Historic preservation law operates in two layers that most property owners confuse. The federal layer, built on the National Historic Preservation Act of 1966, only restricts projects that involve federal money, permits, or licenses. The layer that actually controls what a private owner can do to a designated building is local: a city or county ordinance creating a historic district and a commission that must approve exterior changes. National Register listing alone imposes no restrictions on what you do with your own property using your own money. Unauthorized alterations in a locally regulated district, on the other hand, can bring daily fines and forced restoration, while a properly certified rehabilitation of an income-producing historic building can unlock a federal tax credit equal to 20% of qualified expenses, spread over five years.
When Federal Preservation Law Applies
The National Historic Preservation Act directs the federal government to identify and protect historic resources in partnership with state, local, and tribal governments.1Office of the Law Revision Counsel. 54 USC 300101 – Policy It created the National Register of Historic Places, the network of State Historic Preservation Officers, and the Advisory Council on Historic Preservation.2National Park Service. National Historic Preservation Act of 1966
The operative piece is Section 106. Before any federal agency spends federal funds on a project, issues a federal permit, or grants a federal license, it must evaluate whether that action will affect a property listed on or eligible for the National Register.3Office of the Law Revision Counsel. 54 USC 306108 – Effect of Undertaking on Historic Property Highway projects, bridge replacements, federally permitted cell towers, and housing developments using federal grants all trigger review. If no federal money, permit, or license is involved, Section 106 does not apply.
Review starts with the State Historic Preservation Officer, who consults with the federal agency on effects and protection strategies.4Office of the Law Revision Counsel. 54 USC 302303 – Responsibilities of State Historic Preservation Officer When the project may affect properties of religious or cultural significance to Native American communities, the agency must also consult with the relevant Tribal Historic Preservation Officer, whether or not the project is on tribal lands.5Advisory Council on Historic Preservation. Consultation with Indian Tribes in the Section 106 Review Process
Section 106 does not forbid destruction of historic sites. It requires the agency to consider the impact and, when the project would cause harm, to explore ways to avoid, minimize, or offset it. When an adverse effect is identified, the agency and consulting parties negotiate a Memorandum of Agreement setting out mitigation steps, which can include modifying alignment, documenting the property before demolition, or funding restoration of a related site.6Federal Highway Administration. Section 106 Tutorial – Chapter 4.5 Resolving Adverse Effects
What National Register Listing Actually Does
This is the single most misunderstood point in preservation law. Federal regulations state it plainly: listing does not prohibit any actions a private owner might otherwise take with private funds.7eCFR. 36 CFR Part 60 – National Register of Historic Places You have no obligation to open the building to the public, to restore it, or to maintain it. Restrictions kick in only when federal funding, permits, or licenses enter the picture and trigger Section 106.
To qualify for the Register, a property must hold significance in American history, architecture, archaeology, engineering, or culture, and retain physical integrity in location, design, setting, materials, workmanship, feeling, and association. It must meet at least one of four tests: association with historically important events, connection to significant individuals, distinctive architectural or artistic merit, or potential to yield important archaeological information.7eCFR. 36 CFR Part 60 – National Register of Historic Places
Properties generally must be at least 50 years old. A newer property can still qualify if it is of “exceptional importance.” Religious properties, moved structures, cemeteries, birthplaces, reconstructed buildings, and commemorative properties are ordinarily excluded, but each category has its own exception. A church can qualify if its primary significance is architectural rather than religious; a relocated building can qualify if it is important mainly for its design or is the sole surviving structure tied to a significant person or event.8eCFR. 36 CFR 60.4 – Criteria for Evaluation
If you own private property and oppose a nomination, you can stop it. Submit a notarized statement certifying ownership and objecting. For a district nomination with multiple owners, each owner gets one vote regardless of how many properties they own. If a majority of owners object, the property or district will not be listed. The State Historic Preservation Officer then forwards the nomination to the Keeper of the National Register only for a determination of eligibility, which recognizes the property’s significance on paper without formally listing it. The property can be listed later only if the objecting owners submit notarized statements withdrawing their objections.9eCFR. 36 CFR 60.6 – Nominations by the State Historic Preservation Officer
Local Historic Districts Are Where the Real Restrictions Live
Local governments exercise direct control over historic properties through zoning ordinances that create historic districts. The authority comes from the constitutional police power over land use, and the Supreme Court has confirmed that aesthetic goals, including preserving a community’s visual character, fall within that power.10Justia Law. Berman v Parker, 348 US 26 (1954)
When a municipality designates a district, it typically creates an appointed Historic District Commission or Landmarks Commission that reviews proposed changes to properties inside it. If your house sits within such a district, you generally need commission approval before altering the exterior, demolishing a structure, or building an addition. Commissions can deny demolition permits and reject architectural changes that would undermine the district’s character. Many owners assume a National Register plaque means they need commission approval to replace a window. That is only true if their municipality has also enacted a local preservation ordinance covering the property.
The Certificate of Appropriateness
In a locally designated district, most exterior work requires a Certificate of Appropriateness before it begins. You file an application describing the proposed work, whether that is replacing windows, adding a porch, or repointing masonry. Most commissions hold a public hearing where neighbors and interested parties can weigh in. The commission evaluates the proposal against published design guidelines and typically issues a decision within 30 to 60 days of filing. Approvals come with conditions. Denials can usually be appealed to a local zoning board or to a court.
The Standards Commissions Apply
Local commissions across the country rely on the Secretary of the Interior’s Standards for Rehabilitation. The ten principles, codified in federal regulation, come down to a few core ideas: keep the building’s historic character intact, repair rather than replace deteriorated features, and make sure any new work is visually compatible but distinguishable from the original.11National Park Service. The Secretary of the Interior’s Standards for Rehabilitation The standards call for the gentlest possible cleaning methods, matching replacement features to originals in design, color, and texture, and designing additions so they could be removed in the future without damaging the historic structure. Projects seeking the federal rehabilitation tax credit must also meet these standards and receive certification from the National Park Service.
Owner Rights and Protections
The Takings Question
The Fifth Amendment prohibits the government from taking private property without just compensation, and the Supreme Court addressed this in the preservation context in Penn Central Transportation Co. v. City of New York. The 1978 decision upheld New York City’s landmarks law, finding that preventing Penn Central from building a skyscraper above Grand Central Terminal was not an unconstitutional taking. The Court established a three-factor test that courts still apply: the economic impact of the regulation on the owner, the degree to which it interferes with reasonable investment expectations, and the character of the government action. A regulation that wipes out all economic value almost certainly crosses the line. A reduction in property value does not, by itself, amount to a taking.12Justia Law. Penn Central Transportation Co v New York City, 438 US 104 (1978)
In practice, preservation rules survive constitutional challenge so long as the owner can still earn a reasonable return and the regulation is tied to a legitimate public purpose. Penn Central also introduced transferable development rights into the analysis: New York gave the terminal’s owners the right to transfer unused development potential to nearby parcels, which offset the financial impact of the designation.
Economic Hardship Exemptions
Most local preservation ordinances include an economic hardship provision that mirrors the constitutional takings standard. To qualify, you typically have to show that the regulation makes the property incapable of earning a reasonable return. Commissions that evaluate these claims usually require extensive financial documentation: purchase price and date, recent tax assessments, debt service, two years of income and expenses, any offers to sell or lease the property, and evidence that you explored alternative uses. The bar is deliberately high.
Religious Properties and RLUIPA
The Religious Land Use and Institutionalized Persons Act gives religious organizations additional protection. It is not a blanket exemption from landmark or zoning laws, but it bars local governments from imposing regulations that substantially burden religious exercise unless the regulation serves a compelling interest and uses the least restrictive means.13U.S. Department of Justice. The Religious Land Use and Institutionalized Persons Act (March 2024) Local governments must also treat religious assemblies at least as well as nonreligious ones and cannot single out specific denominations. A church seeking to demolish its sanctuary for a larger worship space could raise a RLUIPA challenge if a commission’s denial substantially interferes with its religious mission and the city cannot show a compelling justification.
Penalties for Unauthorized Work
Altering or demolishing a designated property without approval brings consequences well beyond a warning. Local enforcement tools typically include civil fines assessed per day the violation continues, criminal misdemeanor charges in serious cases, and court-ordered restoration to the property’s prior condition. Unpaid fines can become liens against the property. In extreme situations, a court may appoint a conservator to stabilize a building when the owner refuses to act.
Owners sometimes try to sidestep preservation rules by letting a building fall apart until demolition becomes the only option. Robust preservation ordinances address this through affirmative maintenance requirements: keep roofs watertight, walls structurally sound, and windows and doors intact. Violations trigger the same enforcement machinery as unauthorized alterations, and many ordinances now define specific types of deterioration that constitute a violation, from crumbling mortar to failing foundations.
The 20% Federal Rehabilitation Tax Credit
The most valuable incentive in preservation law is a federal tax credit equal to 20% of qualified rehabilitation expenditures on a certified historic structure. The credit is allocated ratably over five years starting in the tax year the building is placed back in service.14Office of the Law Revision Counsel. 26 USC 47 – Rehabilitation Credit To qualify, the building must be listed on the National Register or located in a registered historic district and certified by the National Park Service as historically significant. The rehabilitation must be “substantial,” meaning your qualified expenses during a 24-month measuring period exceed either the adjusted basis of the building or $5,000, whichever is greater.15Internal Revenue Service. Rehabilitation Credit
Qualified expenses include most capital improvements to the building itself. They exclude the cost of acquiring the property, work that enlarges the building’s total volume, landscaping, parking lots, and other site work outside the structure. Construction loan interest used for qualified rehabilitation work can count, but the rehabilitation must be certified by the National Park Service to meet the Secretary of the Interior’s Standards.16Internal Revenue Service. Rehabilitation Credit – Historic Preservation FAQs The building must also be depreciable, which effectively limits the credit to income-producing properties like rental housing, offices, or commercial space. Owner-occupied residences do not qualify for the federal credit, though some states offer their own credits for historic homes.
You claim the credit by filing Form 3468 (Investment Credit) with your federal return for each of the five years. Before starting work, apply for Part 1 certification through the National Park Service to confirm the building qualifies as a certified historic structure.15Internal Revenue Service. Rehabilitation Credit
Many states offer their own incentives, typically as income tax credits or property tax freezes. Some provide income tax credits for a percentage of rehabilitation costs with caps that differ for commercial properties and owner-occupied homes. Others freeze property tax assessments at pre-rehabilitation levels for a set number of years. These programs generally require compliance with the Secretary of the Interior’s Standards and certification through the State Historic Preservation Office. Check with your state preservation office, since these programs change through legislative action.
Preservation Easements
A preservation easement is a voluntary legal agreement in which a property owner permanently gives up certain rights, most commonly the right to demolish or significantly alter the building’s historic features. The easement is recorded with the deed and binds all future owners. A qualified organization, usually a nonprofit preservation group or government agency, holds the easement and enforces its terms through periodic inspections.
Donating a qualified preservation easement can generate a federal charitable contribution deduction. The contribution must protect the property’s conservation purpose in perpetuity, and the recipient must be a qualified organization with the resources and commitment to enforce the restrictions. The easement must prohibit the recipient from transferring it unless the new holder also qualifies and agrees to enforce the original conservation purposes.17eCFR. 26 CFR 1.170A-14 – Qualified Conservation Contributions The deduction is based on the appraised reduction in property value caused by the easement restrictions.
A caution here: the IRS has pursued abusive easement transactions aggressively, particularly syndicated deals where investors receive deductions worth far more than their investment. The IRS designated these arrangements as listed transactions and has pursued accuracy-related penalties of 40% against participants, along with penalties against the appraisers, promoters, and tax preparers involved.18Internal Revenue Service. IRS Increases Enforcement Action on Syndicated Conservation Easements A legitimate preservation easement donated at a fair appraised value remains a valid tool, but any easement transaction should be structured with professional tax and legal guidance.