What Historic Property Developers Need to Know About Proposed Section 106 Changes

By: Heather Cooper, Architect / Historic Renovation Studio Lead

A federal advisory council voted on Friday, July 24, to advance proposed changes to the regulations implementing Section 106 of the National Historic Preservation Act. If implemented, the changes would loosen oversight of construction projects affecting historic sites and landmarks. For developers working with historic properties, the changes could affect the future of their projects with federal funding. The preservation review process governed by Section 106 can influence early due diligence, design and permitting decisions, mitigation requirements, financing schedules, and ultimately when a project can move forward.

Section 106 applies when a development uses federal funding or requires certain federal permits, licenses, or approvals. It currently requires the responsible federal agency to consider how the project could affect historic properties before the project can proceed. The July 24 vote did not change the current regulations; it advanced the proposal into formal rulemaking. The draft will now undergo interagency review before it can be published in the Federal Register for public comment.

When Does Section 106 Apply to a Development Project?

Section 106 applies to projects that a federal agency carries out, assists, funds, permits, licenses, or approves and that have the potential to affect historic properties. For Section 106 purposes, a historic property is one that is listed in, or eligible for listing in, the National Register of Historic Places.

Federal funding is one potential trigger, but it is not the only federal connection that matters. HUD or FEMA assistance, certain HUD/FHA-insured transactions, federal grants, certain U.S. Army Corps of Engineers permits, federal licenses, and the transfer of federally owned property are among the circumstances that may require review.

For developers using historic tax credits, an important distinction is often missed: Section 106 review and historic tax credit review are separate processes. A project does not enter Section 106 merely because it is pursuing historic tax credits. It may, however, be subject to both processes when its capital stack or approvals include another federal connection. The proposed Section 106 changes would not directly rewrite the federal Historic Tax Credit program, Louisiana’s Historic Rehabilitation Tax Credit, or local historic district requirements.

What Changes Are Being Proposed to Section 106?

According to summaries issued by the American Institute of Architects and national preservation organizations, the proposed rewrite would give federal agencies substantially more control over Section 106 decisions and schedules. It would reduce the formal roles of State Historic Preservation Offices (SHPOs), Tribal Historic Preservation Offices (THPOs), Tribes, local governments, preservation organizations, and the public. It would also narrow which resources and activities fall within the process and weaken the current emphasis on identifying ways to avoid, minimize, or mitigate adverse effects. The AIA stated on its website that the “proposed rewrite of Section 106 would decimate [the] historic review process.”

The proposal’s stated objective is to reduce regulatory burden and give federal agencies greater control over review decisions and schedules. For developers, however, speed is valuable only when it also produces a predictable and durable decision that can withstand community scrutiny, lender and investor due diligence, administrative changes, and potential legal challenge.

How Could Section 106 Changes Affect Developers?

FASTER REVIEW MAY NOT MEAN GREATER PREDICTABILITY

The current process can be time-consuming, but it provides a recognized framework for reaching and documenting decisions. Greater agency discretion could shorten some reviews while producing more variation among agencies and federal programs. A faster initial determination may offer limited value if unresolved issues later result in redesign, permitting conflicts, community opposition, financing delays, or litigation.

EARLY CONSULTATION CAN PREVENT LATE PROJECT SURPRISES

SHPOs, Tribal representatives, local governments, preservation organizations, and community stakeholders often possess information that is not apparent in a building survey, environmental report, or title review. Consultation can identify archaeological concerns, historic district issues, culturally significant places, prior commitments, and acceptable mitigation strategies before a project’s design, financing, or schedule becomes difficult to change.

Reducing formal consultation does not eliminate those underlying interests. It may allow unresolved concerns to surface later, when responding to them is more expensive and disruptive.

FEDERAL CONNECTIONS SHOULD BE IDENTIFIED BEFORE THE CAPITAL STACK AND SCHEDULE ARE LOCKED

Developers should identify every potential federal touchpoint during acquisition and predevelopment, not only direct grants. A project may involve HUD assistance, FHA-insured financing, FEMA recovery funds, a federal permit, or another approval that brings Section 106 into the development schedule.

The proposed rewrite may narrow some triggers or create additional procedural off-ramps, but the applicability analysis will remain highly project-specific. Developers should not assume that a smaller federal contribution or an indirect federal role automatically eliminates the need for review.

HISTORIC TAX CREDIT AND SHPO COORDINATION WILL REMAIN IMPORTANT

Even if the SHPO’s formal role in Section 106 is reduced, SHPO coordination remains central to National Register matters, federal and state historic tax credits, and many state or local preservation processes. Developers should not interpret a change to Section 106 as a reason to defer preservation coordination on a tax-credit or adaptive-reuse project.

What Should Historic Property Developers Do Now?

Until any new regulations take effect, the existing Section 106 process remains in place. Developers should continue to identify potential federal connections early, build adequate review time into project schedules, and coordinate Section 106 with historic tax credit, environmental, permitting, and local preservation requirements.

Whatever form the final regulations take, the most effective risk-management strategy will remain early due diligence and informed consultation. A shorter formal review process will not eliminate the historic, cultural, community, or regulatory issues associated with a property. Identifying those issues before acquisition, design, and financing decisions are fixed can help prevent costly redesign, approval delays, and threats to project funding.