Historic Districts, Economics and Misconceptions

January 30, 2016 Blog, Economics, Historic Districts Comments (6) 169

Everybody loves them some locktender’s houses

One of the interesting facts about the heritage conservation field is that it does not track neatly with political persuasions.  My first day of work in 1983 saw the legislation creating the first national heritage area co-sponsored by every single member of the Illinois Congressional delegation, bar none.  Imagine.

So, I was a little confused that Republican lawmakers in Wisconsin and Michigan were trying to get rid of historic districts in the name of “property rights.”  This is odd, because when I wrote my dissertation on historic districts, one of the reasons I looked at districts and not individual landmarks was that they tended to have broad political support because they treated everybody – or every property – the same.  A true libertarian can’t stand individual landmarks because they require an owner to save a property while letting all his neighbors do whatever they want.

cleve-ot-pan

Old Town, Chicago.  One of the case studies in my dissertation

Given the ideological fumbling of said state legislatures, we can write these actions off as the attempts of a political junior varsity to go after some low-hanging regulatory fruit.  Historic districts are government actions after all, right?

pv-water-bottle-store

So is water, but that issue is a tad sensitive in Michigan right now, so best to look elsewhere…

The quotes are typical of our facts-be-damned era.  Feature this:

“How would you feel if you woke up one day and found your house subject to 40 pages of rules and regulations?” said Wisconsin Republican State Senator Frank Lasee in a statement. “Burdensome regulations that require you to get permission from a government committee to improve your house, get approval for paint color, or the style and brand of windows you buy.”

Senator you are KILLING it!  40 whole pages!  That’s like almost as big as a newspaper!  “A government committee” that it turns out is made up only of your neighbors?

Paint color regulation in Wisconsin????  Are you (something) kidding me??

main drag.jpg

actual Wisconsin historic district.  Paint superfluous.

And windows….oh lord help me.  Dude, if you are replacing your windows, have at it, because you have already lost.

To even things out, one of the writers at Citylab – which is generally one of my favorite feeds – decided to attack districts from the other side of the aisle.  He said that historic districts prevent affordable housing by keeping values high and excluding people.  He said we should only designate individual public landmarks and then ranted about how Charleston (SC) is ruined now that its historic district is 85 years old.  See the article here.

100 wesley eastS

my historic district, protecting my property values.  we have awesome parties too.

How cool is this!  Historic districts are hurting people’s property rights!  Historic districts are raising values and thwarting affordable housing!  Historic districts are government overreach.  Historic districts are walls keeping out the poor!  (Got whiplash yet?)

carlos-thropp-tors

except when they are community planning tools in underserved areas.  BURN!

No, historic districts do not restrict density (or use) and they do not prima facie restrict affordable housing, assuming there is local legislative requirement.  I live in a district full of houses that have been turned into 5-10 units without running afoul of the landmarks commission.

215 grov 406eS

Now, in fairness to the dude, this stuff is not known by most people.  So let’s break down the common misconceptions about historic districts, zoning, and real estate economics.

Real Estate Value

Real estate is the only asset whose value is entirely externalized.  This is obvious, but our nagging and inaccurate common sense always wants to pretend there is a zero-sum game out there.  But there isn’t.  A house can be gorgeous, important, even nicely fitted out, and if its neighborhood sucks mightily, it will have NO VALUE.  Ain’t nothing you can do to reclaim the value of that asset unless you fix the whole damn neighborhood.  Here’s proof:

waller-98-2844s

This is one of the Waller Apartments, designed by Frank Lloyd Wright in 1894.  I bought this property 25 years ago for $1.  I paid $40,000 too much for it.  You got that, cowboy?  It had a NEGATIVE value because of its neighborhood, Frank Lloyd Wright be damned.

emeryville raised vics

Emeryville.  Too late, you missed it.

Yes, historic districts are like zoning, and yes, they preserve value.  People invest in their properties and want to preserve or enhance their investment.  That is why zoning was upheld by a really conservative Supreme Court in 1926.  Interestingly, because historic districts are more precise and individualized than zoning, they are a more useful tool for community activists.

Home economics

Here is the most economically illiterate sentence in the whole article:

“Houses, on the other hand, are often poor candidates for historic preservation.”

Whoa.  No.  Commercial and institutional properties are poor candidates for preservation because they have to make the rent.  They have to put a third down and convince a bank that they can offer a beige product that someone will buy NOW.

roper interior

People will spend money on their houses in a completely irrational manner because it’s their house.  There would be no pools, no doggie doors, no projection TVs, rec rooms, home theaters, basement bars or carpets if houses had to follow the same rational economic rules that other buildings do.

Urban Economics

The argument that both liberals and conservatives like to lob at historic districts is that they affect the real estate economics of the city.  This is what dude says about Charleston, which is apparently just ruined by entitled historic district owners and too expensive.

View east from King

Ewww.

Ed Glaeser made the same argument about Manhattan, so it is good to see the liberals and conservatives united in opposition to preservation.  Except that this argument betrays a failure to understand economics at scale.

aeri-ny8-v-z

Charleston and Manhattan are actually your best bets for making this argument, because if you take most cities and suburbs and look at all the properties and find out how much is encumbered by historic districts, you are lucky to hit 3% of the land.  You can hit maybe 15 or 20% if you look only at Manhattan or Charleston’s downtown peninsula, but once you include the rest of the city you are sitting back down in the single digits.

Which is why historic districts preserve value for the communities that seek them out (which is basically how it happens).  They are a technique to defend against larger, impersonal real estate issues rolling across the other 97% of the land.

curbcut class burlingS

Which means you can build loads and loads of these.  Blair Kamin calls them Curbcut Classicism.  I call them Lollapalazzos.

There are real estate forces at work that are much bigger and more powerful than historic preservation.  That is why all sorts of non-landmarked parts of Brooklyn have rocketed in value.  Indeed, in the late 1980s I saw Wicker Park in Chicago get landmarked and the adjacent non-landmarked neighborhood of Bucktown tripled in value in one year.  It took landmarked Wicker Park a decade to catch up.

bucktown newbers

Bucktown!

dodger hdon

Demolished in Bucktown, 2006.

So how do you define success?  Low real estate values?   High real estate values?

This is one of those tricky issues – like gentrification – where you want to have a neat and clean reaction but you can’t.  Because it is messy.  I would like to have everyone who lives here stay here.  I would like to protect my property’s value.  I don’t want to be told what to do, but I REALLY want to tell my neighbor what to do.  Also, a pony would be nice.

sewickley-hunt-dogs2

Sorry, we can’t afford a pony.

You want affordable housing?  Legislate it.  Here is some in Palo Alto, where the average house is about $2million.

801 alma PA w

The left and the right should both stop using historic districts as a whipping post.  These are tools that communities use to help determine their destiny in a more precise and individual way than is possible for most communities.  Also they save precious resources from filling landfills.  And grant a bit of beauty, grace and depth to our lives.

UPDATE: 24 Days later – Source of Michigan legislative illness revealed!

Turns out the Michigan law came about because the wealthy of East Grand Rapids defeated a local historic district last year and decided no one else should have one either!   Check out this article.

Sore losers I can understand.  But sore winners?  That’s just mean.

Maybe it’s just typical 1% thinking:  “Look Mom, I did something clever!  Now let’s scale!”

I saw the EXACT same thing happen in Winnetka, Illinois, 25 years ago.  Made a stink for awhile – even used the same analogies.  It died down as soon as the lobbying funding did.  Which is predictable because there are two truths this law fails to recognize:

  1. How real estate economics works (see above).
  2. How these districts got created in the first place, which was BY and FOR homeowners trying to protect their investment. That’s pretty much the ONLY WAY it happens.

Indeed, that is what happened in East Grand Rapids, except the community split over the idea of an historic district and kiboshed it.  So why would you spoil it for everyone else unless you were, say,  a developer who wanted to make your job easier.

Did I just answer my own question?

They also hired marketing gurus who came up with this whopper lie about how historic regulations work:

“Modern technology allows builders to make historic-looking home exterior parts out of aluminum or plastic, argues Afendoulis, but district commissions rarely, if ever, allow their use regardless of how closely they mimic wood.”

You know, if you are spending this much money you might do a little homework.

6 Responses to :
Historic Districts, Economics and Misconceptions

  1. Ugh. That picture of the former Artful Dodger on Wabansia hurt. Like a kick in the yarbles.

  2. Craig Deller says:

    Hey Vince,

    Turns out I am on the board of directors of the Madison Trust for Historic Preservation (Madison Wisconsin) and we are in the midst of this whole debate.
    I have testified before both the Assembly and the Senate and we are soften the verbiage. I wanted put a link to your blog but you really blast Lasee (good job by the way) and we are concerned that it would just piss him off.

    Craig

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