In today’s economic climate, state and locally funded programs for historic preservation are in serious jeopardy. During this legislative season alone, we have seen the slashing of state Main Street programs, reductions in staff positions and funding for state and city preservation offices, and the proposed elimination of state historic tax credit programs. One logical response is to look for low-cost or no-cost incentives to encourage preservation during these tough economic times. And given the enormous deficits facing most states, it becomes even more important to encourage these incentives at the local level.

Local governments have the authority and, in many cases, the resources to provide substantial incentives for historic preservation efforts -- and many do. The impetus behind these incentive programs varies from city to city. In some cases, cities adopt these programs to energize adding downtown or dilapidated neighborhoods; in others, especially where strict preservation controls are in place, city governments view these incentives as a balancing tool for strong regulations. Whatever the reason, local incentives can stimulate rehab activity and can often be the deciding factor in the feasibility of a project.

Below are examples of several low-cost incentives for preservation. It is important to note that local governments should review state enabling legislation to determine if these programs are permitted under their state laws.

Regulatory Relief

Building and Seismic Codes

Compliance with building and seismic codes can often be a deal breaker in rehabilitation projects. It is often cost-prohibitive and, in many cases, impossible to bring an older building into compliance with standards written with only new construction in mind. In addition to state building codes for rehabilitation, often referred to as “smart codes,” many localities have adopted their own building code or offer flexibility in the interpretation of an existing code to facilitate the rehabilitation of historic properties.

Wichita, Kans.: In 2000 the city of Wichita organized a group of local architects, engineers, historic preservationists, Realtors, builders, and business representatives to recommend redevelopment incentives for the city. The establishment of a rehab code was their major recommendation. The city council hired a consultant to develop the code, which was modeled after the New Jersey Rehab Sub-Code, the Nationally Applicable Recommended Rehabilitation Provisions, and the Year 2000 Edition of the Uniform Code for Existing Buildings. The Wichita Rehab Code was adopted in 2001. Since then, the city council has approved additional funding for training and seminars on the code.

Many other cities also exercise flexibility in the application of building, seismic, and accessibility codes to historic buildings. Among these cities are St. Helena, Calif.; Portland, Maine; Seattle and Spokane, Wash.; Duluth, Minn.; Sacramento, Calif.; Boise, Idaho; and Denver, Colo.

Zoning-Based Incentives

Transfer of Development Rights

Transfer of Development Rights (TDR) programs allow the owners of historic properties to sell or transfer development rights (air rights) to other property owners for use on another site. The property owners who purchase development rights may use them to build a larger building on their property than zoning would otherwise allow.

Seattle: Under Seattle’s TDR program, developers can purchase and transfer unused development rights from most sites occupied by designated landmarks. The city operates a TDR bank, where those development rights can be “banked” and sold to developers as needed. The city promotes the use of this program by requiring that a specific percentage of the floor area added to a project through TDR and bonus incentives be attained from the city’s TDR bank, if available. To further encourage the use of TDR, the city only offers a limited number of other options for increasing the floor area of a building. The owners of the sending and receiving lots determine the value of these rights, and the transfer lasts for the life of the property on the receiving lot.

Other cities with TDR programs include Philadelphia, San Francisco, and New York City.

Zoning Variances

As is the case with current building and seismic codes, local zoning requirements can often impede the rehabilitation of historic buildings. Many localities offer flexibility in zoning regulations, and others have adopted adaptive use programs to make the rehabilitation of historic buildings easier.

Los Angeles: In 1999 Los Angeles adopted an adaptive use program for historic buildings listed in the national, state, or local historic registers (and buildings built before 1974).Responding to the large number of vacant commercial buildings in its downtown, the city hoped to facilitate the conversion of these buildings to downtown housing, which would have been problematic under existing zoning regulations. Among other things, the program mandates that adaptive use projects are “by right” projects (do not require special permission as long as the projects follow existing zoning rules); waives residential density requirements; allows existing conditions for yards, height, parking, and floor area, even though they do not meet residential code requirements; and waives disabled access upgrades in private residential areas of a building.

Many other cities allow zoning variances as an incentive for historic rehabilitation. Examples can be found in Lansing, Mich.; Sarasota and Miami, Fla.; and Roanoke, Va.

Easements

Easement programs offer incentives to both property owners and municipalities. When donating a historic preservation easement to a governmental entity or nonprofit organization, property owners are allowed a tax deduction for a charitable contribution on their federal income tax return. The city, meanwhile, is provided a low-cost mechanism for protecting historic properties from demolition and neglect and keeping the property on local tax rolls.

With the donation or sale of a historic preservation easement, a property owner gives away certain property rights, usually the ability to alter the exterior façade of the property without permission from the easement holder. Some easement programs, however, are focused on protecting the historic interior of a property and/or the land surrounding the structure. The easement holder can be a city government, nonprofit organization, or quasi-governmental organization. In order to take advantage of the federal income tax deduction, property owners must donate the easement in perpetuity to a qualified organization for conservation purposes. In addition, the property must be listed in the National Register of Historic Places or be a contributing structure in a National Register Historic District.

Mobile, Ala.: The Mobile Historic Development Commission (HDC) holds approximately150 easements on historic properties. Established as an independent nonprofit initially, the HDC was folded into city government in 1988 but maintained its 501(c) (3) status and the authority to accept easements. The program is considered a valuable preservation incentive in the city and is used to protect both residential and commercial properties.

Other historic preservation easement programs can be found in Alexandria, Va.; Boise, Idaho; Charleston, S.C.; Philadelphia, Pa.; Sacramento, Calif.; and Savannah, Ga.

Tax Incentives

The significant property tax increase that often follows a historic rehabilitation can be a deterrent to preservation efforts. Similarly, the cost of the rehab itself may be off-putting to property owners and viewed as exorbitant when compared to new construction. Factors like these can make what is already a difficult undertaking even more unattractive to property owners. Fortunately, many states have enabling legislation that allows municipalities to counter these obstacles by offering incentives in the form of property tax abatements or exemptions, tax freezes, or tax credits.

Dover, Del.: The city offers historic property owners undertaking the preservation, restoration, and/or rehabilitation of the exterior facade of their building a tax credit of 50 percent of the total cost of the rehab expenses. The maximum credit is $6,000; total project cost minimum is $12,000. Eligible properties include those located within the Dover Historic District Zone or properties listed in the National Register of Historic Places. The credits run with the property for 10years and are pro-rated over that period. Credits do not transfer to new owners of the property.

Tax incentive programs for historic preservation can also be found in Cumberland, Md.; Tampa. Fla.; Spokane, Wash.; Dallas, Tex.; Newport, Ky.; Providence, R.I.; and Chicago, Ill.; among others.

Grants, loans, and other more costly incentives may be harder to justify during a budget crisis, but should be carefully considered as well. Although these programs will cost local governments initially, most are significant economic generators that will more than pay for themselves in the end.

For more information about all of these options, and for help in crafting and promoting local incentive programs in your city, contact Leslie Tucker at the National Trust’s Department of Public Policy, (202)588-6234, ltucker@savingplaces.org.

Publication Date: May/June 2003