2020 Analysis of the Historic Tax Credit
Since the creation of the program in 1996, CHAP has believed that the city's historic tax credit would be an important tool to enhance the architectural, cultural, and economic value of the City. While the physical impact is easy to see, it was important for CHAP to measure the economic impact of the credit. In 2019, the Department of Planning hired PlaceEconomics to analyze the historic tax credit. The result, completed in the summer of 2020, is the following report; An Analysis of the Baltimore Historic Preservation Tax Credit. The report supports positive assumptions about the value of the credit and brings to light new information about the use and benefit of the credit in communities across the city.
Included in the report are the following key findings:
1. More than 3,500 historic properties have been renovated using the CHAP credit, representing private sector investment of nearly $1.2 billion.
2. The credit produces value. The properties whose CHAP credits have now expired increased in value from $17 million in 2000 to $211 million in 2019. Income from city property taxes on these properties rose from $1.3 million to $5.9 million.
3. In the next nine years, the City can expect $43 million in additional tax revenues from properties with expiring CHAP credits.
4. Because of the private investment and increasing property values, the taxes foregone over ten years are recouped in just over seven years. For more information on the foregone taxes recovered please click here.
5. The City of Baltimore is foregoing around $10 million a year through the CHAP credit. However, very conservatively, if even 52% of the projects would not have happened without the credit, the city is better off financially than if there were no credit.
6. These projects have a “halo effect.” Properties located within 500 feet of CHAP credit projects see increases in aggregate property values greater than properties between 500 and 1000 feet of CHAP projects, and significantly greater than the rest of the city.
7. Critical mass matters. In general, the greater the percentage of properties that are eligible for the credit, the greater share of them will use the credit. The program is also responsible for bringing private investment to Baltimore’s weaker market neighborhoods.
8. Just the incremental rate of higher value growth in the halo vicinity of CHAP projects has created a preservation premium of $2.5 billion in property values. If as little as 20% of that premium is attributable to the investment in CHAP projects, the $10 million in foregone revenues from the credit is recovered from the additional taxes generated from nearby properties.
9. The program creates jobs. Over the last five years, an average of nearly 600 direct and indirect jobs and $36 million in labor income have been generated each year through CHAP credit projects.
10. During the Great Recession, investment in CHAP projects was counter-cyclical, increasing in activity when the rest of the construction activity in Baltimore declined.
For more information on the City Historic Tax Credit please click here.
*all diagrams are from PlaceEconomics: Analysis of the Baltimore CHAP Credit, 2020