Rising Above: Upper-Floor Housing Can Revitalize Small Town Economies

In small towns across the country, the potential for economic growth may be hiding in plain sight—above the bustling sidewalks of downtown streets. Upper-floor housing, often overlooked in urban planning, is increasingly recognized as a key driver for revitalizing small-town economies. By converting the underused or vacant spaces above shops into vibrant living areas, small communities can foster growth, increase foot traffic, and breathe new life into their downtown districts.

In many small towns, downtown areas are struggling to compete with sprawling suburban developments and online shopping. The once-thriving "main streets" have become quieter, with empty storefronts and dwindling foot traffic. However, introducing upper-floor housing to these areas can reverse the trend. When residents live within walking distance of businesses, they naturally help sustain local shops, restaurants, and services.

"People living downtown tend to become loyal customers to businesses within walking distance," says Kristen Johnson, Kendallville’s Main Street Executive Director. "They grab coffee at the local café, shop at the local boutique, and enjoy meals at nearby restaurants. It's a win-win for the community."

But the benefits of upper-floor housing goes beyond increased foot traffic.  With more people living downtown, tax revenue grows and property values increase as buildings are renovated, leading to higher tax revenues for local governments. In addition, renovating older buildings creates construction jobs, while a bustling downtown attracts entrepreneurs and business owners, as well as tourists seeking new experiences.

Of course, converting upper floors into housing often has roadblocks. Many small-town buildings require significant investment to meet modern safety codes and accessibility standards. Property owners may be hesitant to take on the risk without the help of local incentives.  To address these challenges, the following incentives are available to downtown Kendallville property owners who wish to renovate their buildings:

·          Kendallville Redevelopment Commission (RDC) Façade Grants: The RDC offers a variety of grants to improve the look and integrity of your building, including grants for windows, tuckpointing, awnings, and other exterior aesthetics of the building, as well as grants for roof repair/replacement, signage, and parking lot repairs. 

·         Vacant Tax Abatements: This incentive offers a tax break to individuals who purchase a building within the economic development target area that has been vacant for more than one year.

·         Historic Tax Credits:  The Division of Historic Preservation and Archaeology (DHPA) offers a 20% income tax credit on qualified expenses for the rehabilitation of historic, income-producing buildings.

Several of Kendallville’s downtown building owners have recently taken on the challenge of creating 2nd floor living spaces – both in the form of apartments, as well as short- and long-term stay AirBNB rentals.  While the upfront costs may require taking out a loan, the benefits over time can be substantial.

For small towns looking to thrive in an increasingly urbanized world, the path forward may be upward. By embracing the potential of upper-floor housing, communities can create a mutually beneficial relationship between residents and businesses, ensuring downtown areas remain the heart and hub of Kendallville’s social and economic life.

The formula is simple but powerful: more people downtown equals more business, more vibrancy, and more opportunities for growth—one floor at a time.