Chapel Hill home preservation efforts stalled due to expiring tax credit

CORRECTION: A previous version of this article misstated the name of the organization that helped to restore the Edward Kidder Graham House. The owners of the home hired a private consultant and worked with Preservation North Carolina. The story has been updated to reflect this change. The Daily Tar Heel apologizes for the error.

Historic preservation in Chapel Hill has hit a roadblock.

The North Carolina state historic preservation rehabilitation tax credits are set to expire at the end of this year and were not renewed for 2015.

“I don’t know what to expect,” said Cheri Szcodronski, the executive director of Preservation Chapel Hill. “I’m afraid this will discourage homeowners from restoring historic homes.”

The tax credit was implemented to encourage historical rehabilitation projects. In 1998, the state tax credit increased from 5 percent to 20 percent for rehabilitations to income-producing historic properties, on top of a 20 percent federal investment tax credit for those properties, for a total tax credit of 40 percent.

Historic properties that don’t produce income, like private residences, received a 30 percent tax credit for rehabilitations from the state. Most historic properties nationally registered in Chapel Hill fall under this category, she said.

Cary Cox, a spokeswoman for the N.C. Department of Cultural Resources, said the state is ranked in the top five in the country for historical rehabilitation. Ninety out of the 100 North Carolina counties have at least one project that benefits from the credits, she said.

The North Carolina Historic Preservation Office estimates the credit created 23,100 new full-time jobs and encouraged $1.36 billion in investments in 2,146 separate historical projects in North Carolina.

This growth is expected to reverse when the state tax credits expire. Without them, only the 20 percent federal tax credit for income-producing properties remains — with no tax credits for properties that don’t produce income.

“We lose a market-driven, efficient tool to incentivize private investment for historic rehabilitation,” Cox said.

Historical properties where expenses would exceed revenue are not expected to be rehabilitated without the tax credit, since investors would lose money. This could also discourage investment from out of state, she said. Additionally, developers could choose the easier option of constructing new buildings in place of historical ones, making the historic properties obsolete.

“The real disappointment is that our General Assembly did not renew the program — in spite of significant lobbying by the preservation community and those who have benefited from the program,” Szcodronski said.

Recently, Preservation Chapel Hill helped restore the Isaac Manning House.  The owners of the Edward Kidder Graham House worked with a private consultant and Preservation North Carolina to restore their home.

Sallie Shuping-Russell, secretary for UNC’s Board of Trustees and homeowner and primary restorer of the Isaac Manning House, said she is disappointed that the tax credits were not renewed.

“Redoing an old home helps preserve the history of the town,” Shuping-Russell said. “It is history that deserves to be maintained.”

Russell faced several problems when restoring the house, especially when it came to keeping the house up to code, which involved refurbishing the doors and putting in new insulation in the attic. For one historic home in the area, the power would go out every time it rained due to the condition of the wires, she said. Other homes have had problems with rodents invading the space.

“There are surprises you come across when restoring an old house,” Shuping-Russell said.

Historic homes usually aren’t well-maintained by previous owners, she said. New buyers of these properties might find costly problems. Russell said the tax credit helps encourage homeowners to thoroughly restore historic properties.

“I would have done my renovation without the credit, but not to the extent to which I did,” she said.

Szcodronski said preservation experts are talking about proposing a new grant-based incentive.

“Hopefully another program will take its place,” she said. “Hopefully that will prevent the wholesale abandonment of our historic buildings.”

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