The back-to-the city trend in recent years has not ended Americans’ love of suburbia, but it has resulted in a noticeable shift in living preferences. Today, a not insignificant share of the population, in all age groups, is opting for urban neighborhoods that a decade or two ago were considered undesirable or nonresidential.
For financial advisors, this trend in housing preferences has ramifications for clients’ financial plans. It also increases potential liabilities of which advisors and clients themselves may not be aware.
For example, many urban neighborhoods that are magnets for new city dwellers are designated historic districts. These are areas for which a local government has established rules and regulations regarding the external appearance of homes, and at times their internal features, to preserve their historical integrity.
There are about 2,300 local historic districts spread throughout the country, and they are not confined to urban areas. Many suburban and even rural historic districts exist, and newcomers buying homes in these districts may not be aware of the restrictions on renovations they may face, or the cost of making changes that comply with requirements.
For those who love the charm of an older home and derive satisfaction from living in an area with historical significance, the hassle and cost of complying with historic district requirements — such as limitations on external paint colors and types of windows that can be used — may be annoyances, but not deal-breakers. In fact, buying a home in an historic district is often a good investment.
PlaceEconomics, a Washington-based research firm that specializes in analyzing the economic impact of historic preservation, has found that property values in local historic districts appreciate significantly faster than the market generally in the vast majority of cases.