Published May 17, 2021
Historic Homes and the Mills Act
Those of you who know me, know that I have a soft spot for historic homes. Growing up, my Dad frequently rehabbed historic properties, and I fell in love with the character, details, and quality that historic homes have.
When I’m showing property to clients, I love showing them historic (or potentially historic) homes because I get to tell my clients about the Mills Act.
What Is The Mills Act?
Enacted in 1972, The Mills Act was created as an economic incentive program for the restoration and preservation of historic buildings and homes owned by private property owners in the state of California. The Act is named after State Senator John Mills, who lived in Coronado before his passing earlier this year.
This act is administered and implemented by the state’s local governments and each local government establishes their own criteria to determine how many historic properties will qualify in their area, and what the financial benefit is once a home is approved.
It’s important to note that not all cities and counties in our state participate in the Mills Act program.
Locally, the cities of Coronado and San Diego do support the Act, which is great news if you’re thinking of buying or already own a piece of our history!
If you’re wondering whether your city/county qualifies, click here for a list of all participating locations.
How Does it Work?
The Mills Act offers economic incentives to help foster the preservation of historic properties in both residential neighborhoods and downtown commercial districts.
Once a property is qualified, California legislation grants the local government the authority to enter a contract with the qualified historic property owner. In a Mills Act contract, the homeowner agrees to preserving the historic integrity of the in exchange for property tax relief.
What Qualifies a Home as Historic?
Just because a home is old doesn’t mean it’s necessarily historic. There are certain criteria a property must meet in order to qualify such as –
1. The home must be proven to be connected to a significant historical event or the lives of significant historic individuals
2. It must be considered an embodiment of a particular historic style/location
3. It is listed as historic on any federal, state, county or city register such as the National Register of Historic Places, California Register of Historical Resources, California Historical Landmarks, etc.
Both owner-occupied family residents as well as income-producing commercial properties are eligible to qualify for The Mills Act program (subject to local regulations).
What are the Benefits of the Program?
The benefits of the program include substantial tax savings for historic property owners that qualify, as well as the ability for owners to preserve and maintain a piece of local history.
Property owners aren’t the only ones who benefit, though. Local governments who participate in the program receive the economic benefits that come with helping conserve resources and reinvest value in their communities. The Mills Act also helps to promote local tourism, contributes to affordable local housing and encourages buyers to help do their part in keeping community history alive and well.
How Much Can Qualified Candidates Save
If a home or commercial building is deemed historic and the property owner agrees to the rehabilitation and maintenance that the property requires, owners have the potential to save a substantial amount in property taxes (usually between 40-60% each year).
Valuations of Mills Act properties are determined by the income approach to value divided by the capitalization rate to determine the assessed value of the property. For residential properties, income is based on comparable rents for similar properties in the area and for commercial properties, it is based on the amount of rent received.
Because rental values vary based on location, property tax savings vary as well for owners.
What if the Property I’m Interested in is Under a Mills Act Contract?
If you purchase a property that is currently under a Mills Act contract, you can expect the contract to stay with the property when transferred. Therefore, the new owners will be subject to the same rights and obligations as the original owner who previously entered the agreement.
Even with the transfer though, any interested buyer or new property owner should contact the proper local government official to discuss the specific terms negotiated in the contract as it may vary.
What’s Involved in a Mills Act Contract?
Mills Act Contracts involve an application process, yearly assessments, and an annual report due the year after the first affected tax bill is issued.
Contracts typically last up to 10 years and require minimal fees including application fees (around $150), a contract fee (ranging $840-1428) as well as an annual reporting/inspection fee ($252). These fees are considered minimal in comparison to the tax savings property owners can expect to receive annually.
Those under a Mills Act contract are subject to the agreement of in person, annual inspections by the city on an as-needed basis. At minimum, each property is subject to an inspection once every five years.
(Contract terms are subject to specific requirements by the California Government Code, Article 12, Sections 50280 – 50290, which can be found by visiting, GUIDELINES FOR THE ASSESSMENT OF ENFORCEABLY RESTRICTED HISTORICAL PROPERTY.)
How Can I Apply?
Step 1 in the application process is making sure your property is eligible to be determined a historic landmark or contributor to a historic district.
Then, you will need to gather any necessary documents including:
1. A completed Mills Act application
2. Copies of your property’s grant deed and most recent property tax bill
3. Any necessary clear, color photos that include both the exterior and interior of the home that display relevant areas negotiated to be upheld in the contract
4. A copy of a proposed work plan for your historic property
Once you have your documents and submit your application and application fee, you will await the decision from your local officials.
Note – Mills Act applications are processed twice annually - once in the spring and again in the fall.
If you’d like to learn more about The Mills Act or are interested in buying/preserving a historic property of your own, let’s chat! Give me a call today: Kate Gillingham Milke (619) 933-5319.
Sources:
https://ohp.parks.ca.gov/?page_id=21412
https://www.sccassessor.org/index.php/tax-savings/tax-reductions/historical-properties
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