Filling in the Gaps in Historic Urban Neighborhoods

One thing advocates of "smart growth" and supporters of historic preservation agree on is the importance of concentrating development where existing infrastructure is already dense -- and where houses, businesses, schools, hospitals, and public transportation are already located.

Each time a new housing development is located in an outer-ring suburb or on outlying rural land, local government is burdened with the responsibility to construct and maintain new roads, utilities, and public services. For example, only 25 percent of these "exurbs" connect with existing public transportation systems -- the remainder clog roads with more automobiles (and the air with more toxic exhaust). In stark contrast, 60 percent of existing urban neighborhoods are already served by public transportation and have schools, hospitals, and other community services already in place.

Concentrating new construction and rehabilitation in our existing downtowns is the most environmentally and economically sustainable development possible. Much urban building stock is historic, and one of the greatest economic engines driving the rehabilitation of these areas is historic preservation.

Building and rehabilitating in historic contexts requires sensitivity, however, and can be expensive. Recognizing this, the federal government first established a rehabilitation tax credit in 1976, acknowledging that rehabilitation, while beneficial for urban areas, was an added cost to owners.

A 20 percent tax credit was established to provide incentives for careful rehabilitation of income-producing (commercial) historic buildings, incentives that prove ever more attractive to property owners and developers.

For example, in fiscal year 2008 (the most recent year for which figures are available), the National Park Service approved 1,231 projects representing a staggering private investment of $5.64 billion -- all of which cost the Federal treasury less than $1.128 billion in tax credits. This powerful financial engine has been so successful that 30 states have added complementary rehabilitation tax credit programs, and 25 have extended their programs to non-income-producing properties (i.e., private homes).

The tax credit program leverages private money to rehabilitate historic buildings, returning them -- and the surrounding area -- to productive use. Because state and local tax incentives can often be attached to the federal credit, the program leads to greater public awareness of the benefits of historic preservation, which, in turn, provides incentives for private investment in historic neighborhoods.

The federal Rehabilitation Tax Credit program, on average, draws five private dollars for every public dollar invested for historic preservation and adaptive reuse -- an especially compelling ratio in today's economic climate.

Rehabilitation of historic buildings alone, however, is not enough to rehabilitate entire neighborhoods. What about the "missing teeth" in our urban fabric? How do we fill those gaps?

Nationwide, there are some 14,000 historic districts, many of which are plagued by two separate problems: demolished buildings and vacant lots, and inappropriate infill.

According to the Urban Land Institute, by the year 2050 the U.S. urban population will grow by 100 million people, all requiring housing, schools, and places for business -- needs that cannot always be met by the existing historic building stock. In these cases, infill construction may be necessary.

Examples of poorly planned and poorly designed urban infill can be found in every city. Astute in crafting public policy to promote the re-use of historic resources, we are lousy at guiding what is built next door, and the urban fabric as a whole suffers badly.

To further stimulate our economy, state and local governments should consider expanding the existing historic preservation tax credit programs to include new, compatible infill development within existing state historic district boundaries. This could be accomplished through complementary state legislation in the form of a Historic District Infill Tax Credit (HDITC) that would further focus development within successful historic districts and encourage the completion of empty blocks.

The HDITC could be designed for existing and newly created National Register-listed historic districts (some 14,000 of these exist nationwide), ensuring broad access to the program. Tax credits would be available for qualified construction expenses resulting from residential and commercial infill in a historic district.

The certified buildings should meet historic infill design guidelines and be constructed on a property vacant for at least 24 months or in place of a previous, non-historic structure. The credit should be limited to 15 percent of expenses incurred, with a maximum credit of $500,000, to ensure homeowner accessibility.

The credit could be applied to individual income tax, corporate income tax, corporate license tax, public service corporation property tax, or bank franchise tax -- and could be sold or transferred. There should be a penalty equal to 100 percent of the tax credit for any disqualifying work performed on the structure.

HDITC legislation could add a multiplier for economically challenged districts to encourage responsible development, raising the value of credit for certified infill by an additional 10 percent. The credit may be applied to individual or corporate income tax, with the amount of credit equal to the amount of approved awards. The resulting tax credit could be carried back one year, and forward 10. To further make the credit available to lower-income users, the credit could be sold or syndicated to investors.

The secretary of the interior's Standards would be the most logical foundation on which to build design standards for an HDITC, with precautions taken to guard against misinterpretation (or overinterpretation).

To keep things clear, I would suggest the following caveats to the proposed program:

• Retention or adaptive reuse of historic buildings is encouraged.

• Demolition of historic buildings (and/or moving historic buildings to make way for new construction) is discouraged.

• Sensitive and appropriate infill construction is encouraged in historic districts.

• Evaluation of proposed infill design must focus on its effect upon the larger urban fabric (adjacent buildings, streetscapes, etc.), rather than on the individual infill project.

• The historic rehabilitation tax credits and the infill tax credit should be viewed as tools of economic growth, not just historic preservation. In this way, development would focus on existing urban areas, where long-range environmental and infrastructure impacts would be minimized.

The program would provide a positive incentive for owners to build compatible infill in historic districts, further enhancing the very qualities that make them special places. An HDITC would give us the tools to make our historic neighborhoods the viable, vibrant places that many used to be -- and could be again.

Bryan Clark Green, Ph.D., is director of historic preservation at Commonwealth Architects in Richmond. Contact him at bgreen@comarchs.com.