Bridging the gap: methods to improving financial feasibility in historic rehabilitation projects

Initially, the scope of this work centered on the completion of a project in a small city in North Carolina. Working with Preservation North Carolina, a leading statewide non-profit, the goal was the successful conversion of a 1920 apartment building in the downtown into 18 residential units. Making use of their 501(c)3 status, Preservation North Carolina had been able to acquire the building from the city at a reduced rate several years earlier. Unfortunately, due to past market conditions and other perceived barriers, no significant progress was made despite several proposals. Vacant for some years, the city desired a change on the property and included it in the Downtown Master Plan as ideally suited for rehabilitation. Accordingly, Preservation North Carolina and the city began talks of how to get the project off the ground. In a meeting with city officials, an experienced developer, and representatives of Preservation North Carolina, the initial proposal was to pursue the most common and obvious track: conversion into residential using the federal and state historic preservation tax credits. The requirements of these programs, which will be discussed later, mandate that the property remain an income-producing property for five years. In terms of residential properties, this translates to a minimum mandatory period of rental residential. Page 5 Unfortunately for the initial plans, this proposal was not amenable to the city officials. The city manager expressed a strong desire for owner-occupied housing in the downtown area, which did not fit the income-producing requirement of tax credits. The need for a replacement gap-reducing mechanism became the topic of discussion. On the city's suggestion, the group researched and considered changing the scope of the project to qualify for a grant through Housing and Urban Development's Neighborhood Stabilization Program. The first round of the Neighborhood Stabilization Program consisted of $3.92 billion for the redevelopment of abandoned and foreclosed homes. Overall, there were 309 total grantees, with each state receiving a minimum of $19.6 million to obligate to projects based on a determination of need. North Carolina obligated 20 grants to eleven local governments, six non-profits, and three statewide organizations for a total of $48.85 million. The city was one of the local governments to receive funding for their proposal to purchase and rehabilitate fourteen foreclosed properties. Intending to provide homeownership opportunities to participants in the Individual Development Account and through a lease-purchase program, the city focused its investment in identified areas of need not absorbed by the investor market. The city received a total of $2.1 million out of the $5 million requested, of which more than $1.3 million went toward the rehabilitation of a building in a similar area to the project under consideration (North Carolina Department of Commerce, 2009).Master of City and Regional Plannin