The preservation and rehabilitation of historic buildings is an important part of a city's visual and cultural landscape and can also be an important component of community development and urban revitalization. Although there are numerous programs that serve historic preservation directly, there are also a wide variety of programs with compatible goals, such as incentives for low-income housing. These incentives are provided by non-profit organizations, public-private partnerships, and by all levels of government. When combined, these programs can be a substantial source of equity. What follows is an overview of some of the direct and indirect incentives that can be used to encourage historic preservation while satisfying the economic needs of a project.

Meat and Potatoes Preservation Incentives

Perhaps the most well known programs are the federal tax incentives, including the Historic Rehabilitation Tax Credit (HRTC) program, which provides an income tax credit for 10% or 20% of eligible costs associated with historic rehabilitation, and the Conservation (or Façade) Easement Charitable Tax Deduction. The HRTC is designed to encourage the reuse of income producing properties, including commercial and industrial properties, and in most cases, rental residential as well. For buildings listed or pending listing on the National Register of Historic Places (NRHP), 20% of qualified rehabilitation costs can be used as a tax credit. For non-residential buildings that were built prior to 1936 but that are not NRHP eligible, 10% of rehabilitation costs can be used. Participating projects must meet certain standards for rehabilitation, depending on which credit is utilized.

In addition, owners of National Register eligible properties or owners of land areas that contain National Register eligible properties may be eligible to receive a tax deduction for the charitable contribution of a portion of the rights to their property to a non-profit organization dedicated to preservation. Generally, this is in the form of an easement, such as for the preservation of a façade. In Washington State, there have been approximately 180 projects that have utilized the tax incentive program since its inception the 1970s, totaling over $375 million in investment.

Grants and Assistance

The National Trust for Historic Preservation (National Trust) provides a variety of preservation incentives and services, including loan assistance, several granting programs for governments and non-profit organizations, and preservation consulting services. In addition, the National Trust offers a comprehensive programmatic assistance for commercial revitalization of historic urban areas through its national Main Street Program.

The Local Front

Washington State has two principle tax-based incentive programs that encourage historic preservation. Under the 1970 Open Space Taxation Act, owners of landmark properties may be eligible for special tax assessment if their land contains certain open space resources, including historic resources (this applies in King County, not within the City of Seattle).

The Special Valuation tax incentive for historic properties, passed in 1985, allows the subtraction from property taxes renovation costs to a landmark or NRHP property that are approved by the local review board. In addition, grants are available to organizations and local government agencies from the Washington State Historical Society.

Likewise, King County's Office of Cultural Resources offers funding through a variety of programs, including the Landmarks Rehabilitation Grant, public/private loans such as the Restoration Loan Fund and Landmark Restoration Loans, and through monies available in its Cultural Facilities Program. Generally, these funds are limited to King County Landmarks or landmarks within participating cities.

In Seattle

In addition to many of the above incentives, landmark owners in the City of Seattle have at their disposal several kinds of regulatory relief. Both the Seattle Building Code and the Seattle Municipal Code allow the Director of the Department of Design, Construction and Land Use (DCLU) flexibility when applying certain regulations for landmark properties. For example, a use not otherwise permitted in a zone may be allowed, or an alternative method of satisfying a building requirement may be permitted.

Within the downtown area, landmarks located in commercial or mixed-use areas may be eligible for the Transfer of Development Rights program, which allows an owner to sell unused development rights to another property owner. Commercial density bonuses are also granted for preserved residential landmarks in the downtown, whereas bonuses may be withheld for demolition of a landmark or destruction of a façade.

Indirect Incentives

Most indirect incentives that affect preservation come in the form of housing incentives. Housing assistance is a major social priority in the United States, and the array of programs and assistance available to prospective homebuyers, homeowners, developers, and housing organizations is a testament to this. The goals of housing preservation frequently dovetail with the goals of historic preservation because the loss of historic residential property is also a loss of housing stock. Older residential buildings in the city core often house low-income occupants. The availability of housing incentive programs makes such pairings very important to historic preservation, and historic rehabilitation incentives are commonly layered with housing incentives. As with historic preservation, these programs exist on several levels.

The federal government provides tax incentives and loan assistance to property owners, and grants to organizations and local governments. The federal low income housing tax credit (LIHTC) is similar to the HRTC, in that it offers two percentages of construction or rehabilitation costs that can be claimed for credit: 70% and 30%. In targeted census tract areas, these percentages can receive a 130% boost, to 91% and 39% respectively. These credits can be sold to organizations as a tax shield, thus raising substantial equity in the property.

The United States Department of Housing and Urban Development (HUD) provides mortgage insurance and loan assistance to individual homebuyers through several programs, many of which are designed to make renovation easier and more feasible. An example is the Section 203 (k) program, which allows banks to make loans at more favorable rates by providing mortgage insurance for rehabilitation home loans. HUD also provides Community Development Block Grants to local governments, which in the past have been used to fund rehabilitation and preservation activities as well as to construct low-income housing. At the Washington State level, the Office of Community Development provides similar services, including administering the Washington Housing Trust Fund, which works with local governments, community development organizations, and non-profit institutions to preserve and enhance low income housing in the state.

King County's Department of Community and Human Services offers several affordable housing incentives, including credit enhancement, density bonuses for the rehabilitation of historic housing, and favorable loans for rental rehabilitation.

Within the City of Seattle, there are many programs and incentives geared towards creating and maintaining affordable housing in the face of our accelerated real estate market; these issues are similar to the issues faced by historic buildings. In many instances, these programs are on a circumstantial basis, targeted toward a specific geographical area or segment of the population, but generally they take the form of low interest loans. The Multifamily Rehabilitation Loan program, targeted towards buildings in Pioneer Square and the International District, was implemented to offset the economic hardships created by the 2001 Nisqually Earthquake. It had the dual goals of preserving housing and the existing buildings in those historic neighborhoods. There are also property tax exemption and Transfer of Development Rights (TDR) programs geared towards the preservation and creation of affordable housing.

Of particular interest to preservationists is the 2002 Housing Levy, which is coming to vote in September. This program will provide $86 million towards housing opportunities, including funds for rehabilitation of low-income housing and mixed-use developments.

This overview is not exhaustive, but provides an introduction to the variety of programs and incentive options that are available. The list of programs and their requirements can seem somewhat daunting, but when used strategically can be a source of substantial gain while at the same time providing an important social benefit.

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