Missouri housing incentives bill hits Gov. Kehoe’s desk for sign-off

Missouri lawmakers have passed legislation to spur housing development statewide – from downtown commercial corridors to rural communities – by establishing a new class of development zones, offering tax incentives to convert vacant buildings into housing and directing new revenue to underserved areas.

The bill cleared its final hurdle on Wednesday and now awaits Gov. Mike Kehoe’s signature. It’s due to take effect Aug. 28 if signed.

Unlike states that have moved to pre-empt local zoning authority, Missouri lawmakers chose an incentive path designed to draw developers and cities into participation voluntarily, leaving land-use control in local hands.

The bill creates Missouri Innovation Zones, giving qualifying cities access to property tax abatement, tax increment financing and a new office-to-residential conversion tax credit without needing separate redevelopment approvals for each project. Projects within certified zones would be scored on a 100-point master scorecard that weighs housing creation, affordability, historic preservation and other factors to determine a developer’s incentive level.

The office-to-residential conversion credit is one of the bill’s most closely-watched provisions, offering up to $50 million per year statewide. Half is reserved for large structures exceeding 750,000 gross square feet – aimed at cavernous, vacant commercial towers in downtown St. Louis, including the AT&T and Railway Exchange buildings.

A cure for St. Louis blues

The incentives are especially important to St. Louis, which has suffered population loss since 1950. The city’s population of 278,000 is far below the 350,000 when it split from St. Louis County in 1876. The county’s population is now about 1 million.

Last September, the National Geospatial-Intelligence Agency opened a $1.75 billion campus in north St. Louis. City leaders hope the campus and its hundreds of employees will help the city turn a corner.

Downtown has had pockets of redevelopment over the past couple of decades. Once known as “Shoe Street, USA,” Washington Avenue’s old shoe-manufacturing buildings are now home to residential units.

The AT&T building has bedeviled developers and investors for years. Standing 44 stories tall and spanning 1.4 million square feet, it has traded hands several times after proposed plans failed to gain traction. Boston-based Goldman Group bought it for $3.5 million two years ago and has mixed-use plans that include more than 630 units.

“For the past three years, we have advocated for legislation to address major vacancies in Downtown St. Louis, including the AT&T and Railway Exchange Buildings,” Greater St. Louis, Inc. Managing Partner Ron Kitchens said in a statement. “Communities across the state, including Downtown St. Louis, need to see this become law.”

More than downtown redevelopment

The bill also expands the State Supplemental Downtown Development Program. It raises the cap on annual state disbursements and extends the maximum financing term. For the first time, municipalities may capture residential income tax from new residents and redirect it toward project costs.

Participating cities must establish a one-stop permitting shop to receive Innovation Zone certification. The shop serves as a single review process for construction permits, zoning approvals and business licenses.

High-wealth cities must share a portion of new sales tax gains with smaller communities. Those funds go toward housing rehabilitation and stabilization in rural areas.

“Creating more and better jobs is our focus, and to increase jobs and drive growth, our top priority this Missouri legislative session is the creation of an office-to-residential conversion tax credit that spurs hundreds of millions of dollars of new investment in Downtown St. Louis and Main Streets across the state,” Kitchens said.