There are two primary types of historic districts: National Register historic districts and local historic districts.
Historic Home, 1940'sLocal historic districts like Owl's Head and Sherman Hill in Des Moines require that exterior improvements meet certain standards, as interpreted by the Historic Preservation Commission. In a local historic district, for example, a property owner cannot alter fencing, siding, windows, or porches without a "Certificate of Appropriateness" being issued.
National Register historic districts are essentially all "carrot" and no "stick". The myth that the government will restrict what property owners can do to their privately held buildings in a National Register historic district is as persistent as it is false. In a National Register District, one can install vinyl siding, add an ugly porch, even demolish their house if so desired!
The "carrot" is Historic Tax Credits. Qualifying renovation work on buildings that contribute to the historic district is eligible for a refundable state income tax credit of up to 25% (and in some cases an additional Federal tax credit of up to 20%)! In my experience, there is no development tool more effective for spurring sustainable neighborhood reinvestment. Not only does renovation have the direct benefit of returning vacant and underutilized properties back to use, but it also has the associated benefits of raising property values, directing investment back to developing neighborhoods, paying of local wages and material purchase among others.