Preserving History or Hindering Growth? The Heterogeneous Effects of Historic Districts on Local Housing Markets in New York City
Since Brooklyn Heights was designated as New York City's first landmarked neighborhood in 1965, the Landmarks Preservation Commission has designated 120 historic neighborhoods in the city. This paper develops a theory of heterogeneous impacts across neighborhoods and exploits variation in the timing of historic district designations in New York City to identify the effects of preservation policies on residential property markets. We combine an extensive dataset of residential transactions during the 35-year period between 1974 and 2009 with data from the Landmarks Preservation Commission on the location of the city's historic districts and the timing of the designations. Designation raises property values within historic districts, but only outside of Manhattan. In areas where the value of the option to build unrestricted is higher, designation has a less positive effect on property values within the district. Consistent with theory, properties just outside the boundaries of districts increase in value after designation. There is also a modest reduction in new construction in districts after designation.
We would like to thank Gerard Torrats-Espinosa for his exceptional research assistance. We also wish to thank Sara Lense and Paul Salama for their assistance in preparing and analyzing the data, and Rohan Jolly and Clint Wallace for their research on the law of historic designation and the policy controversies that accompany designation. We are grateful for suggestions and questions we received from participants in the 2011 and 2013 fall APPAM meetings, the 2013 AREUEA meetings, and Furman Center for Real Estate and Urban Policy brown bag lunch series. We would especially like to thank our conference discussants, Matthew Freedman and Claudia Sharygin. We are indebted to the Furman Center for Real Estate and Urban Policy at NYU for supporting this research, and to the Filomen D'Agostino and Max E. Greenberg Faculty Research Fund for support of Professor Been. Note that Professor Been worked on this project before she became Commissioner of Housing Preservation and Development in New York City. The views represented here are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
I have received speaking fees from organizations that organize members that invest in real estate markets, including the National Association of Real Estate Investment Managers and the Pension Real Estate Association.