Credit history

Property tax savings on historic houses help revitalize areas and boost sales

June 01, 2008|By Andrea F. Siegel | Andrea F. Siegel,Sun reporter

When Mike Aubele and Todd Wetzelberger put the Union Square house they'd just renovated on the market, they hoped the Baltimore historic property tax credit would pique buyer interest.

It did.

They had a contract in 22 days. The estimated tax credit for the buyer - an exact figure won't be known until after settlement later this month - is $60,000 spread over a decade, or $6,000 a year shaved off the annual tax bill, Aubele said.

"That's a way in this market to compete," said Wetzelberger.

Historic tax credits, which come in several forms, serve multiple purposes. They can make houses more affordable for buyers, help them sell and help fund historic improvements - whether by homeowners, developers or landlords - and revive neighborhoods while preserving distinctive architecture.

Homeowners can use the city and state credits. The federal ones go to income-producing properties.

Wetzelberger and Aubele are rehabbing five houses in the Union Square Historic District on the city's west side - among them the former 19th Ward Democratic Club and a place that's a brick facade with rubble of its collapsed house. They're planning to seek city historic preservation tax credits for all and perhaps will apply for the state's historic tax credit for a few.

"We wouldn't be doing this if it weren't for the historic tax credits," Wetzelberger said.

On each structure, that translates into thousands of dollars for each buyer; cumulatively, such renovations offer buyers a way to save on a purchase, Aubele said.

The city tax credit directly benefits a homeowner, who reaps a discount on the city's hefty property taxes. It benefits a developer who can use it as a sales incentive to move the property faster.

The fixed credit reflects the difference between the property assessment before the renovations and after, said Brigitte Fessenden, a preservation planner for the city's Commission for Historical and Architectural Preservation.

The credit is taken annually for 10 years. If the property is sold during that time, the credit transfers to the next owner.

The state version is an income tax credit to an owner for 20 percent of historic renovations, said Collin Ingraham, a preservation officer with the Maryland Historical Trust.

And when the homeowner's income tax bill is less than the tax credit?

"You can get a refund of the overage," he said.

Historic tax credits are a long-established tool for revitalizing neighborhoods, like Union Square-Hollins Market.

"It's one of the hot markets - I'm seeing huge numbers of addresses come across my desk," Ingraham said.

State and local historic tax credits helped prod rehabilitation of other neighborhoods, Canton and Patterson Park among them.

"A couple of projects done in the same area on properties that were in bad shape - that would visually and physically bring up the neighborhood," Fessenden said. It produces revenue, and "there are all kinds of psychological benefits to it," she said.

Since 1996, the city credit is responsible for more than $272 million in property investment, residential and commercial.

Consultant Sally Otto at the nonprofit Jubilee Baltimore helped about 30 property owners in the Union Square-Hollins Market neighborhood navigate the historic tax credit maze. But she estimated as many as three times that number looked into it.

The grid-style neighborhood, built mostly in the 1800s, is in transition. It once was writer H.L. Mencken's stomping grounds and is home to Baltimore's oldest market structure still being used. On some streets, redone homes and houses bearing building permits share the streetscape with boarded-up structures and others in need of attention.

A biotech park and road access are among the neighborhood's lures, Otto said.

"The tax credits sweeten the deal," she said.

State officials are more stringent and conservative in what they consider eligible for historic tax credits than the city.

Studies show that being in a historic district helps to maintain property values, and tax credits help people buy and stay there, Otto said.

"As a homeowner, as a neighborhood leader and as an investor, I can say it works on all levels," said Union Square Association president Chris Taylor, an agent with City Life Realty.

He's used the credits in his home. His changes included restoring tin ceilings and keeping historic Mercer tiles, while adding air conditioning.

Aubele and Wetzelberger bought what was largely the shell of a three-story rowhouse for roughly one-tenth of the selling price of $299,900. Turning it into a three-bedroom house with green features and a rooftop deck, they spent an estimated $20,000 strictly to comply with rules to obtain the city's tax credit.

Among those renovations, they replaced parts of the cornice out front that were gone, matching them to what was there, bought old French-style doors for the front to match other homes nearby and overhauled an iron-and-brass handrail that a neighbor had given them.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.