older towns and cities. Therefore, the 
bill does not limit the tax benefits on the basis of income. However, 
it does impose a cap of $40,000 on the amount of credit which may be 
taken for a principal residence.
  The Historic Homeownership Assistance Act will make ownership of a 
rehabilitated older home more affordable for homebuyers of modest 
incomes. It will encourage more affluent families to claim a stake in 
older towns and neighborhoods. It affords fiscally stressed cities and 
towns a way to put abandoned buildings back on the tax rolls, while 
strengthening their income and sales tax bases. It offers developers, 
realtors, and homebuilders a new realm of economic opportunity in 
revitalizing decaying buildings.

  In addition to preserving our heritage, extending this credit will 
provide an important supplemental benefit--it will boost the economy. 
Every dollar of federal investment in historic rehabilitation leverages 
many more from the private sector. Rhode Island, for example, has used 
the credit to leverage $252 million in private investment. This 
investment has created more than 10,000 jobs and $187 million in wages.
  An increasing concern to many mayors, country executives and 
governors is the issue of urban sprawl. Wherein new housing is 
constructed on nearby farmland, older housing stock is abandoned. This 
legislation encourages the rehabilitation of that housing stock and 
will help curb urban sprawl.
  The American dream of owning one's own home is a powerful force. This 
bill can help it come true for those who are prepared to make a 
personal commitment to join in the rescue of our priceless heritage. By 
their actions they can help to revitalize decaying resources of 
historic importance, create jobs and stimulate economic development, 
and restore to our older towns and cities a lost sense of purpose and 
community. I ask that a summary of this bill be printed in the Record.
  The summary follows:

           The Historic Homeownership Assistance Act--Summary

       Purpose. To provide homeownership incentives and 
     opportunities through the rehabilitation of older buildings 
     in historic districts.
       Rate of Credit. 20% credit for expenditures to rehabilitate 
     or purchase a newly-rehabilitated eligible home and occupy it 
     as a principal residence.
       Eligible Buildings. Eligible buildings would be buildings 
     individually listed on the National Register of Historic 
     Places or a nationally certified state or local register, and 
     contributing buildings in national, state or local historic 
     districts.
       Maximum Credit: Minimum Expenditures. The amount of the 
     credit would be limited to $40,000 for each principal 
     residence. The amount of qualified rehabilitation 
     expenditures would be required to exceed the greater of 
     $5,000 or the adjusted tax basis of the building (excluding 
     the land). At least five percent of the qualified 
     rehabilitation expenditures would have to be spent on the 
     exterior of the building.
       Carry-Forward: Recapture. Any unused amounts of credit 
     would be carried forward until fully exhausted. In the event 
     the taxpayer failed to maintain his or her principal 
     residence in the building for five years, the credit would be 
     subject to ratable recapture.
       Historic Rehabilitation Mortgage Credit Certificates. Lower 
     income taxpayers, who may not have sufficient Federal Income 
     Tax liability to make effective use of a homeownership credit 
     would be able to convert the credit into a mortgage credit 
     certificate

[[Page S2948]]

     which can be used to obtain an interest rate reduction on his 
     or her home mortgage loan. For homes purchased in distressed 
     areas, the credit certificate could be used to lower an 
     individual's downpayment.
       In many distressed neighborhoods, the cost of 
     rehabilitating a home and bringing it to market significantly 
     exceeds the value at which the property is appraised by the 
     mortgage lender. This gap imposes a significant burden on a 
     potential homeowner because the required downpayment exceeds 
     his or her means. The legislation permits the mortgage credit 
     certificate to be used to reduce the buyer's down payment, 
     rather than to reduce the interest rate, in order to close 
     this gap. This provision is limited to historic districts 
     which qualify as targeted under the existing Mortgage Revenue 
     Bond program or are located in enterprise or empowerment 
     zones.
 Mr. GRAHAM. Mr. President, today I join my good friend and 
colleague Senator Chafee in support of the Historic Homeownership 
Assistance Act. This bill will spur growth and preservation of historic 
neighborhoods across the country by providing a limited tax credit for 
qualified rehabilitation expenditures to historic homes.
  In virtually every corner of this land, homes in which our 
grandparents and parents grew up, communities and neighborhoods that 
nurtured vibrant families, schools that were good places to learn and 
churches and synagogues that were filled on days of prayer, have 
suffered the ravages of decay. Every year we lose thousands of historic 
housing units that are either demolished or abandoned. We are losing 
both physical structures and the historic past that these physical 
structures represent.
  The Historic Homeownership Assistance Act will stimulate 
rehabilitation of historic homes while contributing to the 
revitalization of urban communities. The Federal tax credit provided in 
the legislation is modeled after the existing Federal commercial 
historic rehabilitation tax credit. Since 1981, this commercial tax 
credit has facilitated the preservation of many historic structures 
such as Union Station in Washington, DC. In my home state of Florida, 
the existing Historic Rehabilitation Investment tax credit has resulted 
in over 300 rehabilitation projects since 1974. These projects range 
from the restoration of art deco hotels in Miami Beach, to the 
preservation of Ybor City in Tampa and the Springfield Historic 
District in Jacksonville.
  The tax credit, however, has never applied to personal residences. 
This legislation that Senator Chafee and I are cosponsoring is designed 
to empower the one major constituency that has been barred from using 
the existing credit--homeowners. It is time we provide this incentive 
to homeowners to restore and preserve homes in America's historic 
communities.
  Like the existing investment credit, this bill would provide a credit 
to homeowners equal to 20 percent of a qualified rehabilitation 
expenditures made on an eligible building that is used as a principle 
residence by the owner. The amount of the credit would be limited to 
$40,000 for each principal residence. Eligible buildings would be those 
that are listed individually on the National Register of Historic 
Places, or a nationally certified state or local register, and 
contributing buildings in national, state or local historic districts. 
Recognizing that the states can best administer laws affecting unique 
communities, the act gives power to the Secretary of the Interior to 
work with states to implement a number of provisions.

  The bill also targets Americans at all economic levels. It provides 
lower income Americans with the option to elect a Mortgage Credit 
Certificate in lieu of the tax credit. This certificate allows 
Americans who cannot take advantage of the tax credit to reduce the 
interest rate on the mortgage that secures the purchase and 
rehabilitation of a historic home.
  The credit would also be available for condominiums and co-ops, as 
well as single-family buildings. If a building were to be rehabilitated 
by a developer for sale to a homeowner, the credit would pass through 
to the homeowner. Since one purpose of the bill is to provide 
incentives for middle-income and more affluent families to return to 
older towns and cities, the bill does not discriminate among taxpayers 
on the basis of income.
  Mr. President, the time has come for Congress to get serious about 
urban renewal. For too long, we have sat on the sidelines watching idly 
as our citizens slowly abandoned entire homes and neighborhoods in 
urban settings, leaving cities like Miami in Florida and others around 
the nation in financial jeopardy. This legislation affords fiscally 
stressed cities and towns a way to put abandoned buildings back on the 
tax rolls, while strengthening their income and sales tax base. It will 
encourage more affluent families to claim a stake in older towns and 
neighborhoods. It offers developers, realtors, and homebuilders a new 
realm of economic opportunity in revitalizing decaying buildings.
  The Historic Homeownership Assistance Act does not reinvent the 
wheel. In addition to the existing commercial historic rehabilitation 
credit, the proposed bill incorporates features from several tax 
incentives for the preservation of historic homes. Colorado, Maryland, 
New Mexico, Rhode Island, Wisconsin, and Utah have pioneered their own 
successful versions of the historic preservation tax incentive for 
homeownership.
  At the federal level, this legislation would promote historic home 
preservation nationwide, allowing future generations of Americans to 
visit and reside in homes that tell the unique history of our 
communities. The Historic Homeownership Assistance Act will offer 
enormous potential for saving historic homes and bringing entire 
neighborhoods back to life. I urge all my colleagues to support this 
important piece of legislation.
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