Since 2001, when Rhode Island increased its historic preservation investment tax credit to 30 percent, many of Rhode Island’s mill buildings have been rehabilitated, and many are used today as housing.

The Riverlofts at Ashton Mill in Cumberland, the Royal Mills in West Warwick, the Foundry in Providence, and one of the latest additions, the Halstead at the Slatersville Mill in North Smithfield, are some of the state’s biggest residential mill-conversion projects.

But even as the state once again considers limits on its historic tax credit to reduce the budget deficit, the troubled housing market is exerting pressure of a different kind on these mill projects.

Several mill redevelopments that were originally planned as condominiums are instead going to become apartments — at least until the market turns around, according to Scott Wolf, executive director of Grow Smart Rhode Island.

The state of the housing market is “stretching out the duration of the construction period,” for many mill redevelopers, Wolf said. Depending on the individual project, these delays could be caused by difficulties securing financing or the developer’s desire to wait out the market, he said. “I think that the slowdown in the residential market in particular is resulting in a higher proportion of commercial and mixed-use projects,” he said.

The local condominium market has softened, and a 20-percent federal historic tax credit available to projects that are used as rental property for at least five years provides an added incentive.

Last summer, Baltimore developer Struever Bros. Eccles & Rouse announced that 78 units originally planned as condos at Royal Mills would instead become apartments. Rents at Royal Mills, which will have 250 units when construction is completed this spring, range from $1,150 to about $2,000. When the 78 units were to be sold as condos, prices started at $175,000.

“[Renting] is a good move, if you’re not moving them,” said Kate Duggan, of Essex Properties in Woonsocket. Duggan said 36 or 37 of the 52 units at her company’s Woonsocket mill condo-conversion project, The Lofts at Allen Street, have sold, “but we’re priced for the down market.” The studios, and one- and two-bedroom units are priced from $149,000 to $220,000, she said.

Developers of two pending projects, the Bourne Mill in Tiverton and the Pocasset Mill in Johnston, will take advantage of federal government incentives to provide affordable rental units at the former mills.

Winn Development, of Boston, began plans last summer to redevelop the Pocasset Mill in Johnston and create 91 apartments; according to Noelle Humphries, Winn’s associate project director. In addition to the 20-percent federal and 30-percent state historic tax credits, Winn will use federal affordable housing incentives to finance the Johnston project, Humphries said. Of the 91 units, 56 percent will be affordable housing set aside for low-income individuals.

The Johnston Planning Board recommended approval of a zoning change needed for the project on Feb. 5, said Merrick Cook, Johnston’s municipal planner. Cook said the project will help the town progress toward its affordable-housing goals.

“This project would not go forward without any of these credits,” Humphries said. “It’s so expensive to undertake the rehabilitation of a historic mill building.”

“Moderately priced housing — there is always a need for that,” said Jan Brodie, vice president of development for the Armory Revival Company. Armory Revival is planning affordable housing in the first phase of its $45-million redevelopment of the Bourne Mill in Tiverton. Sixteen of the 25 mill buildings at the North Tiverton site near Cook Pond were saved. The first phase of the project will produce 166 units, and 40 percent of them will be rented to low-income tenants, Brodie said.

“Without the historic tax credits, this would not be happening,” she said. The second phase of the project may include some condominiums, but the first phase will be “100-percent rentals,” she said.

Brodie added that the company, which has done most of its work in Providence, decided to take on the Tiverton project several years ago, at the height of the market. “The thought was perhaps getting out of downtown Providence” because of the number of new or pending condo projects, she said. “At some point, the market gets saturated.”

There are 22 affordable rental units at the Halstead at Slatersville Mill, a group of 224 apartments in North Smithfield. Market rents at the Halstead range from $1,100 to $1,730 for one- and two-bedroom flats and lofts, and there is one three-bedroom, two-bath loft apartment, priced at $2,500 a month. The mill project is owned by DSF Group of Waltham, Mass., and was designed by Newport Collaborative Architects.

Governor Carcieri’s proposed budget would cap the total value of the state historic credits redeemed this year at $20 million, which is less than half the cost of a single large project like the Bourne Mill redevelopment. Carcieri would increase the cap to $40 million in subsequent years through 2017, when the program is set to expire. Opponents say this would virtually end the historic restoration incentive and undermine pending projects.

The governor’s bid to make the cap retroactive could save the state a projected $25 million this year and $21 million next year. Wolf said a retroactive cap would be a serious blow to economic development in Rhode Island because it would disrupt development that is already under way during an emerging recession. It would also send the message to the business community that Rhode Island is an “unpredictable” place for investment, he said.

Wolf said that instead of a cap, some members of the Coalition of Neighborhood and Economic Renewal have proposed a “modest reduction” in the historic-preservation tax credit, from 30 to 25 percent.

“We don’t do that with great enthusiasm,” he said. “… But that’s far preferable to the cap.”

The proposal also suggests stretching out credit disbursements from one to three years for larger projects, and the elimination of private social clubs from future eligibility.

cdunn@projo.com