Upstairs in the Vieux Carré: An Analysis of Incentives and Tools to Catalyze Private Sector Rehabilitation

Millions of tourists flock to New Orleans’s famed French Quarter each year to enjoy its offering of unique culture and historic buildings. However, many of the low-rise historic buildings are in need of rehabilitation. These blighted structures threaten the vitality of the Vieux Carré Historic District. This thesis examines public sector incentives and tools to determine their ability to catalyze private sector rehabilitation of the French Quarter’s low-rise historic buildings. A list of extant incentives and tools were compiled and tested using two hypothetical projects, each representing a different type of common French Quarter building typology. The goals of this financial analysis were to determine which incentives provided the greatest monetary impact and whether or not the impact was sufficient to motivate the private sector to undertake the project. The analysis determined that state and federal historic tax credits were the most effective incentives, but that they were not adequate to spur a significant amount of rehabilitation activity on the French Quarter’s low-rise buildings. A sensitivity analysis was conducted on both federal and state historic tax credits to determine the appropriate tax credit rate. The analysis determined that combined tax credit rate of up to 90% of Qualified Rehabilitation Expenditures was necessary to achieve the necessary unleveraged yield for real estate developers to undertake these small-scale rehabilitation projects. Other recommendations included the adoption of tiered tax credit rates, reform of the Louisiana residential rehabilitation tax credit program, and the adoption of a rehabilitation sub-code under the parish’s building code ordinance.