Many of North Carolina’s historic neighborhoods are under stress. In some neighborhoods, older houses are being destroyed to make way for much larger new houses. In other communities, they are being removed because of code enforcement, drug interdiction, tax default, and other measures.

From North Carolina Preservation (Spring 2008)

In either case, historic preservation can be an excellent tool for local governments to stabilize neighborhoods so they will be good places to live. This issue of North Carolina Preservation will address preservation strategies for struggling neighborhoods. Next fall we will consider how to preserve neighborhoods that are victims of excessive development.

Here’s the basic dilemma for an older neighborhood in decline: If a person or family wanted to buy and renovate a house in the neighborhood for their own home, would they have a reasonable expectation of being able to recoup their investment? If the answer is no, the neighborhood is in trouble. Few homeowners will knowingly purchase a house that is going to entail a possible financial loss.

Even if qualified buyers fell in love with a particular house, could they make the purchase? Probably not, unless they had sufficient financial resources to finance the purchase and renovation without a traditional mortgage. Lenders aren’t going to lend more than the projected appraised value of the renovated home. So, if the typical “young family” can’t get the financing to purchase and renovate a historic home in an older neighborhood because property values are stagnant or declining, what does that mean for the existing property owners and tenants in the neighborhood? Loss of investment. Decrease in owner-occupancy. Increase in vacant houses.

What does that mean for the local government? Loss of tax base. More crime. Higher public expenditures for code enforcement, cleanups of vacant lots, etc. Historic preservation offers useful tools to the locality that wants to revive a declining neighborhood. The most powerful tool—design review through a historic district commission—can help protect a neighborhood from drastic changes. Preservation easements can help lock down the preservation of important community landmarks. Rehabilitation tax credits encourage reinvestment and can subsidize renovation. A revolving fund can help deal with problem properties and stimulate a failing real estate market.

The challenge for a struggling neighborhood is to attain a sufficient level of public support, private reinvestment, and owner-occupancy. Purchasers should expect to be able to feel safe physically and recoup a modest return on their investment. That requires that a neighborhood reach a “tipping point” where property values are increasing, at least modestly.

Studies repeatedly show that local historic districts help increase and stabilize property values. Consistently property values in a city’s historic districts will increase more than those in the city as a whole. The gradual increase in property values in a local historic district allows existing long-term residents to stay put and enjoy the benefits of neighborhood revitalization. Historic preservation is much less likely to lead to extensive displacement than new construction, whether public or private.

Discussions about neighborhood revitalization efforts often come to a halt when someone throws in the word “gentrification.” They shouldn’t. The word is so imprecise (meaning different things to different people) and so full of emotional (but not factual) baggage that it’s not useful. So instead of “gentrification,” let’s focus on more concrete issues about revitalizing struggling neighborhoods.

Diversity. A poor neighborhood is not a diverse neighborhood, and a struggling neighborhood that’s in decline is getting less diverse. Preservation can be an excellent tool for enhancing racial, cultural, and economic diversity in a neighborhood. Most of North Carolina’s historic districts are far more diverse than are their suburban counterparts, and many of their residents desire diversity. In a typical North Carolina historic district, the value of the most expensive housing is often as much as 500% more than the least expensive. Big houses are flanked by small houses, and a variety of people can afford to live there and enjoy the neighborhood.

Displacement of long-term residents. Older neighborhoods don’t revitalize overnight. It’s a slow and incremental process, often taking 30 or 40 years of concerted effort. Long-term residents welcome the stability and personal security that accompany neighborhood revitalization. Tools (such as reverse mortgages) can help existing residents retain their homes in the face of rising taxes and insurance costs. Studies repeatedly show that residents of historic districts remain in their homes much longer than elsewhere in a city, and they are also likely to be more involved in community and civic activities.

Increased property values. Rising property values make stable neighborhoods. If property values don’t rise, then a neighborhood will stagnate and become a victim of disinvestment. The problem is when property values rise too quickly, and that’s usually the result of new construction in and around the neighborhood. Preservation can encourage rising property values, while helping to prevent rapidly soaring prices that dislocate residents.

Affordability. Many of North Carolina’s older neighborhoods are more affordable than their new counterparts. Purchasers of moderate income can buy modest homes and improve them for less than the cost of a new home in the suburbs.

Many people believe that renovation is astronomically expensive. If you’re doing a made-for-television transformation (gutting rooms, rearranging spaces, installing the finest and most expensive appliances, etc.), it is. In reality, renovation is typically much less expensive than new construction, and you can phase work over a period of time, unlike new construction.

The maintenance and operating costs of older homes are often less than their new counterparts, when measured over a period of years. Older houses were built to last. All too soon, their new fast-built suburban counterparts will have substantial maintenance needs. The old house will need periodic paint jobs, and roof and window repairs, while the new house may well have its roof, exterior siding, and windows completely replaced before the mortgage is paid off!

Homeownership. The most important indicator of a neighborhood’s health is the rate of homeownership. When homeownership sinks too low, a neighborhood is in trouble—financially, socially and politically. The social capital needed to maintain the fabric of the neighborhood evaporates. Churches, cultural institutions (YMCAs, YWCAs, etc.), schools, shops, and banks leave when homeownership rates drop, and local governments cut back on capital expenditures with the dwindling of the political base.

Wealth creation. The purchase, renovation and long- term maintenance of a home in an older neighborhood can be an excellent way for people of modest means to build net worth, while providing a good place to live. When it comes time to send children to college or assist elderly parents, buyers of older homes in stable neighborhoods will have more equity. Neighborhoods naturally go through ebbs and flows. The low point for a neighborhood, whether dating from the 1890s or the 1960s, often occurs when a generational change is taking place.

A neighborhood must adjust to the change in demographics that occurs when its long-time, elderly residents must leave for health and security reasons. Their homes usually have deferred maintenance, such as kitchens, bathrooms, heating systems, and structural issues that have not been addressed for years. The challenge for such a neighborhood is to attract new homeowners rather than absentee landlords when these houses are placed on the market, often by owners who need a quick sale for financial reasons.

A preservation “revolving fund,” whether operated by a nonprofit organization or a public agency or by an informal network of neighbors, can be an essential tool for neighborhood revitalization. In order to change the dynamic of a neighborhood, such a program must be able to achieve critical mass, requiring both staying power and financial resources. With 30 years of property experience, Preservation North Carolina’s Endangered Properties Program is going to be increasingly involved in neighborhood revitalization.

A Neighborhood Case Study

Since 2006, PNC has been working with the City of Goldsboro to revitalize the historic housing surrounding the downtown area. As part of the Main Street program for two decades, Goldsboro has worked to revitalize the downtown commercial district—with some stellar successes. However, the downtown was still not functioning at its highest potential in large part because the surrounding residential districts were struggling. These districts date from the mid-1800s to 1948 with a wide variety of styles and sizes.

The city realized that its tax base was drying up as it forced the demolition of condemned houses, leaving only vacant lots with no market value. It had to break the cycle, as one demolition led to another. Further, its social capital was fading away as stable residents and businesses left the downtown area.

As part of a new revitalization plan, the city contacted Preservation North Carolina about entering into a working partnership. With a no-interest loan from the city, PNC purchases derelict and vacant properties for resale as single-family residences subject to protective covenants. The city also provides a modest financial incentive for owners of condemned properties to give property to PNC. The sales of donated properties help finance the project for PNC.

Buyers have several layers of protection for their new homes. The locally designated historic district provides design review for both the historic fabric and new construction. Rehabilitation tax credits are available for most of the structures.

In eighteen months, PNC and the Downtown Goldsboro Development Corporation (DGDC) have worked together to sell twelve houses for owner- occupancy; twelve more are currently available for restoration. New owners have come from as far away as Pennsylvania and California.

DGDC is actively planning special events in the area to build community among the businesses and residents, both new and old. They want to make Goldsboro feel once again like a close-knit community. The Goldsboro project is showing substantial progress, and its spin-offs are exciting. North Carolina Railroad and NCDOT have announced the planned renovation of Goldsboro’s impressive Union Depot, located in the heart of the neighborhood, for rail passenger service.

A development team from Mount Airy plans to renovate the vacant historic factories of the Borden Manufacturing Company into the Borden Mills Lofts (www.bordenlofts.com). The project will take advantage of North Carolina’s special incentives for the renovation of historic mills, passed by the legislature in 2006. Self-Help Ventures Fund of Durham has broken ground to build architecturally compatible, energy- efficient infill houses on vacant lots in the historic district.

The sense of newfound community pride in Goldsboro is not limited to the physical fabric of the neighborhoods. It is inspiring to be a partner in a historic preservation project in a city where homeowners, business owners, city officials and employees are so committed to making neighborhood revitalization a success. In Goldsboro, preservation is not just a tool for a struggling neighborhood. It may turn into a valuable resource for the whole community.

Myrick Howard is President of Preservation North Carolina.