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Historic and Low-Income Housing Tax Credits
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This Discussion Guide is part of Community Conversations at FOCUS St. Louis.  It is meant to initiate civil discourse around the policies that affect the St. Louis region; to hear each other’s perspective. As is the case with all public policies, this issue is complex and multi-faceted, with many stakeholders. Please keep this in mind as you discuss historic and low-income tax credits in your community. 
Historic and Low-Income Housing Tax Credits

One of the most widely-used forms of economic development in the state of Missouri is the issuance of tax credits to spur activity. Two of the most common credits in Missouri are the Historic Tax Credit and the Low-Income Housing Tax Credit (LIHTC), accounting to 45.6% of Missouri's 64 tax credit programs in 2009. Tax credits have also come under fire as Misouri tries to dig itself out of a severe budget deficit.

Low-income housing tax credits issued by the State of Missouri not only provide housing for people who otherwise might not be able to afford it, but they also help create much needed construction jobs. Historic tax credits, available in the State of Missouri since 1998 and federally since 1976, have encouraged investment in historic resources – in urban cores, residential neighborhoods, and small towns throughout the state.


While many groups oppose the use of tax credits, the Show-Me Institute (SMI) prominent among them, studies have found many economic benefits in issuing tax credits, although SMI points to evidence to the contrary. In analyzing the costs and benefits of the Missouri LIHTC, a sample of 30 projects selected from the 327 projects awarded credits in the years 2000 through 2005 were examined. The study’s findings conclude the following:
  • Each dollar of state tax credit awarded generates $9.60 in economic activity.
  • Each dollar of state tax credit awarded results in an increase in gross state product of $5.45.
  • Credits awarded during the project period generated almost $6.5 billion of total economic impact to the state of Missouri and increased gross state product by over $3.73 billion.
  • Credits awarded during the project period generated over 41,800 full-time job equivalents.

According to the Missouri Department of Economic Development, and shown in Table 1 below, historic tax credits from July 1 - Dec. 31, 2012 are overwhelmingly used in urban areas, much more so in St. Louis City than Kansas City in Jackson County.  

This urban-rural split helps to explain divisions in the General Assembly about the future of the historic tax credits. While the credits enjoy strong support from urban lawmakers – and House Speaker Steven Tilley, R-Perryville – Senate budget hawks, particularly from outstate districts, have long targeted them for cuts.

Who else is involved with this issue?

Overwhelmingly, developers have been the most prominent organizations involved in preserving the tax credit programs. The Missouri Workforce Housing Association has been vocal in efforts to preserve the LIHTC.  Preservation organizations, such as the National Trust for Historic Preservation have been active in keeping the Historic Tax Credit program. Indeed, many of these organizations point to the fact that their project would not have been feasible without the credits.

Three Possible Perspectives:

Person A believes the Tax Credit programs more than pay for themselves, are worthwhile and lead to revitalization of certain areas, downtown St. Louis perhaps most notably. Even in the case of deep budget cuts, the programs should remain in place.

Person B believes that the Tax Credit program is too costly for the state, especially during a budget crunch. Developers do not really need the financial assistance in order to make a project happen. Besides, what money is available is needed for other, more worthy programs.

Person C is of the opinion that some of the state budget should be allocated for tax credit programs, but the money should be used on truly worthy projects, after a thorough review process. The program should be revised to make sure only worthy projects receive funding. The increase in the number of tax credits allocated in recent years is a sign that developers are taking advantage of the program.

Discussion Questions:
  1. Which of the three people in this scenario do you most closely align with A, B, or C?  Why?
  2. Similar to the perceived overuse of tax increment financing (TIF), in the region, are developers taking advantage of the tax credit programs?
  3. Instead of shrinking them, should the Historic Tax Credit and LIHTC programs be expanded to help spur revitalization and provide jobs as the economy slowly recovers?
Links for further reading:
  1. August 26, 2011 St. Louis Post-Dispatch article: The future of historic tax credits in Missouri?
  2. January 17, 2012 St. Louis Post-Dispatch editorial: Nixon should be bold; fund schools, suspend tax credits.
  3. January 20, 2012 St. Louis Beacon article: Spence calls for tax-credit curbs years after his firm sought such aid.
  4. January 17, 2012 St. Louis Post-Dispatch article: Use of historic tax credits see surge in late 2011.
  5. May 16, 2012 St. Louis Beacon article: Senate approves lowering cap on historic preservation tax credits.
  6. Missouri Department of Natural Resources: State Historic Preservation Office.
  7. The Missouri Department of Economic Development.
  8. The Missouri Housing Development Commission's (MHDC) Low Income Housing Tax Credit (LIHTC) Program.
  9. MHDC: Cost/Benefit Analysis of the Missouri Low-Income Housing Tax Credit Program.
  10. November 1, 2011 Show-Me Institute Policy Briefing Number 30: Tax Credits as a Tool of State Economic Development Policy.
  11. February 15, 2012 Show-Me Institute testimony before the Missouri House of Representatives Appropriations Committee.
  12. FOCUS St. Louis 2005 Task Force Report: Affordable Housing for the Region's Workforce.
  13. The Missouri Workforce Housing Association
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