On the train home this evening, I had a chance to read the two
articles that Al Kriegman discussed and that David Taccafondi put on
the web.
The Dennis Gale article ("Impacts of Historic District Designation"),
if I read it correctly, explores two hypotheses concerning real estate
valuations rising after historic designation. It concludes that the
hypotheses are not supported.
It does not conclude that the negative of the hypotheses is supported,
and, indeed, a separate study would be necessary to conclude
that. Data that generate a hypothesis can not be used to support that
hypothesis.
Gale's article then goes on to survey a bunch of litterature on the
subject, and concludes that sometimes prices go up and sometimes they
stay the same and sometimes they go down. This doesn't really help me
reason about UC.
All of this might be somewhat less relevant than the article by
Asabere, Huffman, and Mehdian, which concluded a 24% relative decrease
in valuation in Philadelphia specifically. I am cautious, though,
about extrapolating that data to University City for three reasons,
the first being the most significant:
1. The data used was based on sale data in Center City from 1980 to
1991. But two important events occurred during that period. First, in
1985, the City of Philadelphia passed the updated historic
preservation law, a significant departure from the older 1955
law. Second, that law was successfully challenged in court, and then
overturned by a higher court, in the following years. This introduced
a great deal of uncertainty in the minds of market participants (real
estate buyers and sellers). (One of the articles even discussed this
sort of transient effect.) So at the end of the study period in 1991
one might well expect to see uncertainty still affecting the market.
2. The 24% relative decrease (meaning sale prices of designated
structures went up 24% less than for non-designated, not that they
went down by that amount) was over an 11 year span. If the effect had
been uniform, this would translate to a 1.9% decrease per year. Not
that this is small change, but it's very different than thinking that
the law would pass and, poof!, your house is worth only three-quarters
of what it was the day before.
3. Center City is a different animal than any other part of the
city. It's not clear to me that an extrapolation to UC is valid.
I'm curious what other people concluded from the articles, or if
anyone has had time to research in a library other articles on the
subject.
--
Jeff
Jeff Abrahamson <http://www.purple.com/jeff/>
The Big Book of Misunderstanding, now in bookstores
<http://www.misunderstanding.net/buystuff.html>
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