How to Avoid the Biggest Historic Building Restoration Pitfalls: Lessons from 40 Years in Detroit

I love this city! There is something about the soul  and the grit of Detroit: the history baked into the very bricks of our neighborhoods. For over 40 years, I’ve walked these streets, looked at crumbling facades, and seen not "blight," but possibility. I’ve seen the families who deserve a beautiful place to call home and the historic gems that are just waiting for someone to give them a second chance.

But let me tell you, historic restoration in a city like Detroit isn’t for the faint of heart. It is a high-stakes game where you’re juggling architectural integrity, complex financial models, and the ever-shifting landscape of government regulations. We’ve had some incredible wins, like our Palmer Park Square project, which transformed a whole section of the neighborhood into vibrant, mixed-income housing.

However, even with four decades of experience, the road can be incredibly rocky. If you want to survive in this business, you have to be ready to fight for your vision. Today, I want to pull back the curtain and share some "real talk" about the pitfalls that can sink a project: and the $5 million lesson that still keeps me up at night.

The $5 Million Kitchen Wall: A Cautionary Tale

When we set out to restore buildings like the Sarasota, the Seville, the La Fer, the Madrid, the Eldorado  and the Palmer Lodge in the Palmer Park Apartment District, we knew we were dealing with icons. These are 1920s masterpieces. Our goal was: and always is: to create a marriage made in heaven between historic preservation and modern, dignified affordable  living.

But here is the pitfall most people don’t see coming: Regulatory Overreach.

During the final phase of our Palmer Park restoration, during the Part III approval process, we hit a wall, literally. And this is where the story gets so frustrating. MSHDA required full-size appliances in the affordable housing units, which meant we had to move the kitchen wall to make the layout work. At the very same time, the National Park Service (NPS), in reviewing the final step in the approval process for Federal Historic Tax Credits, claimed we committed "wholesale demolition". Even though all of the demolition plans were submitted and approved to the City of Detroit and SHPO and we did not deviate from the plans, they denied our Part III approval on 5 of the 6 buildings. So there we were, caught between two government requirements that directly conflicted with each other. How do you satisfy affordable housing standards and historic standards when government agencies and funding sources disagree?

What made it even harder is that the City of Detroit and SHPO had already approved the plans, and there were zero deviations from what had been submitted. We were not freelancing. We were not cutting corners. We were doing exactly what had been reviewed and approved at the local and state level.

Then came the inconsistency that still stuns me. NPS approved the first Part III, the Palmer Lodge ( which by the way when doing the calculations during the litigation this building had the highest percentage of interior demolition)  They denied the second, The Eldorado, but I fought and WON that appeal in Washington DC. Then I appealed the final four buildings and NPS denied the remaining four buildings, under the same circumstances, and I LOST that appeal. Same issue. Same logic. Different outcomes. That is exactly the kind of arbitrary and capricious decision-making that makes developers feel like they are dealing with a moving target in government agencies instead of a clear standard.

And then came the real shocker. In the middle of all this, an NPS representative said: "Maybe historic credits should not be used in conjunction with LIHTC to provide affordable housing." Think about that for a minute. In a city like Detroit, where the need for high-quality affordable housing is so urgent, how can the very tool designed to preserve historic buildings not be layered into the capital stack to help provide affordable housing?

Despite our plans being compliant concentrating on bringing the exterior and the common area's back to their original grandeur  and the interior unit changes being minimal, the NPS denied the tax credits for those buildings over moving the kitchen wall. Meanwhile, this was a project that went on to win the State of Michigan Historic Project of the Year. So on one hand, the work was being recognized as a model of preservation excellence. On the other hand, DC bureaucracy was treating it as if we had violated the spirit of the program. How is that not arbitrary and capricious?

This is the reality of the work. You can have the best intentions, the most experienced team, and a community cheering you on, but a single bureaucratic decision can create a massive financial gap. And the ripple effect was devastating. We spent over $1 million in legal fees trying to fight for what was right. We spent 3 years in litigation. We were forced to sell the remaining 6 buildings in our pipeline for the Palmer Park neighborhood,  just to keep our staff employed and the company afloat. And in one of the bitterest twists of all, the tax credit investor ended up with the project that we had committed over a decade of our life to bring to fruition,  a $36 million development with no conventional debt.

That $5 million-plus loss wasn't just a number; it represented the margin we use to ensure our rents stay affordable while maintaining the highest quality of workmanship. We stayed the course because we are committed to Detroit, but a blow like that would have many developers give up, as I have said over and over, "it should not be this hard to do something so good."

Pro Tip: When two government mandates conflict, the developer is usually the one left holding the bag. Always build a "buffer" into your timeline and budget—especially for historic tax credit projects.

The Palmer Park Ripple Effect: By the Numbers

• $5 Million+: Federal Historic Tax Credits denied.

• 3 Years: Spent in litigation..

• $1 Million+: Drained in legal fees just to fight for the vision.

• 6 Buildings: Lost from our future development pipeline.

• $36 Million: Total development value now owned by the tax credit investor with zero debt.

Local Roots vs. The "Fly-By-Night" Investor

This brings me to one of  the biggest pitfalls in the Detroit market today: Speculation without Commitment.

Following the major loss we incurred in Palmer Park we were forced to sell almost a dozen buildings to continue to stay in business and take care of our families. We seen a wave of out-of-state investors: come into Detroit with big promises and even bigger spreadsheets. They bought up dozens of buildings and single family homes. . Buildings that we had intentionally purchased in specific neighborhoods where we had been committed for over a decade.

What happened? Now, those beautiful buildings remain  vacant and boarded up, hurting the very neighborhoods we’ve worked so hard to rebuild.

In Detroit, you cannot just be an investor; you have to be a stakeholder. You have to care about the "soul" of the building and the "dignity" of the residents. At Shelborne, we lived and breathed this city. We knew that when we restore a building, we weren't just fixing a roof; we were acting as a catalyst for the entire block, rebuilding neighborhoods, and providing hope to the residents who lived there. 

Navigating the "Financing Trifecta"

If you’re looking to get into this space, you have to master what I call the Financing Trifecta. To make affordable, historic housing work in Detroit, you have to juggle:

1. LIHTC (Low Income Housing Tax Credits): This is the engine that drives affordable housing.

2. Federal & State Historic Tax Credits: The reward for preserving our heritage and the critical gap filler for completing the capital stack.

3. Brownfield Credits: Essential for dealing with buildings being functionally obsolete and any environmental "surprises" these old buildings may have in store.

It is a complex puzzle. When you get the mix right, everybody wins. The city gets a restored landmark and an increased tax base, the community gets high-quality,  affordable housing, the building gets another hundred years of life and most importantly the residents get a beautiful affordable place to live and raise a family. But if you miss one piece: like that NPS credit I mentioned: the whole house of cards can come tumbling down.

That is why our 40 years of experience isn't just a talking point; it’s our survival kit. We’ve learned how to bridge those gaps and how to navigate the technical complexity of financial models without losing sight of our mission.

Why We Keep Fighting

You might ask, "Kathy, if it’s this hard: if you’re losing $5 million over a kitchen wall: why do you keep doing it?"

It’s simple. Because every time I see a resident walk into a newly renovated apartment at La Vogue Square or Chalmers Square and see their eyes light up because they have a beautiful, safe, and affordable place to raise their children, I know it’s worth it.

Transformation is our business, but human happiness is our goal.

We aren't just building apartments; we are building a future for Detroit. We are ensuring that the next generation grows up in a city that respects its past while providing a foundation for their success and hope for their future. 

The Big Picture: A Call to Action

The future of Detroit depends on our ability to revitalize these historic districts correctly. We need developers who are in it for the long haul, not just the quick flip. We need policies that recognize the reality of construction costs and the need for flexibility in historic standards.

And we need to be honest about the neighborhood impact when that system fails. The vision for Palmer Park did not just slow down; it stalled. Buildings that should have been completed in this past decade—as a part of the beautiful revitalization vision we worked so hard on—have been left unfinished.

Our plan for rebranding the neighborhood to "Uptown" Detroit was vibrant: mounted police, trees lit up throughout the district, and lights strung across the streets like you see in Paris. We envisioned commercial space built into the first floor of the last two centrally located buildings, with cafes, bistros, and bakeries integrated into the overall plan. Instead, these projects were left unfinished by investors who came in, failed to execute, and now those properties are sitting in receivership.

Who really suffers when the system breaks down? The community.

Are we going to let our history crumble into receivership, or are we going to stand up and do the hard work of historic rehabilitation?

At Shelborne Development, we’ve already made our choice. We’re staying. We’re building, and we’re working hard for Detroit to be a place where anyone  can afford to live in a home they are proud of.

Stay tuned as we continue to think creatively about what’s possible in historic preservation combined with energy efficiency! The best is yet to come!

If this story resonates with you, please share this post to help raise awareness about the need for collaboration between everyone at the table. We must work together when building the capital stack needed to rehabilitate vacant, blighted, historic buildings into quality affordable and mixed-income housing.

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