Historic Preservation: Preserving Value?

14 Pages Posted: 8 Apr 2011 Last revised: 2 Aug 2012

See all articles by Martin D. Heintzelman

Martin D. Heintzelman

Clarkson University School of Business

Jason J. Altieri

Clarkson University - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: August 23, 2011

Abstract

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. Thus, these studies are mistaking correlation for causation. 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 external 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 con firms 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.

Suggested Citation

Heintzelman, Martin D. and Altieri, Jason J., Historic Preservation: Preserving Value? (August 23, 2011). Journal of Real Estate Finance and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1803643 or http://dx.doi.org/10.2139/ssrn.1803643

Martin D. Heintzelman (Contact Author)

Clarkson University School of Business ( email )

Potsdam, NY 13699-5780
United States

Jason J. Altieri

Clarkson University - School of Business ( email )

Potsdam, NY 13699-5780
United States

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