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The Enduring Value of the Minnesota Historic Tax Credit

By Erin Hanafin Berg, Director, Rethos Policy Institute

Tuesday, May 17, 2022

Things are looking rosier for Minnesota’s historic preservation advocates this May. Gov. Walz has proclaimed it to be Historic Preservation Month in the State of Minnesota, the State Historic Preservation Office has released a new Statewide Preservation Plan outlining goals for the next decade, and the Legislature is poised to extend the Minnesota Historic Structure Rehabilitation Tax Credit, which provides a 20 percent tax credit (and is paired with an additional 20 percent Federal tax credit) for the costs of qualified historic building rehabilitations. Although the House and Senate historic tax credit bills differ – the House extends the program for eight years and allows the credit to be taken as a single refund, and the Senate bill makes the credit permanent but retains the current 5-year refund allocation schedule – those of us who champion preservation and historic building reuse have good reason to be optimistic. But that stubborn Charlie Brown-ish tendency that clouds even very good news has been keeping our celebrations in check.

Here’s why:

  1. The House and Senate bills head next to conference committee, where they’ll be discussed as part of a much larger tax bill that must be finalized before May 22. Those negotiations are complicated even under normal circumstances. Add in a record budget surplus, the uncertainty of inflation and war in Ukraine, and polar-opposite political views around taxing and spending and we worry that the historic tax credit – despite being the one thing everyone at the Legislature seems to agree on, with broad bipartisan support from across the state – will get mired in end-of-session politics.

  2. Systemic inequities persist in access to historic tax credits and this program has not yet reached some of the communities that could most benefit from its economic and cultural impacts, both in greater Minnesota and in urban neighborhoods of our core cities. Repurposing and rehabilitating historic buildings, many of which have suffered decades of neglect, is challenging and complicated work. Finding the financial resources to undertake the projects is even more difficult. Historic tax credits are awarded only after the project is completed and put in service, which means that the project developers need access to cash – and a lot of it – to cover design, legal, financing, and construction costs for the first 2-3 years. Rethos supports a bill introduced by Rep. Mohamud Noor, chair of the House Workforce and Jobs Committee, that would provide grants for new real estate developers who are BIPOC, women, or rural. Chair Noor’s Emerging Developer Grant program would pave the way for more people from underrepresented communities to participate in historic rehab projects, but it is not included in the Senate Jobs bill and we are not certain it will make it through conference committee negotiations.

  3. Demolition is still the easiest, and cheapest, option for too many communities faced with aging building stock. Public redevelopment grants – our tax dollars at work – disproportionately go to demolishing buildings rather than providing financial assistance to people who want to fix them up and keep them in use. Even though we can point to substantial economic benefits of rehabilitation, the true costs of demolition – in terms of lost opportunities and environmental impacts – have not been thoroughly researched and quantified. Recently, attention has shifted to deconstruction as an alternative to demolition. During this Preservation Month, Rethos has been hosting a three-part webinar series of Deconstruction Masterclasses to help people from throughout Minnesota and beyond become more familiar with strategies to keep useful building materials out of landfills. Grants are available in Hennepin and Ramsey Counties to help with the costs of deconstruction, but not for rehabilitation or adaptive reuse.

Assuming the historic tax credit is extended into the next decade, the Legislature will have done its part. Then it will be up to the people of Minnesota to figure out how to make the historic tax credit work for them and their communities, and how to keep more old buildings out of landfills. We should start with recognizing existing historic buildings as the unique assets they are, focusing a little less on what has been and much more on what can be. Can empty schools be repurposed as housing for seniors? Can the second and third stories of downtown buildings be fixed up as apartments, providing another source of income for people who weigh keeping their small, local businesses afloat against the costs of maintaining their historic building? Can we embrace the idea that “new ideas need old buildings” as resources are poured into creating new jobs and opportunities in tech?

The state of Minnesota has enacted policies to do all of these things, but it is up to the people to use the tools presented to us to make our communities – and the buildings we inhabit – as strong and resilient as possible.

Erin Hanafin Berg is the Director of the Rethos Policy Institute, a program of Rethos: Places Reimagined. Rethos is a nonprofit organization founded in 1981 and headquartered in Saint Paul, Minnesota dedicated to historic preservation, building reuse, and serving as a resource for those interested in excellent public policy.


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