"This Old House" may have seen better days

A state law that encourages improvements in older homes by giving a property-tax break will end after the 2003 assessment, and an author of the law doubts an extension can be obtained this session.

The so-called "This Old House" program provides a property-tax break for improvements made on homes at least 45 years old. It became law in 1993 -- with a provision to sunset in after the

2003 assessment.

There is little chance a bill extending the program will pass the House this session since the Republicans who control the House have declined to move forward any tax bills, according to state Rep. Jean Wagenius (DFL-Minneapolis), who was one of the original authors.

"Next year is the fight," Wagenius said.

If an extension were not granted, 2002 would be the last year to make qualifying improvements, according to Minneapolis City Assessor Scott Renne. That's because the 2003 assessment will be done at the very beginning of the year -- Jan. 2.

Wagenius said the need for the program became evident during campaigning in the early 1990s. "When door-knocking, folks were talking about the fear of rehabbing their older homes because they thought their property taxes would go up too much and it wasn't worth it," Wagenius said. At the time, the city was on the cusp of a decision of whether there would be reinvestment in the city or whether the city would plunge into decay, she said.

Wagenius dismisses arguments that the cities have been revitalized and the need no longer exists. "We see that [revitalization] more in our neighborhoods than other neighborhoods," Wagenius said, referring to Southwest Minneapolis.

"The need is still there. When other parts of the city become strong, it makes the whole city strong."

But some question tax policy that doesn't spread taxes evenly by market value. "One taxpayer benefits and the others pick up that difference," said Hennepin County Assessor Tom May. "Many more things influence people to do improvements to their homes than the property taxes."

May said many people aren't even aware of the program until his office sends out an application following completion of a home-improvement project.

In the city of Minneapolis, there are 7,369 homesteaded properties participating in the program, deferring $81.9 million in improvements in 2001 for taxes payable in 2002, according to City Assessor Scott Renne.

To be eligible for the program, the following conditions all must be met:

  • The property must be a residential homestead and at least 45 years old.

  • The property must be valued at $400,000 or less.

  • The improvements must contribute at least $5,000 in assessor's market value.

    Typical improvements that add value and qualify for the program include additions to the home or garage, decks or porches and kitchen or bath remodeling.

    All of the added market value is deferred -- up to $50,000 -- in a home at least 70 years old. In a home at least

    45 years old, but less than 70 years old, 50 percent of the value -- up to $25,000 -- can be excluded. The exclusion lasts for 10 years and then the value is gradually added back to the home's assessor's market value.

    If the property is sold, it reverts to market value for assessment.

    "This has been a policy decision that this is something that serves as an incentive for people to rehab their homes," Renne said. "I don't think taxes are an exclusive driver for the decision, but when people make an informed decision that helps out."