HOUSING CONVERSION INCENTIVES

The City, State and Federal governments offer both financing programs and regulatory incentives to make it easier and more feasible to convert buildings in the Historic Downtown to housing. Described in detail on the following pages, these incentives include:

• Adaptive Reuse Ordinance
• Federal Rehabilitation Tax Credit
• Conservation / Faηade Easements
• Mills Act
• Private Activity Housing Bonds
• FHA-Insured Mortgage Financing
• Low Income Housing Tax Credits

REGULATORY INCENTIVES

Adaptive Reuse Ordinance
The City of Los Angeles adopted the Adaptive Reuse Ordinance in April 1999 to facilitate the conversion of older commercial buildings in downtown to housing by eliminating planning regulations and providing a performance-based framework for building and fire codes. For example, the Ordinance:
- Does not require discretionary planning review and approval;
- Waives residential density requirements;
- Permits existing conditions for yards, height, parking and floor area, which may not meet current residential Code requirements;
- Does not require disabled access upgrades in the private residential areas of the building; and
- Allows for flexibility in how to meet structural & fire life safety requirements.

PRESERVATION INCENTIVES

Federal Rehabilitation Tax Credit
The Federal Rehabilitation Tax Credit rewards private investment in the rehabilitation of income-producing historic properties, such as offices and rental housing, by providing a 20% income-tax credit for all qualifying rehabilitation costs. To be eligible, a building must be listed in the National Register of Historic Places or a contributing structure in a National Register Historic District. All construction work is required to meet the Secretary of the Interior's Standards for Rehabilitation.

Conservation / Facade Easements
The owner of an historic property can earn a significant one-time income tax deduction by donating a conservation easement to a qualifying preservation organization such as the Los Angeles Conservancy. An easement is a legal agreement between a property owner and a conservation group that limits the property's future development rights by allowing the preservation group to review changes to the property. To be eligible, a building must be listed in the National Register of Historic Places or a contributing structure in a National Register Historic District.

Mills Act
A Mills Act contract provides property tax relief in exchange for the continued preservation of a historic property. The program is administered by the City's Cultural Affairs Department. To be eligible, a building must by a designated City Historic-Cultural Monument.

FINANCING PROGRAMS

Private Activity Housing Bonds
Private activity housing bonds are a method of borrowing funds at interest rates below those of conventional loans to finance multi-family rental housing. Private activity bonds are issued by a public entity on behalf of a private party for the community benefit of providing affordable housing. Due to this public purpose, the bonds are tax-exempt, resulting in lower interest rates and increasing available loan proceeds. Eligible projects must dedicate at least 20% of units for occupancy by low-income households.

FHA-Insured Mortgage Financing
The Federal Housing Administration (FHA) provides mortgage insurance to facilitate the development of multi-family rental housing. The program does not directly make loans, but rather insures loans originated by private lenders. Because these loans are insured by the Federal government, private lenders offer better loan terms.

Low Income Housing Tax Credit
The Investment Tax Credit for Low-Income Housing rewards property owners for providing low-income housing to the community. The incentive provides a 4% tax credit over ten (10) years for projects involving tax-exempt bonds. Most credits are sold to corporate or individual investors through public or private syndication, enabling developers to raise project equity. Only rental housing projects are eligible and at least 20% of the units must be set-aside for low-income households.