Historic Preservation: Preserving Value?
The creation of historic districts has become a common way to preserve historic buildings and neighborhoods. Advocates of historic districts assume that such districts augment, or at least, protect property values for homes within these districts. The existing economic literature supports this conclusion, but most studies seem to fall victim to an endogeneity bias since higher value homes are, all else equal, more likely to be included in districts. This study uses repeat-sales fixed effects (difference-in-differences) analysis to look at homes before and after the creation of districts in the Boston-Cambridge-Quincy MSA between 2000 and 2007, and thus control for this endogeneity bias. Secondarily, we re-examine the effects of a Massachusetts preservation policy, the Community Preservation Act (CPA) which, in part, supports historic preservation. We find evidence that the creation of a local historic district, on average, reduces home prices for homes in that district between 11.6 and 15.5%. This indicates that any restrictions implied by the creation of a district outweigh any benefits to homeowners within the district. If, instead, census block fixed effects are employed, the analysis shows a statistically insignificant impact, the sign and magnitude of which depends on the specification. Taken together with the repeat sales result, this confirms our intuition about the importance of controlling for omitted variables and endogeneity biases. Finally, we find evidence that the CPA also lowers property values, by less than 1%, and that being in a Historic District magnifies the negative effect of the CPA.
KeywordsHistoric preservation Hedonic analysis Repeat sales Regulation
- Cameron, A. C., & Trivedi, P. K. (2010). Microeconometrics using stata. College Station: Stata Press.Google Scholar
- Clark, D. E., & Herrin, W. E. (1997). Historical preservation districts and home sale prices: Evidence from the sacramento housing market. The Review of Regional Studies, 27(1), 29–48.Google Scholar
- Coffin, D. (1989). The impact of historic districts on residential property values. Eastern Economics Journal, 15(3), 221–228.Google Scholar
- Glaeser, E. L., & Gyourko, J. (2003). The impact of building restrictions on housing affordability. Economic Policy Review - Federal Reserve Bank of New York, 9(2), 21–39.Google Scholar
- Halvorsen, R., & Palmquist, R. (1980). The interpretation of dummy variables in semilogarithmic equations. American Economic Review, 70(3), 474–475.Google Scholar
- Heintzelman, M. D. (2010a). Measuring the property value effects of land-use and preservation referenda. Land Economics, 86(1), 22–47.Google Scholar
- Heintzelman, M. D. (2010b). The value of land use patterns and preservation policies. The B.E. Journal of Economics Analysis and Policy (Topics), 10(1), Article 39.Google Scholar
- LeSage, J. P., & Pace, R. K. (2009). Introduction to spatial econometrics. Chapman and Hall, CRC Press.Google Scholar
- McMillen, D. P. (2006). Teardowns: Costs, benefits, and public policy. Land Lines, 18(3), 2–7.Google Scholar
- Parmeter, C., & Pope, J. C. (2011). Quasi-experiments and hedonic property value methods. In J. A. List, & M. K. Price (Eds.), Handbook on experimental economics and the environment. Edward Elgar Publishing.Google Scholar
- Sirmans, G. S., Macpherson, D. A., & Zietz, E. N. (2005). The composition of hedonic pricing models. Journal of Real Estate Literature, 13(1), 3–43.Google Scholar
- Taylor, L. O. (2003). The hedonic method. In P. A. Champ, K. J. Boyle, & T. C. Brown (Eds.), A primer on nonmarket valuation. The economics of non-market goods and resources, (Vol. 3). Kluwer Academic Publishers.Google Scholar