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Real Estate

Dogtown Dish: “Tax Reform Act Will Obliterate Richmond’s Historic Shell Property Values”

Michael Hild at Dogtown Dish has walk-through of how the proposed tax reform will impact redevelopment in Richmond:

I am surprised by the number of people who are attempting to spin what is going on in Washington DC right now related to the Historic Tax Credit changes proposed by The Tax Reform Act as “not that bad” or “it could be worse”. True, an outright elimination of the Preservation Credit for Historic Properties could be worse, especially for developers who rely on the program. But the changes could not be more dire for the owners of historic shell properties who will not be able to qualify for grandfathering under the old rules. The City of Richmond’s real estate tax base is also going to suffer a whopping blow. Let me walk you through the math.

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Church Hill Ventures
Church Hill Ventures
2020 years ago

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The Dogtown Dish
The Dogtown Dish
2020 years ago

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Michael Hild
Michael Hild
2020 years ago

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Elaine Odell
Elaine Odell
2 years ago

The proposed elimination of the preservation tax credits is not only bad for aging urban areas, but for historic towns and individual properties throughout rural VA. The state economy will suffer #notfakenews

Dan Nemer
Dan Nemer
2020 years ago

FB_10100198565406963

Alex Goodmundson
Alex Goodmundson
2020 years ago

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Kim Morden Oliver
Kim Morden Oliver
2020 years ago

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Laura Dyer Hild
Laura Dyer Hild
2020 years ago

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SA Chaplin
SA Chaplin
2 years ago

“The City of Richmond’s real estate tax base is also going to suffer a whopping blow . . . .”

An overstatement, to say the least. More importantly, why should the federal government subsidize certain development projects. The government should not be picking winners and losers. (I have been involved in renovating properties since the 1980s. I have never utilized historic tax credits, but I do understand why developers take advantage of them.)

lanny
lanny
2 years ago

#2 – It’s not just the feds that subsidize projects. The city just picked a winner/loser (TBD): $8 million already “provided” and another $4.9 just “provided” (because the developer didn’t get his funding straight before he started)…so, of an estimated $25 million total cost, Richmond’s already provided just shy of half the development cost:
http://richmondfreepress.com/news/2017/dec/15/city-council-oks-money-raises-church-hill-north-pr/

Dave Seibert
Dave Seibert
2 years ago

Historic tax credits have become harder and harder to obtain. With these new changes it doesn’t sound worth the risk. Would like to read more on it. Very disappointing. That said I don’t think the value of shells are going to tank. Probably only 1 in 20 homes are renovated with tax credits. (If that). So that should not impact demand or supply very much. Definitely a bummer though. I’ve renovated several homes and used the credits. Not having to pay taxes does not suck.

Grayson Thomas
Grayson Thomas
2020 years ago

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bill
bill
2 years ago

historic tax credits will not be eliminated. typical fake news political bullshit.

bill
bill
2 years ago

and there is no proposal to eliminate historic tax credits

bill
bill
2 years ago

hey bull. get your self updated. there is no proposal to eliminate HTC. HTC is scheduled for a vote next week.

will you ask your house rep and senators to support it? will they?

yes I heard about a Detroit recovery. I have been there. I don’t buy that.

Keith West
Keith West
2 years ago

Their “values” need to fall. They’re artificially kept up by the misuse of tax money. Were they more affordable, it’s more likely they would be renovated.

Though tax credits may have been a good idea at one time, they have outlived their usefulness. The incentives are causing aberrations such as 20th Century warehouses being turned into apartments when letting the market work would have resulted in newer, less expensive, more useful buildings being put in their place. Tax incentives have become a giveaway to connected developers who know how to work the system.

Lee
Lee
2 years ago

@Keith, Bill, etc. The tax credit is a form of accelerated depreciation which is intended to make it feasible to renovate these buildings properly, preserving and restoring historic features, rather than to do a half-@$$ job. The value of the credit (20% federal, 25% state – 45% of renovation costs) is supposed to be immediately deducted from the buildings basis, reducing future depreciation and, if the building is ever sold, substantially increasing the capital gains tax associated with that sale. It’s a strong upfront incentive, but not as strong long term. When the program works, developers only “win” if they… Read more »

MJR
MJR
2 years ago

I am in favor of what the Hild’s are doing to revitalize Manchester. But they have bought several uninhabitable shell properties for over 600K. Those were a risky speculative actions they took. A speculative bubble if you will… This tax bill is going to hurt so many people. Low income people, grad students, those on Obamacare, working stiffs who needed to deduct their state income taxes to itemize, etc… Having sympathy for speculative purchases of shell properties being adversely impacted is not real high on my list. Besides, Mr Hild is a CEO of a reverse mortgage company in his… Read more »

bill
bill
2 years ago

the trumpet tax bill is like obamacare, you get to find out what is in it after it passes. that is how it is done in a third world shithole country.

Michael Hild
Michael Hild
2 years ago

Hey MJR, the point of the article is that historic un-renovated building shell owners who can’t qualify for grandfathering under the old rules, are going to take a hit. That isn’t necessarily Laura/I. All our “risky speculative” Manchester projects qualify for grandfathering under the old rules because we have already started renovation work. And yes, our Manchester projects are highly risky. We know that. But we are trying to help Manchester get back on its feet. The only way to accomplish that is for someone to take a seemingly crazy risk, when no one else will. We thought we would… Read more »

MJR
MJR
2 years ago

Your “bottom line” comment completely overstates the impact tax collection from shell properties have on funding city services. It’s disingenuous. what the city can charge empty shells doesn’t move the needle much at all. This is just the typical pro development “think of the schools” claptrap that’s been used for years to distract people. As if anything and everything a developer is lobbying for will somehow be the key to magically yet indirectly improve the schools. As for the devaluations impacting families who have been sitting on vacant for decades in hopes of a big payday? Such land bankers have… Read more »

bill
bill
2 years ago

so what happened to the HTC in the trumpet tax law?

Michael Hild
Michael Hild
2 years ago

The proposed cuts to the HTC program as outlined in the article were included and officially signed into law (Senate Version). Federal credits are now spread over five years. Because of the political risk and time value of money, these federal credits have become essentially worthless collateral to the banks that finance historic renovations. All the recent/former sales “comparables” appraisers and city officials use to value historic shells are drastically overstated as a result, and no longer applicable. The only remaining question is will the City write down (reduce) its assessments for the thousands (perhaps tens of thousands) of these… Read more »

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