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Home · Property Management · Real Estate Investing : Preserving History Boosts Local Economies

Across the U.S., designated historic districts attract more business, jobs and tourists than nearby neighborhoods.

In San Antonio, history pays.

The city has 29 local historic districts, including the area around the Alamo. The designation protects a neighborhood with a high number of historic buildings or sites by restricting development and demolition.

“Our districts are not frozen in time. They’re vibrant and changing,” says Shanon Shea Miller, historic preservation officer for the city of San Antonio. “We just have the regulations in place to make sure they’re changing in a way that’s positive.”

San Antonio did a 2015 study showing that its historic districts not only generate more tourism dollars but also more construction jobs than other parts of the city. Continuing its historical preservation efforts, the city designated in September its most recent local historic district, an area known as East French Place with Craftsman bungalows built in 1922.

Homeowners sometimes scoff at strict regulations, but it’s precisely those rules that make local historic districts across the U.S. – from Greenwich Village in New York City to Savannah, Georgia – economically outperform other areas within the same city.

A neighborhood can obtain a historic designation at a federal or local level. The National Park Service maintains the National Register of Historic Places, a list of federally designated historic places worthy of preservation. If the federal government undertakes a project, such as building a highway, it must go through a process to consider any National Register sites in its path, says Tom Mayes, vice president and senior counsel at the nonprofit National Trust for Historic Preservation.

But local designations offer more protection, since that’s where most development happens. Different cities and municipalities have their own designations for local historic districts. Each locality’s definition and regulations are different, but the rules are usually stricter than that of the National Register.

“If I like what Greenwich Village looks like, the fact that it’s designated means that more of that fabric and character will remain,” says David Listokin, professor at Rutgers University’s Bloustein School of Planning and Public Policy.

Local historic districts can focus on the minute details, requiring a homeowner to get approval for an addition to a house or even the paint color. In San Antonio, a design commission reviews 2,400 cases a year in the city’s historic districts, which include about 10,000 properties, Miller says. The cases include new construction, demolitions and exterior modifications.

“[With the] National Register, tear down the house tomorrow and nobody can do anything about it,” says Donovan Rypkema, principal of PlaceEconomics, a Washington, D.C.-based historic preservation and economics consulting firm. “The only protection comes from those local districts.”

An area doesn’t need to be on the National Register in order to be a local historic district, and vice versa. Standards for local districts often grow out of national ones, but what constitutes a local historic district depends on the place. The age of the property plays a part, Listokin says.

“’Historic’ is often broadly defined,” he says. “It’s not ‘George Washington slept there’ necessarily, but looking at architectural achievement, cultural significance, et cetera.”

Protecting the character of a neighborhood can have economic benefits. No matter the region of the U.S. or the wealth within a neighborhood, rates of real estate appreciation in local historic districts outpaces comparable neighborhoods and the city as a whole, Rypkema says. Local districts’ property appreciation even outperforms those on the National Register.

“It’s almost counterintuitive, but it’s really because of the protections that a local district provides that the National Register does not provide,” he says. “The first response is, ‘Well, you’re going to have more regulations, ergo that’s going to hurt property values.’ In fact, in at least this instance, the opposite has been true. The reason is not that people pay a premium for the right to go and appear before some goofy preservation commission. It’s they’re paying the premium with the confidence that the lunatic across the street can’t do something to his property that has an adverse effect on my property.”

San Antonio has seen the effects. In 2013, the average price per square foot for a single-family home outside of the city’s historic districts was up about 68 percent from 15 years prior. Meanwhile, homes in historic districts had increased 139 percent, according to the 2015 report.

The downside to rising property values is that it can price out residents, so cities turn to property tax relief for a designated historic property and community land trusts to help properties stay affordable, Mayes says. Portland, Oregon, has a plan to manage the effects of gentrification. A community land trust exists in Greenville, South Carolina. And California has a tax abatement program for the restoration and preservation of historic buildings by private property owners.

Miller says in order to combat large real estate price increases, San Antonio’s historic districts offer local tax incentives for substantial rehabilitation and for owners to live in their property.

Besides property values, historic preservation can boost business.

The creative economy, especially independent businesses and startups, tends to flock to historic districts, Mayes says. These neighborhoods also have a higher proportion of women- and minority-owned businesses.

“Whenever you drive into a city, the cool place where a lot of people want to go is almost always a historic district where there’s a mix of businesses,” Mayes says.

Rypkema says many small companies want their building to reflect the character of their business. Historic districts make sure those buildings aren’t torn down.

“There’s this kind of qualitative character attraction of historic buildings that will attract the startup business, the new business,” he says. “That’s where the real kind of economic growth and employment growth is. It’s the little guys, not the giants. And if we can have a local economy that is fostering startup businesses and new businesses and small business expansion, that’s a real swing for that local economy. Often it’s those older and historic buildings that are the magnet for those kinds of businesses.”

That’s what happened to Gene Kansas when he searched for a location in Atlanta to open a shared workspace. He says the Southern Schoolbook Building, built in 1910, called to him.

“I came to the building and was like, ‘My God, this would be an incredible place for this concept,’” Kansas says.

The building is in Sweet Auburn, a district known for its history as a black commercial center and the birthplace of the Rev. Martin Luther King, Jr. Kansas moved his commercial real estate company into the space in April because he liked the neighborhood’s history. Constellations, the shared workspace where he serves as founder and president, will open there in May 2018.

“There’s the charm and the character of old buildings, which is incredibly nice from an aesthetic standpoint, but the real reason is the culture, the history and the consequence of Sweet Auburn in particular,” Kansas says. “You’re talking about the birthplace of the civil rights movement.”

Miller says historic preservation creates jobs, including in San Antonio. The rehabilitation and preservation of buildings is more labor intensive than new construction, leading to more money spent on workers rather than materials.

“People get paychecks and they go out and they get their hair cut and they buy groceries and they spend more money in the local economy,” she says. “Spending the new construction on materials doesn’t have the same economic impact.”

Local historic districts have a hand in preventing foreclosures on those buildings. The rate of foreclosures in these districts is one-third to half of the rates in the rest of a city, Rypkema says.

“It’s not that if I live in a historic district that I never get fired or never get divorced or never run up my credit card bill so much. That of course happens every place,” he says. “The difference is that there is a latent strength in demand for properties in those local districts that if I do get in financial trouble, I can get that property sold before I go into the foreclosure side.”

Local historic districts also lead to more money from tourists. Heritage tourists tend to stay longer, visit more places and spend more per day than tourists in general. For example, Charleston, South Carolina, which became the U.S.’s first local historic district in 1931, attracts tourism and the culinary sector, Mayes says. In Pittsburgh, the extra money that heritage tourists spend compared to other tourists leads to nearly $64 million per year in additional economic activity, according to a 2015 report from PlaceEconomics.

“There are plenty of places that have no historic districts, but a good heritage tourism business,” Rypkema says. “The issue is: Is that sustainable when the market decides that’s a nice, old four-story hotel, but we could use that site and build a 30-story hotel because we’ve got all these tourists coming in?”

Local historic districts also improve quality of life since they tend to be more walkable to schools and public transit, leading to less traffic, Miller says.

It is hard to define what makes up the character of a neighborhood, but residents, businesses and tourists alike often find it preserved in a local historic district – even if they aren’t aware of the designation.

“Very few people seek out the suburban mall to go on vacation. We seek out the authentic, local experience and what makes places unique,” Miller says. “A historic designation is a great tool for accomplishing that.”


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