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Artist Housing Threatened

Editorial By Courant

August 29, 2007

One of the effective tools for reviving cities has been the use of subsidized housing for artists. Unfortunately, that tool is now threatened.

Mimicking the movement of artists to neighborhoods such as Greenwich Village in years past, federally subsidized artist housing is helping revive three dozen cities in 19 states, including four ArtSpace projects in Connecticut.

The projects bring stimulating and diverse "creative class" talent to downtowns, preserve historic buildings, anchor or augment urban arts districts, and provide useful space for art and community activities.

However, this positive experiment in urban revival is in danger, thanks to a recent wrongheaded ruling by the IRS.

The projects are funded in part by the federal Low Income Housing Tax Credit program. After a routine audit of the ArtSpace project in Norwich for the years 2003-2005, the IRS held that it was not eligible for the tax credit. The IRS said ArtSpace violated a rule against renting units to a "social organization," making them unavailable to the general public.

This appears to be wrong on both counts. It is a long stretch to call artists, who probably didn't even know one another when they move in and have no bylaws or other characteristics of an organization, a "social organization." They are not the Elks Club.

Moreover, the building is open to the public. Though some of the advertising isn't clear on the point, the building accepts, and has never turned away, people who aren't artists, said co-developer Peter Shapiro. According to documents filed in the tax case, only 35 of 58 tenants in the Norwich building in 2003 were artists (and of those only six were making a living as artists). The intake interview form has a question for non-artists. The only limitations are those that the tax credit program places on tenant income, which must be in the range of 25 to 60 percent of the area median income. But that applies to all tenants.

In addition to the highly questionable interpretation of its own regulations, the IRS finding violates good public policy. We must revive cities, and artist housing is one of the ways to do it. Like many other cities, Norwich sought an ArtSpace project, which is now part of the Chelsea Arts District. "It's fine - it's part of the good momentum in Norwich," said Mayor Ben Lathrop.

The legal ramifications of the IRS ruling still aren't clear, but could be ominous. If the tax credits are disallowed, it will be hard to fund new projects. The language of the ruling suggests that existing tax credits must be "recaptured," which could endanger existing projects.

That would be patently unfair when other public agencies, from the U.S. Department of Housing and Urban Development to the Connecticut Housing Finance Authority, have endorsed the artist housing concept.

Artist housing works and ought to remain available to cities. Indeed, we see no reason why cities shouldn't be able to give a housing preference to their own employees who meet the income criteria, if they wish.

The state's congressional delegation should seek clarification or amending the Internal Revenue Code to correct this problem.