Panel advances bill to create tax credit for converting underused buildings

The House Housing Committee voted to send House File 457 to the tax committee after testimony supporting a new tax credit and grant program intended to help convert vacant or underutilized buildings into housing, commercial space or other productive uses.

Representative Jennifer Harder, the bill author, told the committee the proposal would establish a temporary, targeted program to catalyze conversions such as schools to senior housing, churches to daycare centers, and low-rise offices to mixed-use housing. The bill proposes a tax credit equal to 30% of qualified conversion costs and would require conversion work to be completed within three years of application, Harder said.

Erin Hanifenberg, deputy director and director of policy, education and outreach at ReSos, described the proposal as modeled in part on Minnesota’s historic structure rehabilitation credit and said the state’s existing historic credit has returned more than $9 in economic activity for every $1 in state credits. “We know that a tax incentive like the cub credit will work because we’ve seen its success at the state historic tax credit level,” Hanifenberg said.

Saint Paul Mayor Melvin Carter told the committee downtown vacancy has pressured property values and tax bases and urged support for the bill as a tool to stabilize downtowns and add housing. “The adaptive reuse of vacant buildings to housing will create jobs, increase housing supply, increase the value of our downtown buildings and the downtown tax base,” Mayor Carter said, noting downtown Saint Paul’s competitive office vacancy near 32 percent.

Developers and downtown advocates said the credit could reduce reliance on tax-increment financing and attract private investment. Dan Collison, senior director of business development and public affairs at Sherman Associates, said recent conversions in Minneapolis and St. Paul would not have been possible without the historic credit and additional public support. Joe Spencer of the Saint Paul Downtown Alliance said studies identify a number of downtown buildings that are viable conversion candidates and estimated those could yield thousands of units and substantial carbon savings compared with new construction.

Fresh Energy’s Sam Friesen recommended the committee consider pairing conversion incentives with measures that reward measurable carbon reductions, such as electrification, while the City of Minneapolis’ Katie Topinka emphasized the program’s potential to reduce the shift of tax burden onto residential property owners as commercial values decline.

Committee members asked about definitions and program details. Witnesses said technical amendments would be needed to define “underutilized” or vacancy thresholds (testifiers described a working threshold of roughly five years of vacancy in some draft amendments) and to set clear reporting and evaluation metrics such as job creation, units produced and pre/post-conversion tax valuations. Testifiers also described the bill as a six-year, temporary program intended to “jump-start” revitalization; the bill text referenced a sunset date that witnesses said would be clarified in amendment language.

The committee record shows the bill includes reporting requirements to committee chairs and ranking minority members and allows pairing with other incentives where feasible. The committee voted by voice to refer House File 457 to the tax committee. No roll-call vote was recorded in the transcript; committee members approved the referral by voice vote.

The bill will move to the House tax committee, and proponents signaled they expect to propose technical amendments to clarify definitions and reporting details before that next step.