Why Developers Are Looking Twice at Small-Town Main Streets

Tax credits, historic charm, and new demand are putting rural rehab projects back on the map. 

Photo: McGhiever

For years, small-town main streets across America told a familiar story: boarded-up storefronts, aging brick buildings with fading signage, and a steady trickle of businesses moving elsewhere. But today, those same streets are writing a different chapter—and developers are paying attention. 

With the help of historic tax credits (HTCs), shifting demographics, and the appeal of walkable, character-rich places, small-town commercial districts are emerging as viable—and often surprisingly lucrative—development opportunities. 

A Market Developers Once Overlooked 

Traditionally, developers prioritized urban cores, where population density and high rents justified steep investments. Smaller towns were seen as too risky, too slow, or simply too far off the radar. 

But a few trends are changing that equation: 

• Remote work has allowed professionals to live where they choose, not just where their jobs are. 

• Local tourism and "shop local" movements are revitalizing small-town economies. 

• Cost-conscious entrepreneurs and nonprofits are seeking affordable spaces to launch their work. 

• And critically, many main street buildings qualify for historic rehabilitation tax credits, reducing redevelopment costs significantly. 

In short: the numbers are starting to work in places they didn’t before—especially for developers who know how to navigate tax credit programs and pair them with community partnerships. 

Tax Credits Make the Math Work 

The financial story often starts with state and federal historic tax credits. For buildings listed on (or eligible for) the National Register of Historic Places, developers can often access: 

• Federal HTC: A 20% tax credit on qualified rehab expenses. 

• State HTC (in participating states): Ranges from 10% to 25% and may be refundable or transferable. 

These credits can offset hundreds of thousands of dollars in project costs, and in many states, credits can be sold to generate cash post-project. In smaller communities where margins are tighter, this can make the difference between a stalled plan and a successful rehab. 

Case Study Snapshots 

• A former hardware store in rural Iowa was transformed into a co-working space and coffee shop, drawing in remote workers and weekend visitors. 

• In Colorado, a century-old opera house was restored as an event venue, boosting local tourism and creating seasonal jobs. 

• In Louisiana, a once-abandoned hotel became affordable senior housing, supported by a combination of SHTCs and community block grants. 

These projects are not just about real estate—they’re about catalyzing long-term economic activity in places that need it most. 

What Developers Should Consider 

While the opportunity is real, rural historic redevelopment comes with its own set of challenges:

• Community buy-in is critical. Local residents are often deeply tied to these buildings—developers who approach with respect and openness are more likely to succeed. 

• Access to construction talent can be limited. Bringing in crews experienced in historic rehab may take extra coordination. 

• Lenders may need education. Some small banks are unfamiliar with HTC-backed deals, so developers should be ready to explain the capital stack. 

But for those willing to learn, partner locally, and stay flexible, the reward is more than financial—it’s about helping small towns write new stories in buildings that still have plenty of life left in them. 

Final Thought: From Risk to Reward 

Main streets aren’t just symbols of the past—they’re becoming platforms for the future of rural living and local business. For developers looking beyond the metro, small towns offer a unique combination of charm, community support, and underutilized financial incentives. 

In a world where place matters more than ever, small-town main streets are quietly becoming some of the smartest, most meaningful investments around. 

Looking for flexible, tax-advantaged financing to support your historic rehab project? Learn more about the Rethos Historic Rehab Loan and how it can help move your project forward.