The Mills Act: California’s Landmark Preservation Program in the 21st Century

For over 50 years, the Mills Act has been making ownership of older buildings more affordable in communities across California. Historic buildings often require specialized materials, skilled craftspeople, and more expensive maintenance than modern buildings. Recognizing these challenges, legislators passed the Mills Act to provide owners of qualified historic properties (residential and commercial) with property tax savings to partially offset these costs and invest that savings into ongoing maintenance and upgrades to their older homes and businesses.

Even as the State has passed other historic property-focused tax measures, such as the California State Historic Rehabilitation Tax Credit program in 2025, the Mills Act has been California’s primary preservation incentive for privately owned, qualified historic properties.

Participating jurisdictions can elect to design and administer a Mills Act program that fits the needs of their unique architecture, history, and zoning and development goals. The concept is simple: public tax incentives encourage private investment in preserving historic resources that benefit the broader community.

But after decades of implementation, many jurisdictions are asking whether their programs need updating. Recent assessments suggest the Mills Act has been successful in preserving historic buildings across the state, but there are challenges related to administration, monitoring, equity, and long-term fiscal sustainability.

Keeping It Local

Each city determines what buildings and structures qualify for their Mills Act programs. Typically resources must be designated on a local, state, and/or federal registry, but what qualifies in one city may not qualify in another.

See how cities like San Francisco, Los Angeles, and San Diego have defined their programs.

What is the Mills Act?

The Mills Act was enacted by the California Legislature in 1972 after State Senator James Mills introduced legislation designed to help preserve historic buildings that are increasingly threatened by redevelopment. Today, the Mills Act authorizes cities and counties—but does not require them—to enter into contracts with owners of qualified historic properties. Each participating local government establishes its own eligibility requirements, application process, and administrative procedures. As a result, no two Mills Act programs are exactly alike. 

How the Program Works

The Mills Act is voluntary. A property owner agrees to maintain their historic building according to a work program approved by the local government. In return, the property’s taxable value is reassessed under a specialized valuation formula that often reduces annual property taxes.

The contracts begin as 10-year agreements that are automatically renewed annually, unless either the owner or the local government files a notice of non-renewal. Because one year is added annually, the contract effectively becomes a rolling 10-year agreement that remains attached to the property, even if ownership changes. 

Under California law, participating local governments are also required to inspect contract properties before approval and at least every 5 years thereafter to ensure owners are meeting their obligations. 

The Case for the Mills Act

The Mills Act represents one of the few public laws that directly encourages private investment in historic resources, and its positive impact is unmatched. Unlike new construction incentives, Mills Act investments are directed toward extending the life of existing buildings rather than replacing them. Beyond individual properties, the program is intended to strengthen neighborhoods, revitalize downtown commercial districts, encourage heritage tourism, and preserve community character. 

The most obvious benefit is that it encourages owners to invest in buildings that might otherwise deteriorate. Historic windows are repaired instead of replaced; original masonry is restored rather than removed; and roofs, foundations, porches, and decorative architectural features receive long-deferred maintenance.

Because work must generally follow the Secretary of the Interior’s Standards for Rehabilitation, projects are designed to preserve historic character rather than simply modernize buildings. Economically, rehabilitation work generates jobs in the local community. A 2022 assessment of Los Angeles’ Mills Act program estimated that more than $20 million in annual property tax savings is reinvested into rehabilitation projects and local economic activity. 

The Devil is in the Details

One reason the Mills Act has endured is its flexibility. State law establishes the framework, but cities decide how the program operates. Some communities cap the number of annual contracts. Others establish property value limits, geographic priorities, or minimum rehabilitation requirements. This flexibility allows local governments to tailor the program to their preservation goals, housing policies, and fiscal priorities. The most successful programs are also the ones with the most well-defined eligibility criteria.

Success Creates New Challenges

As participation has grown, many local governments struggle to keep up with administration. Managing a Mills Act program requires reviewing applications, conducting inspections, monitoring work plans, maintaining records, collecting fees, and addressing non-compliance. These responsibilities demand staff time and technical expertise that many planning departments simply do not have.

For example, a recent audit prepared for the City of Los Angeles found that many California jurisdictions devoted significant effort to approving new contracts but lacked robust systems for administering them after approval. Cities often had limited inspection programs, inconsistent monitoring, and no clear process for evaluating long-term compliance. 

Staffing shortages are a common contributor to effective Mills Act administration. These findings illustrate a broader issue: preservation incentives require organizational and financial resources that support long-term management, not just initial approval.

Other cities are beginning to question who receives the primary benefits of their programs. Even with carefully crafted eligibility criteria, some cities have found that a majority of tax benefits go to a small percentage of contracts because of high property values in certain areas. This has prompted some cities to reconsider how applications are prioritized. Rather than simply accepting qualifying applications on a first-come basis, some jurisdictions are exploring ways to encourage participation in underserved neighborhoods, prioritize affordable multi-family housing, or focus on buildings that require substantial rehabilitation.

The Future of the Mills Act

The program has unquestionably helped protect historic buildings that might otherwise have deteriorated or disappeared. It encourages private investment in historic resources while allowing local governments considerable flexibility in designing programs that meet community needs.

At the same time, experience has demonstrated that successful preservation incentives require a modicum of resources to ensure adequate ongoing oversight. Without adequate staffing, inspections, compliance monitoring, and periodic program evaluation, local governments risk undermining both public confidence and fiscal sustainability.

Many California cities are now asking: how can the program be modernized to preserve historic resources while ensuring accountability, fiscal responsibility, and equitable access?

In many ways, these discussions reflect the natural evolution of a program that has exceeded expectations. A preservation incentive created in 1972 now operates in California with dramatically different housing markets, property values, staffing realities, and public policy priorities. The resulting conversations will define the next chapter of the Mills Act. If implemented thoughtfully, future reforms will strengthen the program’s original mission: preserving California’s historic places for generations to come.

To learn more about the Mills Act, contact Becky Urbano or Alison Lenci to discuss how ESA can provide administrative support, evaluate program effectiveness, or update an existing Mills Act program.