A couple days ago, Governing ran a story entitled “Historic Preservation is Great, Except When it Isn’t." Written by Scott Beyer who calls himself a “market urbanist,” the piece focused on preservation in New York City. Since PlaceEconomics just finished a study of preservation in New York, I thought we were uniquely situated to respond.
Beyer was right on several things. He cited research that showed that properties in historic districts had higher values than similar properties not in historic districts (we usually call that the “preservation premium”) and that even non-historic properties nearby see an increased value (we call that the “preservation halo effect”). While we usually look at rates of change in values rather than the values themselves as a more accurate picture, the findings he cited are consistent with research we’ve done.
But two things are interesting here. First, when we first began systematic research on the impacts of historic preservation 30 years ago, the most common complaint was “we don’t want those historic districts. It will be another layer of regulation and that means property values will go down.” When, as Beyer notes, the opposite has been true, now the complaint is “those damn historic districts, they just make property values go up.” I suppose Beyer’s general libertarian ideology towards land use laws means whichever the outcome, that regulation is still bad.
What is even odder, however, is that one learns in Economics 101 that prices ARE the expression of the marketplace. That buyers are willing to pay higher prices for properties in neighborhoods of protected character is the market at work. Our findings reveal a general rule of thumb that the “preservation premium” is about 2/3 driven by the character of the neighborhood and 1/3 from the protection that local historic districts provide.
In fact, in economics there is a name for that—revealed preference. Revealed preference is the principle that the best way to measure consumer preferences is to observe their purchasing behavior. If purchasers are willing to pay more for a product of the same utility, they are revealing their preference—in this case to live in a historic home in a historic district. This is “market urbanism” at work.
But as demonstrated in our New York study, it is not just in housing prices where a revealed preference for historic districts emerges. Businesses, and their employees, that disproportionately choose to locate in historic districts include knowledge workers, tech workers, restaurants, and the creative class occupations. They are choosing where to locate based on the quality of the character of those historic neighborhoods with the confidence that that character will also be there tomorrow. And by the way, in Manhattan, historic districts have a disproportionate share of businesses owned by women and minorities and very small firms.
Beyer suggests that having historic districts is constraining needed development. However, in the City of New York less than five percent of the developable parcels are under the purview of the Landmarks Commission. We are such believers in “market urbanism” that we think the real estate development community is smart enough to make a living on 95% of the land not historically designated. It should be noted that, in each of the five boroughs, the historic districts are among the densest neighborhoods. Low density areas in New York? A whopping 1.1% are in historic districts; 98.9% are not.
The oft repeated claims “you can’t build new in historic districts” and “historic districts are preventing the creation of affordable housing” are among the other pieces of misinformation common among preservation’s critics. The “Housing New York” initiative was established with the intent of creating and preserving 200,000 units of high-quality affordable housing. Over the past five years, more than 1,700 units in that program have been created or preserved in local historic districts. Nearly a quarter of those have been through new construction, a rate not dissimilar to the 33% share of new affordable housing units created in the rest of the City.
Beyer also repeats a common pattern of critics of historic preservation—critique by vignette. He cites an example of a church that stood vacant because redevelopment plans were not approved by the Landmarks Commission. Well the plans were ultimately approved, but that’s not even the point. Less than 1% of applications to the New York Landmarks Preservation Commission are rejected. Far more people are run over by taxis in New York every year than receive a “no” on their landmarks application.
A little research might have helped this article. Beyer praises Seattle for having a transferable development rights ordinance (TDR) to allow density to be transferred from historic buildings in exchange for being able to build higher elsewhere. Well, New York had among the first such ordinances, and much of the redevelopment of the Theater District happened because that tool was effectively used.
The article celebrates the redevelopment in Atlanta of old brick warehouses to accommodate new uses. He’s exactly right. It’s just too bad that in his criticism of historic preservation in New York, he didn’t point out that Facebook, Google, Netflix, Apple, and Amazon have within the last year made major investments, either in redevelopment or in long-term leases, in exactly those types of historically designated properties.
Beyer is all for using incentives, including not just TDRs but property tax assessment freezes, tax credits, and other tools. Absolutely right. But every example he cites reflects the understanding that effective market-based preservation uses both carrots and sticks. Seattle, Atlanta, New York City, Savannah, and most of the California cities using the Mills Act property tax relief use incentives in conjunction with, not instead of, the regulatory protection of their historic properties.
Finally, Beyer, along with other preservation critics, seems to be stuck in the historic preservation of the 1970s. First, they are for designating buildings based on grand architectural character but think buildings “that aren’t distinctive” and “uninteresting” and should be razed. It was preservationists’ recognition that our cities’ histories are incorporated into more than just the buildings of rich, dead, white guys that led to a much broader and more diverse set of criteria of what merits protection.
Second, the article ends with this: “The idea of putting historic status around whole districts…is straight out of the top-down planning playbook.” Even a most cursory examination of the reality of historic preservation would have shown the author that today in most American cities (including New York if he would have but asked), local historic districts are only created when local residents ask that the quality and character of their neighborhood be protected—the polar opposite of top-down planning.
We at PlaceEconomics are all for Market Urbanism. And historic preservation is market urbanism at its best.
Donovan Rypkema is president of Heritage Strategies International and principal of PlaceEconomics. This piece was originally pitched to Governing, who were not interested in a counter perspective to their original piece. #Economics#City-ScalePreservation