Historic preservation and the housing crisis: a “two birds, one stone” solution
In Santa Ana, a once-vacant mid-century office building now houses budding artists, a gallery, and additional public amenities, servicing the entire community surrounding it. The building dates from 1965 and was once occupied by the First Western Bank and has since been preserved and adapted into the Santa Ana Art Collective. What was once a drab, dated and unused concrete block is now a creative space that reflects neighborhood art and culture and provides affordable housing for residents who enliven the scene.
Back on the east coast, where urban infill is paramount, downtown Worcester, MA is home to a beautifully renovated mid-rise historic building. The central building now houses workforce housing, serving mixed-income residents who live and work in the downtown corridor. The circa 1925 revivalist-style building is listed on the National Register of Historic Places and retains the many ornate details and craftsmanship that can only be preserved, rarely replicated.
These remarkable examples highlight the creative change of marrying need and demand with preservation and profitability. Developers and housing agencies are not just building homes, but rather homes so residents can live, work, play and thrive in the cities and neighborhoods that rely so heavily on them. As incomes and wages stagnate, inflation continues to rise dramatically, meaning the average American cannot keep pace with the rising cost of living. At the end of the day, it’s not just about living above the poverty line, but about enjoying a quality of life that many take for granted. Undertaking the redevelopment of a historic property can present many challenges, but the benefits make adaptive reuse an attractive option for developers, investors and/or occupiers looking to take advantage of unique funding opportunities and set priorities. ESG.
Municipalities have taken notice of vacant office, commercial, retail and hotel/motel space and now see the opportunity to promote programs that address both the preservation of historic properties and the affordable housing crisis . The rewards go to developers who can bring it all together with a vibrant, sociable community that serves and supports housing in the downtown corridors. Walkable amenities and access to retail, mixed-use amenities, employers, civic centers, and arts and recreation are many components naturally provided by downtown neighborhoods. Even more impactful is experience and history, which many historic neighborhoods and properties can satisfy.
Metropolitan urban growth across the United States means that developers and investors can leverage underutilized historic downtown real estate to create these desirable neighborhoods by reusing main streets that many cities and neighborhoods already have. Historic offices, schools, warehouses and industrial facilities can easily be converted into lofts and mixed-use residential/commercial due to their unique character, universal appeal and timeless quality. Downtown locations with flexible open layouts, gritty aesthetics, large storefronts, and open interiors may be ripe for reinvention.
Revitalizing these spaces can have a significant impact on communities and lead to many potential benefits for low-income families, but it also creates opportunities for developers and investors. Bundling tax credits and finding niche projects to develop may be the secret to getting tax credits and hitting (or exceeding) returns/profit margins.
Financial incentives and tax credits
Properties designated in a historic district or individually listed on the National Register of Historic Places (NRHP) are eligible to receive federal and state historic tax credits. The combination of these tax credits allows qualifying rehabilitation work to receive up to 45% of the cost of qualifying rehabilitation work, a benefit that has a significant impact in today’s increasingly expensive construction market. today. In fact, the benefit is significant enough that if the property is not already designated on the PNSR, it might be worth requesting a designation to create eligibility. A historic preservation advisor can appraise and submit the property or district for listing on the National Registry, then guide the developer through the historic tax credit process.
Historical tax credits can be combined with other financial incentives such as Low income housing tax creditsOpportunity Zones, HOME Funds, local grants and facade improvement programs, and other programs.
How Historic Buildings Support ESG objectives
The reuse of historic buildings can have a significant impact on bringing people together. It can serve as a catalyst for economic recovery in regions affected by recession. Keeping buildings occupied and in use provides economic opportunity and protects them from decay and blight. Sensitive rehabilitation of interiors and storefronts can increase foot traffic and provide evidence of successful neighborhood revitalization, reducing/preventing crime and stimulating further development in the area. Regeneration of the historic built environment also supports the community as a whole, tapping into cultural identity and preserving local heritage and community sense of place.
Repurposing historic properties to create sustainable spaces can attract environmentally and socially conscious investors and residents, while strengthening a developer’s brand identity and loyalty.
Reuse is a principle of environmental stewardship. Demolishing and rebuilding consumes far more raw materials and energy than rehabilitating and reusing an existing building. Additionally, once a residential property is initially (re)developed, apart from ongoing maintenance, it typically undergoes extensive renovations on a less regular basis, which could create unnecessary waste. Reusing existing historic elements (or using salvaged materials) and integrating them into modern design in a less frequent cycle is more sustainable, saves money in the long run, creates unique spaces and is more sensitive to climate. ‘story.
Historic neighborhoods have an inherent imprint of mixed-use community development. Since the different types of real estate in one place allow people to live, work, eat, shop, worship and play, this type of business model has been studied and replicated by city planners and developers. property developers around the world. When planning begins with the reuse of a historic building, the positive impact could last for generations.
In today’s competitive real estate market, investors and developers can uncover impactful and lucrative opportunities by shifting their focus to and exploiting underutilized and neglected buildings in downtown communities. Although there may be economic, legal and physical constraints, a good consultant with expertise in the adaptive reuse of historical properties can be the key to unlocking the growth and potential of historic assets.
A successful and sustainable historic reuse project requires the professional assessment of:
- energy consumption
- carbon footprint and emissions
- gray energy
- financial benefits
- and assessment of historical significance to support and enhance the qualities of the architecture
When appraising a property, the qualified engineering consultant will consider what it will take to make the building viable and suitable for the proposed use. Factors related to historic buildings that the consultant will take into account are:
- structural integrity
- reuse of MEP systems
- residential design issues (accessibility compliance, etc.)
Historical renovation and adaptive reuse projects can seem daunting when there is uncertainty surrounding process and costs. Hire a seasoned due diligence consultant who knows the intricacies involved in creating a successful and impactful transformation is key. With appropriate risk mitigation, valuable historic properties can be profitable ventures that benefit the developer, property management, residents and their communities.