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Committee lays over bill to give 30% tax credit for converting vacant buildings to housing; amendment on affordability fails
Summary
House File 457, a proposed tax credit to subsidize conversion of underused commercial buildings into housing, was amended to allow insurers to claim the credit and was laid over. An amendment that would have imposed affordability requirements failed in committee.
The House Tax Committee laid over House File 457, a proposal to create a temporary state tax credit to help convert vacant or underused commercial buildings to housing and other income‑producing uses.
Representative Harter, the bill’s sponsor, described the proposal as “a new tax credit and grant program for expenses incurred in converting buildings from one use to another” and said it was intended to boost housing supply and downtown vitality amid high office vacancy rates.
St. Paul Mayor Melvin Carter testified in support, citing a local study and a downtown vacancy rate “just above 30%” for competitive office space. “The adaptive reuse of vacant office buildings to housing will create jobs, increase housing supply, increase the value of those downtown buildings and the downtown tax base and increase our population downtown,” Mayor Carter told the committee.
Testimony from preservation and development advocates emphasized economic impacts. Erin Hannifenberg of Rithos, a nonprofit advocacy group, said the state historic rehabilitation tax credit — reinstated in 2023 — produced nearly $10.25 of economic activity for every dollar awarded in recent projects and argued a separate credit for non‑historic or newer buildings is needed. Dan Collison, senior director at Sherman Associates, described conversion projects his firm has completed and said the proposed credit would “catalyze private investment and bring new projects and improve tax bases.”
The bill is drafted as a 30 percent credit of qualifying project costs, according to committee staff. Committee members debated affordability and fiscal exposure. Representative Gomez offered an amendment (A13) to add affordability requirements tied to existing TIF affordability tests; supporters argued public dollars should prioritize housing affordability, while developers told the committee that adding a low‑income requirement could make conversions infeasible because low‑income housing tax credit financing is competitive and often favors smaller projects.
On procedure, the committee adopted an A1 amendment to permit insurance companies to claim the credit against the premiums tax. The A13 amendment to add affordability cross‑references failed in a recorded voice vote, and Representative Harter asked that the bill, as amended, be laid over for possible inclusion in the omnibus tax bill.
Committee staff provided a revenue estimate during discussion: the transcript records estimated state revenue impacts roughly in the low tens of millions in early fiscal years and higher in later years, and an analyst noted the historic rehabilitation credit’s fully phased cost is about $60 million; staff also said the bill’s structure and modeling parallel the historic credit. Representative Anderson observed the proposal could amount to paying roughly 30% of redevelopment costs for qualifying projects across the state and urged attention to fiscal scope.
The committee laid House File 457 over for possible inclusion in the omnibus tax bill. Members signaled continued interest in the policy but said concerns about overall cost, caps, affordability safeguards and labor and sustainability standards would merit further work if the bill advances.
Votes at a glance: A1 amendment (allow insurers to claim credit against premiums tax) — adopted by voice vote. A13 amendment (add affordability cross‑reference) — failed on voice vote. House File 457 as amended — laid over for possible inclusion in omnibus tax bill.
