Historic Tax Credits & LIHTC Stacking | Riverstone Platform Partners

The Premise

Historic buildings are where affordable housing and adaptive reuse meet.

Downtown YMCAs. Closed schools. Turn-of-the-century hotels. Old mills and warehouses. In every city and small town in Riverstone's footprint, these buildings share a story: they shaped a community, they outlived their original use, and they now sit vacant — too expensive to save, too meaningful to demolish. The Historic Tax Credit program exists to change that calculus. Paired with LIHTC, it becomes one of the most powerful capital tools in the affordable housing industry.

The mechanics are straightforward in principle and unforgiving in practice. Federal HTC generates equity equal to 20% of qualified rehabilitation expenditures — roughly the amount that makes the difference between a pro forma that works and one that doesn't. LIHTC delivers the bulk of the equity stack. State historic and affordable housing credits, where they exist, fill the remaining gap. The challenge isn't the concept. It's executing three simultaneous compliance regimes — National Park Service, state HFA, and state SHPO — on a building that was never designed for residential use and has been sitting empty for a decade.

20%

Federal HTC on qualified rehabilitation expenditures for certified historic structures

150K+

Affordable housing units rehabilitated under the federal HTC program since 1976

35

States with their own Historic Tax Credit program that can layer onto federal HTC

5 yrs

HTC recapture period — plus 15 years of LIHTC compliance on the same asset

What follows is a practitioner's walkthrough of the stack — how federal HTC interacts with LIHTC, where the state layers come in, what the basis adjustment means for deal sizing, and how Riverstone has executed this structure on two projects that bookend the rural-to-urban spectrum.

The Federal HTC

A dollar-for-dollar credit for saving a certified historic structure.

The federal Historic Tax Credit is administered jointly by the National Park Service and the IRS. It delivers a 20% credit against the qualified rehabilitation expenditures (QREs) incurred to rehabilitate a certified historic structure used for an income-producing purpose. Apartments qualify. Owner-occupied homes do not. Under current law the credit is claimed ratably over five years beginning the year the building is placed in service — a change from the pre-2017 rule that allowed the entire credit in year one.

A project with $10 million in qualified rehabilitation expenditures generates $2 million in federal Historic Tax Credits. Syndicated to an investor, that translates into roughly $1.7–$1.9 million of equity at current pricing. — Federal HTC equity math, at typical 2026 syndication pricing

What qualifies — and what doesn't

QREs are the structural and operational components of the building itself: walls, windows, stairs, plumbing, electrical, HVAC, architectural fees, construction interest, and most soft costs directly tied to the rehabilitation. What doesn't qualify is equally important. Land acquisition is out. Building acquisition is out. New additions that expand the building's footprint are out. Landscaping, site work, and new freestanding structures are out. Everything that "falls out when you turn the building upside down," in the National Park Service's memorable framing, is excluded.

For adaptive reuse projects, this distinction determines whether a deal is feasible. A building where 85% of the total development cost is interior and structural rehabilitation will generate substantially more HTC than one where a new wing, parking deck, and site improvements dominate the budget. Riverstone's underwriting for historic deals begins here — not with the architecture, but with the QRE ratio.

The three-part application, and why timing matters

HTC certification runs on a rigid sequence. Part 1 establishes that the building is a certified historic structure — either individually listed on the National Register of Historic Places, or a contributing resource within a registered historic district. Part 2 describes the proposed rehabilitation work and must be approved by both the State Historic Preservation Office and NPS before construction begins, since any work that damages character-defining features disqualifies the credit. Part 3, filed after completion, certifies that the work was executed as approved.

The practical consequence: design decisions aren't just architectural. They're compliance decisions. A ceiling assembly, a window replacement spec, a paint scheme on exposed brick — each one runs through SHPO and NPS review. The Secretary of the Interior's Standards for Rehabilitation govern what's permissible, and the standards are interpreted by real people with real opinions about what "preserves the historic character" means in practice. Developers who treat Part 2 approval as a formality find out the hard way that it isn't.

The Stack

Twinning HTC with LIHTC: how the credits combine.

When a historic building is being rehabilitated into rent-restricted affordable housing, both credit programs apply to the same project. But they don't simply add up. The two programs interact through a basis adjustment that affects the size of the LIHTC allocation, and through structural requirements that shape how the partnership is formed.

Figure 1

Illustrative capital stack — $15M historic adaptive reuse with HTC + 4% LIHTC

Illustrative only. Actual deal structures vary by state, pricing environment, and building economics.

The basis adjustment

The central mechanical interaction between HTC and LIHTC is that the federal HTC reduces the building's eligible basis for LIHTC purposes by the amount of the HTC. If a project generates $2 million in federal HTC and would otherwise have $10 million in LIHTC-eligible basis, the basis available for the LIHTC calculation drops to $8 million. That reduces the LIHTC allocation — and the equity it produces — proportionally.

This is not a reason to avoid the stack. It's a reason to size the deal correctly at the front end. A project giving up $200,000 of LIHTC equity to capture $1.8 million in HTC equity is a clearly profitable trade. A project where the adjustment isn't modeled until underwriting is finalized runs out of capital. Recent federal legislative proposals would eliminate the basis adjustment entirely for projects placed in service after enactment, which would materially improve the stack — but that change is not yet law, and Riverstone underwrites under current rules.

Why 4% LIHTC usually pairs with HTC

HTC can be twinned with either 9% or 4% LIHTC, but in practice the 4% bond-financed structure dominates. Three reasons. First, 4% is non-competitive — there's no scoring process, so a historic deal doesn't need to out-compete ground-up new construction in a QAP round. Second, historic rehabilitation projects are typically large enough that 4% credits plus tax-exempt bonds support the debt layer more efficiently than 9% credits alone would. Third, the timeline for NPS Part 2 approval aligns better with the slower bond-deal calendar than with the tight 9% application cycle. Projects with total development costs above roughly $10 million and strong QREs almost always use 4%.

State Layers

Where the deal actually gets closed.

Federal HTC and federal LIHTC set the floor. State programs determine whether the project closes. Roughly 35 states operate their own Historic Tax Credit, typically at rates between 20% and 25% of QREs, with widely varying caps, transferability rules, and certification procedures. Many also operate state LIHTC programs that layer on top of federal 4% credits. For a developer working across Missouri, Kansas, Iowa, and Nebraska — Riverstone's core footprint — understanding these state-specific mechanics is the difference between a pro forma and a closing.

MO

Missouri

Missouri operates one of the country's most-used state HTC programs — 25% of QREs, with a recent legislative history around caps and allocation windows. Pairs with the Missouri Affordable Housing Assistance Program (AHAP) and state LIHTC allocations administered through MHDC. Projects in Kansas City, St. Louis, and designated historic districts routinely stack all four credits.

KS

Kansas

Kansas HTC delivers 25% of QREs with no annual cap — one of the most generous state programs in the region. Transferable, which matters enormously for deal structuring: the state credit can be sold to any Kansas taxpayer, broadening the investor pool well beyond the large institutional syndicators that dominate federal credits. KHRC administers LIHTC separately.

IA

Iowa

Iowa's HTC program operates on a competitive allocation — 25% of QREs, subject to an annual aggregate cap set by the legislature. Deals compete for allocation rounds, which means sequencing matters: project readiness, historic significance, and community benefit all factor into whether a deal receives the state piece that closes the capital stack.

NE

Nebraska

Nebraska enacted the Affordable Housing Tax Credit (LB 884/LB 217/LB 182) and operates a Nebraska Historic Tax Credit administered through the State Historical Society and the Department of Revenue. Both programs pair with NIFA's 9% and 4% LIHTC allocations — including the H3C Priority Pathway for projects serving workforce populations in communities with documented housing need.

Case Study

Y Lofts — Kansas City, Kansas.

An 1100-block YMCA. Four stories of red brick, finished in 1927 after construction stalled for sixteen years. Generations of Wyandotte County residents learned to swim, played basketball, ran the elevated track. In 2018, engineers closed the building for structural deficiencies. Three or four developers walked away. Riverstone didn't.

Urban Adaptive Reuse · Senior Housing

Y Lofts

900 N. 8th Street, Kansas City, Kansas · Former YMCA (1911/1927)

The Eighth Street YMCA was not a candidate for ground-up redevelopment. It was a candidate for demolition. The building had been vacant, the pool was compromised, water intrusion had damaged upper-floor structure, and environmental work — asbestos and lead paint abatement — would consume a significant portion of the construction budget before a single unit was framed. What the building had, in abundance, was character: an original elevated running track, gymnasium murals, terrazzo flooring, racquetball courts with volumes that no new construction could replicate.

Riverstone structured the deal around that character. The project used federal Historic Tax Credits, Kansas state HTC, LIHTC, and a 20-year neighborhood revitalization property tax rebate from the Unified Government of Wyandotte County. The pool was filled to add apartments — but original pool tile was retained in the walls of the units built over it, and the old depth markers were left embedded in the floors. The racquetball courts became 1,400-square-foot two-story lofts with the original hardwood refinished as the unit's ceiling. The gymnasium and elevated track remained as the building's fitness amenity.

The result: 44 affordable loft-style apartments for seniors 55 and over, in a building that would otherwise have been demolished, on a site that now generates property tax revenue for the first time in its history.

44

Affordable senior apartments (55+)

$8.9M

Total development cost

4

Credit layers: Fed HTC, KS HTC, LIHTC, NRP rebate

1927

Original building completion year

See full project details, photos, and location in our portfolio. View Y Lofts in Portfolio →

The lessons that transferred

Y Lofts demonstrated something Riverstone had believed but now had evidence for: the most difficult historic buildings — the ones that other developers pass on — are often the strongest candidates for the full credit stack, because their QRE ratios are exceptionally high. When nearly every dollar spent on the project counts toward Qualified Rehabilitation Expenditures, the HTC equity generation runs at the top of the curve. Environmental remediation, structural stabilization, and systems replacement on an empty historic shell are exactly the kinds of costs that produce the strongest credit-to-cost ratios.

"You've got to go in with eyes wide open," Kelley Hrabe told a reporter walking through the partially-renovated gymnasium. "You're not going to know everything, so you just keep your fingers crossed." The second half of that statement is about contingency budgeting. The first half is about underwriting discipline.

Case Study

1917 Lofts — Red Oak, Iowa.

A closed middle school in a town of 5,700 people. No coastal equity chasing the deal. ARPA funds fell through. Investors were walking away. The only way the project closed was by pulling every available credit to the table — and finding the rare investor willing to pay above-market pricing to make the stack work.

Rural Adaptive Reuse · Family Housing

1917 Lofts

Red Oak, Iowa · Former Red Oak Middle School (1917)

Red Oak is the kind of community where the housing math is hardest. Construction costs are comparable to metro markets. Achievable rents are lower. Land is cheap, but the supply of developable land isn't the binding constraint — capital is. For a rural adaptive reuse project, the only way to close a gap that large is to layer every available credit program onto the deal and price each layer aggressively.

The 1917 Red Oak Middle School had been sitting vacant long enough to become a civic liability. The building qualified as a certified historic structure. Federal HTC and Iowa's state HTC program applied. LIHTC was the primary equity source. ARPA funding was part of the original capital plan — until it fell through. That's where most projects die. What saved this one was M1 Bank agreeing to pay above standard market pricing for the state tax credits, which recovered the gap. Merit Construction held cost discipline through a challenging build. Monarch Private Capital brought the LIHTC equity. Riverstone managed the stack.

Twenty-five families now live in 1917 Lofts, in a building that — had the deal collapsed when ARPA funding disappeared — would have been demolished or left to deteriorate until the town couldn't afford not to demolish it. The project is a reminder that rural historic deals don't close because the underwriting is easy. They close because the partners involved are committed enough to make the math work when a source falls out mid-stream.

25

Affordable family units

5,700

Population of Red Oak, Iowa

1917

Original school construction year

1

Mid-stream financing rescue (ARPA → above-par state HTC pricing)

See full project details, photos, and location in our portfolio. View 1917 Lofts in Portfolio →

We can be a great team and put in the best effort possible, but if you don't have a way to finance the project, it's not going to happen. — Kelley Hrabe, Principal, Riverstone Platform Partners, at the 1917 Lofts ribbon cutting

Urban and rural: same stack, different calculus

Y Lofts and 1917 Lofts use the same financing architecture — federal HTC, state HTC, LIHTC, and permanent debt. What differs is the risk profile. In the urban deal, the binding constraints were environmental and structural. In the rural deal, the binding constraint was capital: finding an investor willing to pay aggressively for state credits in a market where few investors were looking. Both projects required the full stack. Neither project would have happened with only two of its four layers.

This is why Riverstone approaches historic adaptive reuse as a distinct competency within the firm, separate from ground-up new construction. The skills transfer only partially. The underwriting assumptions are different, the compliance burden is higher, the timeline is longer, and the coordination across SHPO, NPS, state HFA, state historic agency, and local government requires institutional experience that can't be built overnight. The buildings are worth the effort — but only if the team knows what it's signing up for.

What We've Learned

Five principles for closing a historic LIHTC deal.

01

Model the QRE ratio before the architecture.

Qualified rehabilitation expenditures drive HTC equity. Before engaging a design team, Riverstone models the realistic QRE-to-total-cost ratio. A building where 80%+ of the budget qualifies is a candidate. A building where a new addition, parking structure, or extensive site work dominates costs may need a different financing strategy entirely.

02

Get Part 2 approval before construction — and plan the schedule around it.

NPS Part 2 review can take months. Starting construction before approval risks disqualifying the credit entirely if the work as built doesn't match the approved scope. Riverstone builds Part 2 approval into the critical path and holds construction mobilization until certification is in hand.

03

Price the basis adjustment into LIHTC sizing at intake.

The HTC reduction to LIHTC eligible basis is not a surprise at closing — unless it's left out of the underwriting model. Riverstone's front-end pro formas include the adjustment and size the deal around the net LIHTC allocation, not the gross.

04

Know the state credit rules cold.

State HTC programs vary on rate, cap, competitive vs. noncompetitive allocation, transferability, and compliance. The state piece often closes the gap — and the rules in Missouri, Kansas, Iowa, and Nebraska are not interchangeable. Riverstone maintains active relationships with the historic and housing agencies in every state where it develops.

05

Build the team before the deal.

Historic adaptive reuse requires a design team that has worked within the Secretary's Standards, a general contractor who understands the cost of surprises in old buildings, a tax counsel who has twinned HTC and LIHTC before, and investors who have underwritten both credits. Projects that assemble the team at closing run twice the execution risk of projects where the team has worked together before.

Stacking Historic Tax Credits with LIHTC.