The following is a paper I wrote for my class in Historical Preservation and Theory at UCD.
Affordable housing is a crisis issue in the United States. According to the Department of Housing and Urban Development (HUD) figures from 1999, the need for affordable rental housing by the poorest households exceeded the available supply by 1.9 million units. Affordable housing is an issue that not only affects the poor, but children, parents, employees and public servants at all economic levels.
One segment of society with the greatest growing need for affordable housing is service workers. People working as teachers, policemen, firemen, hotel and restaurant workers cannot afford to live near where they work. “Workforce housing,” according to The Urban Land Institute, “is not only at a critical level today but is growing more quickly than the need for any other type of housing.” (Urban Land Institute)
Although the adaptive reuse of older and historic buildings has played a role in helping to address the affordable housing crisis, unfortunately, affordable housing activists hold a negative view of historic preservation. This is because in the past, historic preservation and revitalization efforts undertaken in lower-income and working-class neighborhoods have often had negative consequences. This paper seeks to address those issues and also seeks to offer solutions.
Addressing the Issue that Historic Preservation Causes Gentrification
The most common criticism of historic preservation is that it causes gentrification, which is defined as “the process of renewal and rebuilding accompanying the influx of middle-class or affluent people into deteriorating areas that often displaces poorer residents.” (Merriam-Webster) However, recent analysis indicates that not only do the benefits of revitalizing historic urban neighborhoods far outweigh any negatives, but that historic preservation can usually improve the quality of life among low-income households.
Older neighborhoods that are ripe for historic preservation usually have a high percentage of vacant and abandoned buildings. With such a high vacancy rate these neighborhoods are able to accommodate a large percentage of in-migration without displacing long-term residents. Additionally, the improvement of housing and neighborhood conditions appears to stabilize housing among low-income households to the degree that it more than offsets any dislocation caused by rising rents.
Finally, “gentrification” is the result of too little historic preservation, not too much. Historic neighborhoods are popular with people at all income levels because of the quality of the housing, the variety of housing styles and sizes, and the fact that historic designation is one of the few tools that a neighborhood has to effectively defend against inappropriate uses, out-of-scale development, and low quality construction. Because there are more people looking for this kind of housing than exists, historic neighborhoods are in high demand. The answer is to create additional historic neighborhoods, not fewer.
Dispelling the Myth that Neighborhoods Lose Diversity
In reality, the only place where there is racial, educational, economic and occupational diversity is in historic districts. This is because the quality, scale and design of older buildings appeal to a wide segment of the population. Also, there are usually a wide variety of housing sizes, conditions, ages, quality and price in historic districts. When there are more housing options available, then a wider segment of the population can choose from among those options.
The Displacement of Lower-Income Renters
Low-income renters are most at risk for displacement caused by the increase in property values and rents. While the ideal is the preservation of both the building fabric and community, historic preservation is about compromise. While there will be some displacement there are a number of tax credit and grant programs that can be used to provide affordable housing in historic buildings.
An example of a historic building that was redeveloped as a mixed-use, low-income residential and retail development is the Austin Building. Located at the edge of Denver’s Congress Park on the corner of Colfax and Josephine, the Austin Building had been vacant for over five years prior to redevelopment and had been marred by vandals.
The redevelopment project was initiated in July 1994 and the first units were occupied in October 1996. A variety of financial incentives were used including a State Historical Fund grant, low-income housing tax credits, and a Colorado Division of Housing grant. (History Colorado, 2005)
The Displacement of Lower-Income Households
Revitalizing lower-income communities often results in the displacement of the residents of that community. One of the most promising tools that can help to bridge the gap between historic preservation and affordable housing is the shared equity housing model. In these ownership arrangements owners enter into legal agreements that limit the amount of equity they can receive on the sale of their homes. This way housing becomes less of a speculative investment and ensures its affordability into the future.
The best-suited option to ensure long-term affordability is the Community Land Trust (CLT) model, which allows communities to retain long-term control over the use of their land. CLT’s are dual-ownership models in which one party owns the deed to a parcel of land and another holds the deed to a house that is located on the land. The primary goal of this type of ownership model is to hold the land permanently for the benefit of the community.
Drawbacks of the Historic Rehabilitation Tax Credit (HRTC)
While the federal HRTC program is touted by many as being a successful tool that communities can use to promote historic preservation, the program is inadequate when it comes to affordable housing. One limitation of the HRTC is the requirement that the rehabilitation be “substantial.” Requiring that project expenditures exceed the adjusted basis of the building essentially eliminates selective rehabilitation in favor of large-scale projects. By modifying the current tax credit rules to promote selective rehabilitation, there could be three positive outcomes:
1. It would create an incentive to rehabilitate historic properties for which substantial rehabilitation is not feasible.
2. Encouraging selective rehabilitation conforms more to the spirit of historic preservation since this leaves more of the original building’s design elements and materials in place.
3. It can make some historic tax credit projects more affordable and thus marginally help mitigate displacement.
Additionally, there is an extra cost burden from preservation-related requirements. Major expenses include requirements for new wooden windows versus vinyl or aluminum, expensive façade restorations and preservation or restoration of interior features. By creating guidelines that specify when more modern and cost-efficient materials are acceptable would have a significant impact on the financial feasibility of historic projects, particularly in affordable housing projects. Also, by allowing the reconfiguration of floor plans to create optimum room sizes and layouts and maximize usable, income-generating space would make marginally feasible projects more attractive to investors.
Another limitation to the creation of affordable housing units is that the HRTC program does not work well with the Low Income Housing Tax Credit (LIHTC). Presently, the eligible basis for computing the LIHTC must be reduced by the amount of HRTC benefit received. Therefore, the incentive for creating affordable housing units is limited.
Probably the most problematic part of the HRTC program is that the majority of benefits only apply to income-producing buildings such as office, retail, apartments or condominiums, which places them out-of-reach for small investors and owner-initiated projects.
Conclusions and Recommendations
Studies conducted by HUD and other private research firms indicate that historic preservation is not the cause of many of these neighborhood issues. In fact, historic preservation can be used to benefit and enhance the quality of life for members of the community.
At this time, the shared equity model makes up about one-quarter of one percent of all housing. It is essential to educate communities about the benefits of Community Land Trusts and how this model can ensure the affordability of housing for their long-term residents. Additionally, creating a historic homeownership tax credit much like the HRTC would provide a 20% tax credit for qualified expenditures made in rehabilitating a historic residence for owner-occupied housing.
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