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Investing in Historic Districts

Jun 3

 

 

Take a ride on just about any Main Street, and you will see homes and buildings constructed perhaps 75, 100 or more years ago. Many people like the designs and charm of the buildings constructed in these bygone eras. These buildings are part of our history, and the phrase “they don’t build them like that anymore” is often overheard.

And because “they don’t build them like that anymore,” many of these areas are covered by a specialized set of rules that aim to protect and preserve these special places. Many of these areas will be designated as historic districts. As investors, we need to be aware of these districts and the specialized regulations covering them because one can quickly run afoul of these historic regulations — and that can cost you a bunch of money and time.

What is a Historic District?

A historic district is just what it sounds like. It is a neighborhood or portion of a community that contains a significant number of buildings and structures built in a certain era and to a certain style. We have all seen them and perhaps visited some of them on a trip or vacation. Philadelphia’s Old City; Washington’s Georgetown; Bar Harbor, Maine; Savannah, Georgia and the French Quarter in New Orleans are some of the more famous historic districts.

Historic districts are, of course, located all over the country, and most are nowhere near as famous as the examples listed above. But they all will generally have one thing in common, and that is restrictions on what can be done to properties in those districts.

What is a Historic District’s Purpose?

The purpose of any historic district is a simple one: They exist to preserve the history and character of the district and to prevent the loss of the historical integrity of the area. Would the French Quarter be the same if the old buildings that compose it were demolished? Would it still be the tourist draw that it is if a suburban style housing pattern was allowed? The answer is likely no.

To protect these areas, many locales have enacted laws that seek to protect these areas by regulating what can be done to the structures contained in them. While these laws can be called many different things, they are all basically a form of historic zoning, and for ease, that is what I’ll call them here.

Related: 8 Expert Tips for Renovating the Exteriors of Your Buy & Holds

What is Historic Zoning?

Most of us are familiar with traditional zoning that restricts the use of land to residential or commercial. Generally, traditional zoning laws do not concern themselves with building design. Historic zoning, however, can and does regulate items such as building design and much, much more.

Historic zoning laws are, of course, going to vary from location to location. But like I said, historic zoning often regulates much, much more that folks are used to, and if you own or plan to own any properties in an historic district, you need to know what is covered. So what might these regulations govern?

  • Paint Color
  • Roof Color
  • Roofing Materials
  • Window Types, Size and Placement
  • Door Types, Size and Placement
  • Exterior Building Materials
  • Fence Type and Location
  • Additions
  • Demolitions
  • Driveway and Garage Location
  • Anything Else that Might Affect the Exterior of a Building

As you can see, a historic district’s regulations can get pretty detailed, and things that you would never dream of asking government approval for, such as painting your house, adding storm windows or replacing your front door, may require government approval.

What is the Approval Process?

The approval process will vary by jurisdiction. Usually there is some sort of commission in place that reviews proposals for the historic district. This may be a historical commission or a historical planning commission. Here in Memphis, it is called the Landmarks Commission. No matter what they are called, they are usually made up of appointed citizens, and in general, the approval process will often consist of the following:

  1. Discuss your plans with the local commission staff.
  2. File an application and pay a fee.
  3. Staff will review your plans and make a recommendation to the historic commission.
  4. The historic commission will vote “yes” or “no” on your plans.
  5. Move on with your project, redesign it or appeal the decision up to a higher level.

Depending on the scope of your project, this process can really add significant amounts of time and costs. You will likely have to wait a month or more for a decision, and you may need to hire specialized help, such as an architect, to meet code or historic requirements.

Does it Matter What I Do on the Inside?

Usually it will not matter what you do on the inside, as historic zoning is only concerned with keeping up the appearance on the outside. But check with your local jurisdiction just to be sure.

How Do I Know I’m in a Historic District?

Honestly, you may not know and it could be hard to tell, but there may be clues. First, are you working in an area of older (75 years or more) buildings with very few “modern” structures around them? That should be your first clue.

Secondly, many historic districts will have some sort of signage. If you notice signs saying “Historic Neighborhood” or “Historic District,” you should investigate further. Still, not all historic neighborhoods will have historic zoning in place. Some neighborhoods can even be on the National Register of Historic Places and have signage saying as much, but have no local historic zoning regulations. It can be confusing, so if in doubt, it is best to ask.

Related: Zoning: A Primer for Real Estate Investors

Will I Get Caught?

Yes. Getting caught violating historic zoning is highly likely. Owners in historic districts, at least in my experience, are fiercely protective of the character of their neighborhood. It is often why they moved there, and they will tattle on you. So be sure to get on your neighbors’ good side with any project in a historic neighborhood.

Finally, investors should understand that working in a historic district is very different from working in non-historic areas. The methods of building and rehabbing that are commonly used in non-historic areas may not be allowed or might not be proper in a historic district. Historic building and rehabbing methods may require specialized knowledge or hand crafted materials that can add significant costs and delays to any project. I have seen more than one rehabber make the mistake of not understanding historic zoning and what they were getting into. Don’t be that person. Fix up, save and work in historic areas; just know what you are getting into.

Do you have any experience working in a historic district? How did your project come out?

Let us know with your comments.

BY  ON JULY 6, 2015