Carol.......a couple of things could be happening.
From most to least likely - in my opinion.
1. The last paint job was not done well.
2. They used latex primer, which is pulling the oldest paint off of the house.
3. There is physically so much paint on the house that it is falling off. This does happen - it takes many, many layers of paint - but it happens - it is called an intercoat adhesion failure.
I would have the siding stripped down to bare and begin again - a ton of work - but perhaps you could find a grant to help, since you are in an historic district.
I would try not to replace too much of the siding either - wood this old is likely from larger trees - this type of wood is more stable than new.
When you get it clean - oil primer and 100% Acrylic Latex paint.........that's the way to go!
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