Historical

  • Updated on Oct 15, 2024
  • Published on Sep 5, 2024
  • 7 minute(s) read

Understanding Historic Preservation for Homeowners with a Construction Project: Designations, Processes, and Potential Tax Breaks

For homeowners embarking on a construction project or a major rebuild/repair of a historically designated home, historic preservation is an essential consideration. Historic preservation aims to protect, conserve, and restore buildings that have cultural, architectural, or historical significance. Undertaking such a project involves navigating a unique set of regulations and potential benefits, including possible tax breaks and grants.

In this article, we will explore the historic designations that might apply to your property, the processes involved in preserving or restoring a historic home, and the financial incentives that may be available.

1. What is Historic Preservation?

Historic preservation refers to the act of conserving, restoring, and maintaining buildings or sites that have historical, cultural, or architectural significance. These properties are often part of a community’s heritage and play an important role in telling the story of a particular time, style, or event.

Historic preservation does not mean freezing a building in time but rather updating or maintaining it in a way that respects and preserves its historical character. Projects that affect historically significant homes are subject to specific regulations and review processes, especially if the building has an official historic designation.

2. Understanding Historic Designations

There are different levels of historic designation that a property can hold, and each designation can affect the type of construction, repair, or remodeling work allowed on the property. Understanding the type of designation is key to knowing which regulations apply to your project.

a. National Register of Historic Places

The National Register of Historic Places is the official list of the U.S.’s historic buildings, districts, and landmarks. Properties listed on the National Register must meet specific criteria of age, integrity, and significance, often related to architecture, culture, or notable events.

  • Restrictions: While the federal government does not generally restrict private owners from altering properties on the National Register, owners may need to comply with certain preservation standards to qualify for tax credits and other incentives. Additionally, projects using federal funds or permits must comply with Section 106 of the National Historic Preservation Act (NHPA), which requires review of any changes that could impact the property’s historic significance.

b. State Historic Registers

Many states maintain their own historic registers, similar to the National Register. State listings may provide additional financial incentives for preservation, but they also often include requirements regarding how the property can be altered.

  • Restrictions: State historic preservation offices (SHPOs) typically oversee these properties. Homeowners may need to seek approval from the SHPO for construction, major repairs, or restoration work to ensure that any modifications align with preservation standards.

c. Local Historic Designations

At the local level, many cities and municipalities have historic districts or landmark designations for properties that contribute to the historical and cultural fabric of the community. Local historic preservation commissions or boards are typically responsible for regulating changes to these properties.

  • Restrictions: Local designations usually come with the strictest regulations. Homeowners in local historic districts may be required to submit any construction, renovation, or exterior modification plans for review by the local preservation commission. These bodies ensure that any work on the property is in keeping with the character and historical integrity of the neighborhood or building.

d. Certified Local Governments (CLG)

The Certified Local Government (CLG) program is a partnership between local governments, the state, and the National Park Service (NPS) that encourages preservation at the local level. CLGs typically have more access to preservation grants and technical assistance and may provide additional local incentives for homeowners.

3. The Historic Preservation Process for Construction or Major Repair Projects

If your home has a historic designation, the construction or repair process will involve additional steps compared to a non-historic property. These steps are designed to ensure that any changes preserve the historical character of the property.

a. Research Your Property’s Designation and Regulations

Before starting any construction or repair work, you should confirm the property’s historic designation. This can be done by contacting your local historic preservation office or using resources such as the National Register of Historic Places database. Once you know the designation, you can research the specific regulations that apply to your home.

  • Tip: Contact your local Historic Preservation Commission (HPC) or State Historic Preservation Office (SHPO) for advice on how to navigate the process. They can help guide you through any approvals needed and advise you on the best practices for maintaining the historical integrity of the property.

b. Develop a Preservation Plan

A key part of the historic preservation process is creating a preservation plan that outlines how you will approach construction, repair, or restoration while preserving the home’s historic features. This plan should address:

  • Which architectural features need to be preserved or restored.

  • Materials to be used that are historically accurate or sympathetic to the original structure.

  • Compliance with the Secretary of the Interior’s Standards for the Treatment of Historic Properties, which provide guidelines for preservation, rehabilitation, restoration, and reconstruction.

c. Seek Approvals from the Preservation Board or Commission

For most projects on a historic property, you will need to get approval from the local historic preservation board or commission before work begins. This typically involves submitting a Certificate of Appropriateness (COA) application. The COA ensures that proposed changes will not negatively impact the property’s historical or architectural significance.

The COA review will evaluate:

  • Whether the materials and design are compatible with the original construction.

  • Whether the proposed work maintains the historical character of the property and surrounding area.

  • The impact of new construction or additions on the property’s overall historical integrity.

d. Work with Preservation Specialists

To ensure that your project complies with historic preservation standards, it’s often best to work with architects, contractors, and craftsmen who specialize in historic preservation. These professionals have experience working with older buildings and understand the nuances of preserving historic features while incorporating modern upgrades.

e. Conduct the Work Under Supervision

Once your project is approved, the construction or repair work can proceed. Depending on the nature of the project, it may be subject to inspections by local preservation authorities to ensure that it aligns with the approved plans.

4. Financial Incentives and Tax Breaks for Historic Preservation

We cover this in the Finances book as well, but its worth mentioning again that one of the key benefits of owning a historic home is the potential for financial incentives. These can include tax breaks and grants to help offset the cost of preservation.

a. Federal Historic Preservation Tax Credits

The Federal Historic Preservation Tax Incentives program offers a 20% tax credit for the rehabilitation of income-producing historic properties that are listed on the National Register of Historic Places or contribute to a registered historic district. While this program primarily applies to commercial properties, it may also apply to rental properties or bed-and-breakfasts.

  • Important Note: The work must meet the Secretary of the Interior’s Standards for Rehabilitation to qualify for the credit, and the tax credit is typically not available for private residences.

b. State Historic Tax Credits

Many states offer their own historic preservation tax credits, which may apply to private residences as well as commercial properties. These credits can range from 10% to 25% of the rehabilitation costs, depending on the state. Homeowners should check with their state’s historic preservation office to learn more about available credits.

  • Example: In North Carolina, homeowners can receive a 15% tax credit on qualified rehabilitation expenses for owner-occupied homes listed in the National Register of Historic Places.

c. Local Grants and Incentives

Local governments and preservation organizations often offer grants or low-interest loans to help with the cost of preserving historic properties. These programs may also include Property Tax abatements or deferrals for homes located in historic districts.

  • Historic Property Easements: Some preservation organizations offer grants or tax breaks for placing an Easement on a property, which ensures the long-term protection of the property’s historic features.

d. Energy Efficiency Incentives for Historic Properties

In many cases, making a historic home more energy-efficient can be a challenge due to the need to preserve original windows, doors, and Insulation. However, some states and localities offer tax incentives or rebates for energy-efficient improvements that are compatible with historic preservation standards. For example, using energy-efficient storm windows or adding insulation in a way that doesn’t compromise the original materials may qualify for incentives.

5. Further Reading and Resources

For more information on historic preservation, tax credits, and designations, consider visiting the following resources:

Wrap-Up

Historic preservation offers homeowners the opportunity to maintain and restore a piece of architectural history while enhancing the beauty and value of their home. However, it requires a careful balance of maintaining historical integrity while modernizing and improving functionality. Understanding the historic designations, regulations, and preservation processes is essential to successfully navigating the complexities of construction and repair projects on historic homes.

By working closely with preservation experts and taking advantage of financial incentives like tax credits and grants, homeowners can preserve the past while building for the future.