My City's Creating a Historic District Including My Property: Good or Bad for Me?

Considering the restrictions, effect on property values, tax incentives, and other pros and cons of a historic district designation.

Question

I received notice that my city wants to create a historic district. My home is in the proposed district's boundaries. I have heard that if your property is in a historic district, you cannot even do basic remodels or home repairs without approval from some government board.

Is having property located within a historic district good or bad? And what is the difference between a local historic district and the National Register of Historic Places?

Answer

In cases like this, where a local government is creating a historic district, or even just thinking about a zone change, the answer to whether the change is good or bad for a property owner will depend on several factors, including perhaps most importantly, what the owner’s long- and short-term goals are with the property.

Homes prices in historic districts usually appreciate faster in a good real estate market, and stay more stable in a down market. However, local historic districts may impose development restrictions, including limits on remodels that impact the exterior appearance, and may make new development or remodels more expensive.

Are you planning any remodels in the near future that may be negatively impacted by history designation? Or are you more concerned with your home value appreciating? Or making sure your community keeps its historic charm and is not changed by new, modern construction? These questions, among others, may help you determine whether a historic district is good or bad for you.

National and State Historic Registers, and Local Historic Districts

First, some background on historic designations in the United States. Congress created the National Historic Register when Congress passed the National Historic Preservation Act in 1966. A listing on the National Register does not, in itself, impose restrictions on the development of the listed property. However, state and local jurisdictions might have restrictions that apply once a property is on the National Register.

For example, Portland, Oregon generally treats National Register properties the same as properties on its local inventory. This means even if the house is not in a local district, development restrictions may nonetheless apply. A benefit to being listed on the National Register is that some owners qualify for tax incentives.

Most states also have separate historic registers. Like the Federal Register, a state register often provides an opportunity for tax incentives and grant opportunities (such as in Oregon). In some states, just like with the Federal Register, being on the state register will not impose any development restrictions. In other states, though, being on the state register will impose development restrictions that limit what an owner can do with the historic property.

Local historic districts tend to impose the most development restrictions. These districts often:

  • limit building alterations that are out of character for the neighborhood
  • disallow changes to the streetscape (for example, constructing a sidewalk out of a material not used historically and out of character with historical nature of neighborhood), and
  • restrict development of new houses or building that are not consistent with historic nature of the neighborhood.

What development is permitted in historic districts is usually spelled out in the local development code or zoning ordinance. These local laws often:

  • create a historic district commission or board to make certain decisions relating to historic decisions in the local jurisdiction, including, for example, whether a proposed property can be remodeled or demolished
  • designate historic districts and landmarks
  • establish design review criteria for proposed material changes or alterations to the exterior of a building in a historic district (excluding routine maintenance), and
  • describe how the ordinance will be enforced.

The Good: Property Values in Historic Districts Normally Trend Upward

The impact local historic districts have on home values has been studied in detail. The consensus is that historic designation is an economic benefit for property owners within the district. This may be because buyers often associate historic districts with:

  • established neighborhoods, with mature landscaping
  • better construction material and greater attention to detail
  • tax incentives and grant opportunities for certain properties, and
  • certainty that the area will not undergo significant changes and will retain its character.

Studies show that homes in historic districts usually appreciate faster than homes outside. Likewise, home prices in historic districts usually are more stable in down markets. For some property owners, like those who plan no major remodels, this may be the single most important criteria in determining whether they think a historic district is good or bad.

The Bad: Home Remodels and New Development Can Be More Costly in Historic Districts

The restrictions imposed by local historic districts may make remodeling or making any alteration to the exterior of your home more expensive. For example, if you live in a 19th Century Victorian, any remodel may have to be built in a way that maintains the home’s original Victorian character. That can be expensive for many reasons, including that it may be difficult to find the necessary construction material and that the work may be more labor intensive.

Before beginning construction on any remodel or major alteration, you will likely need approval from the local historic district commission. You will likely have to submit an application and pay a fee when seeking this approval.

For property owners thinking about a remodel now or in the future, a new historic district may limit your ability to do so. Talking to a land use attorney will help you determine what rights you may give up if your city or county creates a new historic district that encompasses your property.

Fifth Amendment Protections from Unconstitutional Takings

The Fifth Amendment of the U.S. Constitution declares that no person shall be "deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation." Since ordinances creating local historic districts often act to restrict development, historic district occasionally come under attack for violating the Fifth Amendment "Takings Clause."

If you are unsure how the proposed historic district will impact your rights, contact a local attorney to discuss the specifics of the ordinance and how it will impact your property. If it looks like the city is going to create a historic district, and you think you may want to challenge it, be sure to talk to your attorney about how to preserve your appeal rights.

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