Forum Journal & Forum Focus

Economics and Historic Preservation 

12-09-2015 17:35

Here`s the deal:

  • We are going to have to choose between historic preservation and economic development.
  • Preservation is kind of nice when times are good, but we simply can`t afford it when local budgets are stretched to the limit.
  • It`s great that the rich can afford to restore their mansions, but the public sector certainly can`t afford to rehabilitate these old buildings and most certainly preservation is not a cost-effective means of housing the poor.
  • Historic districts, because of the restrictions they place on properties, inherently reduce property values.
  • Close-in residential neighborhoods are in such a state of deterioration that we need to raze them to get rid of slum and blight, the crime and the eyesores those neighborhoods represent.
  • Preservation probably works as a tourism strategy in Santa Fe or Charleston but is antithetical to broader economic development anywhere else.

Those statements have three things in common: we hear them all the time; they are all economic arguments; and they are all absolute, unequivocal, unadulterated hogwash. And "hogwash" is the more polite term I substituted when I found out I was going to be speaking at Trinity Church.

To have the theme of a National Trust conference be preservation economics is almost amazing to me. My first National Trust meeting was a little over a decade ago. I do not exaggerate when I tell you that there were violent arguments about whether real estate developers should even be allowed to register at the conference--somehow that was diluting the purity of the movement.

This conference, I would suggest to you, marks the date when economics takes its rightful place as one of the pillars upon which the preservation ethic is based. It certainly is not more important than the cultural, aesthetic, sociological or historical bases, but the time has come to recognize its equal importance.

This time has come in part because of the leadership of Dick Moe, Peter Brink and others at the Trust, is evidenced by the emergence of people like Tom Moriarity and Brad White into leadership positions at Preservation Action, through the successes around the country chronicled by Roberta Gratz, by the willingness of groups like the Historic Landmarks Foundation of Indiana to get in and get their hands dirty in real estate development.

But perhaps more than anything else, it has been the incredible impact of the National Main Street Center and its philosophy of economic development through historic preservation. That has made believers out of more crass unrepentant real estate capitalists like me than can possibly be counted; an impact far beyond the 900 towns with Main Street programs. The "Main Street Approach" has now become part of the vernacular of the field of economic development. It would be nice to say this success stems from the brilliance of the staff, the quality of the publications, the excellence of the conferences. Not so. This answer is much more simple: economic development through historic preservation works--it works.

If you ask your local economic development director what is the single best measurement of economic development success, I`ll tell you what the answer will be--jobs. Every community needs jobs. So let`s take a look at historic preservation and job creation.

Dollar for dollar, historic preservation is one of the highest job-generating economic development options available. In Michigan, $1,000,000 in building rehabilitation creates twelve more jobs than does manufacturing $1,000,000 of cars. In West Virginia, $1,000,000 of rehabilitation creates twenty more jobs than mining $1,000,000 of coal. In Oklahoma, $1,000,000 of rehabilitation creates twenty-nine more jobs than pumping $1,000,000 of oil. In Oregon, twenty-two more jobs than cutting $1,000,000 of timber. In Pennsylvania, twelve more jobs than processing $1,000,000 of steel. In California, five more jobs than manufacturing $1,000,000 of electronic equipment. In South Dakota, seventeen more jobs than growing $1,000,000 of agricultural products. In South Carolina, eight more jobs than manufacturing $1,000,000 of textiles. Historic preservation creates jobs.

At the same time, rehabilitation will have a far greater impact on the local economy than will the same amount of new construction. Suppose a community is choosing between spending $1,000,000 in new construction and spending $1,000,000 in rehabilitation. What would the differences be? $120,000 more dollars will initially stay in the community with rehabilitation than with new construction. Five to nine more construction jobs will be created with rehabilitation; 4.7 more new jobs will be created elsewhere in the community with rehabilitation; household incomes in the community will increase $107,000 more with rehabilitation.

But job creation and household incomes aren`t the only measures. There probably isn`t an elected official in the country that doesn`t claim to be for fiscal responsibility. And I politically and philosophically endorse that position. But let me make one thing unequivocally clear--any community of any size that does not have a formal program of downtown revitalization cannot claim to be doing everything possible to save taxpayers` dollars.

Every community has already made a huge investment of public funds in downtown streets, sidewalks, water and sewer lines, parking lots, streetlights and other infrastructure. A downtown that is allowed to deteriorate with buildings sitting empty wastes assets that have already been paid for. It is exactly the same as buying a new police car but only driving it on Fridays, or paying a full-time salary to an assessor who only works twice a week. Certainly taxpayers wouldn`t stand for that as public policy. A community wastes taxpayers` dollars every day when downtown is being used at thirty or forty or fifty percent of its capacity. Commitment to downtown revitalization and reuse of downtown`s historic buildings may be the most effective single act of fiscal responsibility a local government can take.

Forget preservation and the environment--downtown revitalization saves tax dollars; sprawl wastes tax dollars. You tell me who is the fiscal conservative.

Let`s leave downtown for a moment and go to residential neighborhoods. Here`s what a recent study by the National Association of Home Builders discovered: "The size of a house and the number of bathrooms are important in determining the price of a home, but the characteristics of the neighborhood in which a house is located affect price the most...The analysis found that the presence of abandoned buildings in the neighborhood reduces the price more than thirty percent."

Now where are those abandoned houses found? In our older and historic neighborhoods. If municipal budgets really are stretched, how much more fiscally irresponsible can you be than to allow the neighborhoods from which you draw the taxes to decline in value? Not to mention what that does to the security of bank loans, people`s life savings wrapped up in home equity, and crime that gravitates almost instantly to abandoned houses.

Oh yeah, some idiot police chief will have a brilliant solution: "Oh, you have a crack house in your neighborhood? We`ll send over a bulldozer tomorrow, level the house, and that will take care of it." Right! Having an empty lot next door instead of an empty house means having hookers for neighbors instead of drug dealers--some improvement in quality of life that is.

And those of you from smaller communities who say, "abandoned houses are a problem in Detroit or Philadelphia but not in our small town" are kidding yourselves. Half my work is in places of less than 20,000 people and abandoned houses are there too--with the same negative effects.

As counter point, consider the study last year of a State of Washington preservation program. Here was one of the findings: While almost sixty percent of the rehabilitated buildings under this program were either vacant or completely abandoned buildings located in blighted neighborhoods, they are now fully occupied.

Now you don`t have to be the president of the local Mensa chapter to make the connection. The rehabilitation of abandoned housing doesn`t just preserve a single building. It preserves the value of the entire neighborhood. That`s what historic preservation has become. It isn`t about restoring buildings; it`s about restoring communities, and that includes restoring the economic value of communities.

What mayor of a community of any size doesn`t struggle with how to get middle-class taxpayers to move back to the city? But think for a minute where there have been pockets of back to the city migration--Columbus, St. Paul, Chicago, Louisville, Boston, New York, Des Moines, Seattle, Oakland. It has not been back to the city in general. In every instance it has been back to historic neighborhoods within the city. City governments that allow their historic neighborhoods to disappear through demolition, neglect, commercial encroachment or abandonment preclude themselves from being beneficiaries of a future back to the city movement.

While we`re on the subject of neighborhoods, we might as well come face-to-face with another issue preservationists are unfairly saddled with--gentrification. Yes, preservationists encourage reinvestment, renovation and relocation to historic neighborhoods. But not through the displacement of existing long-time residents. Preservationists understand better than anyone that the real character and quality of neighborhoods come from people, not buildings.

When solutions have been developed to prevent displacement, those solutions have almost always come from preservationists. In Savannah, Cincinnati, Indianapolis and elsewhere preservationists have found ways of bringing in new people, new money, and new businesses without displacing the residents who for too long struggled alone to maintain their neighborhood and its sense of place. It is time we acknowledged that for our communities to be reborn we have to have economic integration--and our historic neighborhoods provide the best environment for that to happen.

Henry Jordan, I can`t tell you how thrilled I was on Thursday to hear you say that Chicago Housing Authority Chairman Vince Lane is joining your Board of Trustees. I don`t know much, and everything I do know I`ve learned from others, and I`ve learned a lot from Vince Lane. I had a chance to work with him last year in New Orleans on a very troubled public housing project--St. Thomas. This is a project so dangerous that the housing authority didn`t have a resident manager there, sometimes cab drivers wouldn`t take us there, and nobody knew how many vacancies there were.

But through the public housing grapevine the residents of St. Thomas knew about Vince Lane. They had heard from friends in Chicago that the quality of life in the public housing there was for the first time getting better instead of worse. Because Vince Lane knows the importance of economically integrated communities. And he`s done it in Chicago without involuntarily relocating a single tenant.

So beware, preservationists, when you hear, "We don`t want historic preservation because we don`t want gentrification." There are those on both the right and the left who benefit politically from keeping the poor in isolation. But the poor don`t benefit--just ask Vince Lane or the residents of his economically integrated developments in Chicago or the residents of St. Thomas. The poor don`t benefit and neither does preservation. And our fellow preservationists have found ways of encouraging reinvestment which don`t result in displacement.

Dick Moe mentioned in his address on Thursday that there is an inherent tension between the costs of preservation and providing affordable housing, and I heartily agree. So if there are ways we can speed up the approval process at HUD and at the Park Service, by all means let`s do so. If there are changes that should be made in the Secretary`s Standards--particularly regarding interiors--let`s make them.

But I think we have to ask ourselves why the Standards exist at all and I think it is to assure the quality and the integrity of the structure when the work is done. There are those who have suggested that a somewhat lesser standard be applied when dealing with low-income housing preservation projects. But what does that say? That low-income people won`t know the difference? That low-income people won`t care? That certainly hasn`t been my experience. If procedures, policies, interpretation, or the Standards themselves need to be changed to make residential rehabilitation work better, let`s change them--but change them for all of us, not develop a lower standard for the poor.

There`s another bit of economic silliness we are barraged with--that historic districts reduce property values. Peter mentioned the new book. In researching the book I think I found every published study ever done on the economic impact of historic districts. In some instances, value within the district appreciated at a rate far faster than the community as a whole; in some studies, districting led to significant new investment; in some cases, historic districts were protected from the wide volatile swings in property values.

But not in one instance--zero, zilch, zip--not a single study found that historic districts caused a decline in property values. Not one. It`s time we put that politically motivated nonsense to rest for good.

A good share of these claims, by the way, come from the so-called "property rights" movement. Among their other arguments is that land use controls discourage long-term economic development. In fact, nothing could be further from the truth. Today quality of life is the single most significant variable in economic development.

Think about it. Since quality of life is the significant variable for economic development, and since the physical environment is a major element of the quality of life criteria, there is no greater threat to sustainable economic growth than the elimination of those community-based enactments whose sole purpose is the protection of that physical environment whether it is built or natural. In the name of real estate rights these myopic fast buck artists are the ones dooming the economic future of our communities--not preservationists, environmentalists and our allies.

Many of you first became involved in preservation as a result of a threatened or completed demolition. What about the economics of that? Well, in real estate development perhaps the most important single element is flexibility--you need to maintain as many options as possible for as long as possible. When a building is standing--even if empty and unused--you have four options: do nothing; stabilize the building and warehouse it; rehabilitate; or tear it down. But once the fourth option is taken, the other three are eliminated forever. You can always tear a building down--that choice is never eliminated-- but once a building is razed other choices no longer exist. And stabilizing and warehousing a building is nearly always a cheaper alternative than demolition.

Let me give you a small example. A city I visited recently spent $1.8 million acquiring a vacant 1920s hotel. Now they are preparing to spend another million to tear it down--even though their own engineering study says that they could spend $400,000 and stabilize the building indefinitely. The city manager says demolition is an act of fiscal responsibility. They are going to end up with a piece of vacant ground that will have cost them over $100 per square foot in a neighborhood where you can buy all the vacant lots you want for less than $15 a foot. That has all the fiscal responsibility of the Pentagon`s $600 toilet seats.

I think there`s something to learn from Italo Calvino`s book Invisible Cities. In it Marco Polo is describing to Kublai Khan the various cities of the Khan`s vast empire. In depicting the city of Trude, here is what he tells the Khan:

"If on arriving at Trude I had not read the city`s name written in big letters, I would have thought I was landing at the same airport from which I had taken off. The suburbs they drove me through were no different from the others, with the same little greenish and yellowish houses. Following the same signs we swung around the same flower beds in the same squares. The downtown streets displayed goods, packages, signs that had not changed at all. This was the first time I had come to Trude, but I already knew the hotel where I happened to be lodged; I had already heard and spoken my dialogues with the buyers and sellers of hardware; I had ended other days identically, looking through the same goblets at the same swaying navels.

"`Why come to Trude?` I asked myself. And already I wanted to leave. `You can resume your flight whenever you like,` they said to me, `but you will arrive at another Trude, absolutely the same, detail by detail. The world is covered by a sole Trude which does not begin and does not end. Only the name of the airport changes.`"

It seems to me that the most powerful argument for historic preservation is to avoid having the "world covered by a sole Trude which does not begin and does not end." In economics it is the differentiated product that commands a monetary premium. If in the long run we want to attract capital, to attract investment to our communities to have community rebirth, we must differentiate them from anywhere else. It is our built environment that expresses, perhaps better than anything else, our diversity, our identity, our individuality, our differentiation.

In this world, in this time when far too much is framed in the zero sum game of "for me to win, you have to lose," it`s worth looking at how different from that historic preservation is.

Historic preservation is the single economic development strategy that doesn`t require the rust belt to lose for the sun belt to win; isn`t prosperity in the big city built on poverty in the small town; doesn`t have to take away jobs in the north to create jobs in the south.

Historic preservation is an economic development strategy where reaching economic development goals doesn`t mean sacrificing community development goals.

In fact, more than that. Whenever historic preservation is economic development, community is developed--whenever historic preservation is community development, the local economy is developed.

Since this is a conference about preservation economics and since we are in Boston, it is appropriate to give the last word to the great Harvard economist John Kenneth Galbraith. Here is what he writes:

"The preservation movement has one great curiosity. There is never retrospective controversy or regret. Preservationists are the only people in the world who are invariably confirmed in their wisdom after the fact."

And your wisdom, fellow preservationists, is being confirmed daily.

Thank you very much.

Read an update to this article published in the Fall 2012 issue of Forum Journal (Vol. 27, No. 1).

Publication Date: Winter 1995

#Economics #ForumJournal

Author(s):Donovan D. Rypkema