Compared to traditional communities, the residential environment in historic districts (HDs) is generally poor. Tourism development within HDs has affected these environments. As tailored assessment indicators are absent in HDs, this study introduces the historic district residential environment assessment indicator (HD-REAI) – a framework designed for the urban setting of HDs. The HD-REAI integrates Maslow’s theory and addresses the challenges and attributes of HDs. HD-REAI focuses on factors like housing property rights and district culture, which are pivotal for HDs. This enables a more nuanced and relevant evaluation of the residential environment in these areas. This study details the development of the HD-REAI and validates its efficacy through its application in two Northern Chinese HDs. The results demonstrate that the HD-REAI effectively assesses the environment, offering a specialized and context-sensitive tool. Moreover, different socioeconomic attributes have different effects on the assessment results. This study could provide a basis for constructing more refined and context-specific assessment tools to enhance residential environments in HDs.