Stability and Longevity From Historic District Designation

district

What is a historic district?

ISV has written on this topic before but I still get questions about it. ALL THE TIME. Apologies in advance – this is a lengthy one with lots of live links for further context but it covers a lot of bases.  Here we go…

There is no one-size-fits-all set of rules and regulations regarding historic districts. Historic designation can occur in several ways, designation of an individual property, or designation of a neighborhood or part of a neighborhood that has been identified as historically significant. Lots of folks think that historic designation is an arbitrary way of keeping people from doing whatever they want to their property. Wrong.  Let me repeat that, WRONG!

What are the different types of designation and how do they affect my property?

Federal

While prestigious, designation does nothing to ensure a property isn’t altered or even demolished.  However, being listed on the National Register can pave a road to more protective levels of designation and incentives. National Register properties are eligible for federal planning and rehabilitation grants, federal investment tax credits, preservation easements, and building , fire, and safety code alternatives.

National Register criteria for evaluation  must be met in order to be eligible for nomination (and ultimate listing) on the National Register of Historic Places. The National Park Service and U.S. Department of the Interior tells us;

The quality of significance in American history, architecture, archeology, engineering, and culture is present in districts, sites, buildings, structures, and objects that possess integrity of location, design, setting, materials, workmanship, feeling, and association, and:

  1. That are associated with events that have made a significant contribution to the broad patterns of our history; or
  2. That are associated with the lives of significant persons in our past; or
  3. That embody the distinctive characteristics of a type, period, or method of construction, or that represent the work of a master, or that possess high artistic values, or that represent a significant and distinguishable entity whose components may lack individual distinction; or
  4. That have yielded or may be likely to yield, information important in history or prehistory.

State

The state level of designation varies from state to state. Some states impose strong regulations on the properties they designate while others, much like the national level of designation, are prestigious but offer no protections. In Illinois, the Illinois Historic Preservation Agency (IHPA) can assist with researching properties for historic designation, but offers no protection. The state will help get your property, if deemed historically significant, on the National Register of Historic Places, offering the federal level of protections. IHPA will also assist with grant and tax incentives.

Local

Local historic designation offers the highest level of protection for a property, or the most headache, depending on how you look at it. In most areas, depending on the local landmark commission, exterior alterations or additions are subject to approval by the local commission. In Chicago, the Commission on Chicago Landmarks (CCL) is responsible for recommending properties for landmark designation as well as reviewing any proposed alterations or demolitions to already landmarked neighborhoods and properties. Chicago’s Department of Planning and Development includes an Historic Preservation focus that reviews any proposed changes and makes sure they are within the parameters of the National Park Service and the Secretary of the Interior’s Standards. The guidelines and standards provide “framework and guidance for decision-making about work or changes to a historic property.” With a local designation, more strict guidelines will be in place to ensure the designation retain its historic integrity. Along with the stricter rules come more incentives!

So, how is designation ultimately decided?

A designation is usually bestowed by the local government planning commission. In Chicago,  historic designation is brought about, researched, and defended by the Historic Preservation section of the Department of Planning and Development. If the proposed properties meet the standards, they are put to a vote at a hearing from the Commission on Chicago Landmarks.  Once (and if) passed, the property is subject to design review.

What’s the big deal? How does a historic designation affect my property?

Stability & Incompatible Development

Several studies have been done on property values in historic district in support that a historic designation of a neighborhood with a design review process “can actually boost property values by introducing certainty into the marketplace.” (Clarion Associates of Colorado 2002) While property values are important, they are affected by more important factors like stability. “Stability is related to investor confidence that, because there are explicit design limits in the zoning code, home investments in historic districts will not be adversely affected by construction of an inappropriate, out of scale building next door” (Study – Benefits of Residential Historic Designation 2007 Tucson, AZ).

Another factor in stability in a neighborhood is the “flip.” Flipping, a purchase followed by a renovation and sale at a high profit margin, is generally discouraged in historic districts. Developers and speculators are not attracted to the areas where property is subject to design review, not only because of the length of the process, but also because of the general prohibitive cost of property in the area.

Neighborhood Longevity & Community Character

Along with studies about stability in a historic district, longevity is also an important factor that has been studied. Purchasing a home is an investment; people who purchase homes in historic districts are purchasing a piece of property that has already been invested in by the city and neighborhood. If the value of the investment is increased, it is more likely that the homeowners will stay in their home longer. If they stay longer, they invest in their surrounding community as well as the character of their home. When residents and business owners work together to invest in their community they create a stable environment for years to come. A study conducted in Indiana, “found that historic districts have higher rates of owner-occupation, and longer durations of residence by both homeowners and renters, than do similar, undesignated neighborhoods” (Donovan Rypkema 1997:2,6,10). Historic designation creates a cycle of stability and longevity that keeps giving back to the neighborhood and its people.

Tax Incentives

While these tax incentives are not typically for residential buildings, they can be applied to commercial buildings within a historic district, encouraging small businesses to enter the neighborhood, facilitating economic redevelopment.

20% Tax Credit on rehabilitation work – available to the rehabilitation of historic, income producing buildings that have been determined by the Secretary of the Interior, through the National Park Service to be “certified historic structures.”  The work will be reviewed by the National Park Service, the State Historic Preservation Agency, and the IRS to determine that it complies with the Standards and that the rehabilitation expenses are qualified. This incentive does not apply to owner occupied buildings.

10% Tax Credit on non-historic buildings placed in service before 1936. Must be rehabilitated for non-residential use. There is no formal review process for this credit, but certain criteria must be met; at least 50%% of the existing external walls must remain in place as external walls, at least 75% of the existing external walls must remain in place as external or internal walls, and at least 75% of internal structural framework must remain in place.

Historic Preservation Easements

A historic preservation easement is a voluntary legal agreement, typically in the form of a deed, that permanently protects a historic property. Through the easement, the property owner places restrictions on the development or changes to the historic property, then transfers these restrictions to a preservation or conservation organization. Donating the easement can result in tax benefits like a Federal income tax deduction. Easements are complex and should be discussed with an attorney.

Buying a house in a historically designated area shouldn’t scare you! Unless the neighborhood is locally landmarked through the Chicago Landmark’s Commission, you can still do what want to your property – take that with a grain of sale, please.  This IS about integrity of historic properties! With the design review involved in a Chicago Landmark Designation, the neighborhood will retain its character and integrity without any incompatible construction. Yeah, you will have to have any changes reviewed, but that means your neighbor can’t add a giant rooftop deck, visible from your bedroom window, without permission either. Keeping the neighborhood historically consistent has been shown to raise property values, but it also produces a stable area that will continue to grow and expand, only benefiting the neighborhood and surrounding areas. With the desirable neighborhood created from landmarking, residents stay longer, increasing the longevity of the neighborhood. The longer residents live in a neighborhood, the more investment there is in creating jobs and making leisure activities available. If you buy a house in a historic district, you know that house and neighborhood will be taken care of for years to come. Now that’s a solid investment in your community.

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