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Historic Designation and Residential Property Values

Author

Listed:
  • Andrew Narwold

    (Professor of Economics, School of Business Administration, University of San Diego, 5998 Alcala Park, San Diego, CA 92110)

  • Jonathan Sandy

    (Professor of Economics, School of Business Administration, University of San Diego)

  • Charles Tu

    (Associate Professor of Real Estate, Burnham-Moores Center for Real Estate, University of San Diego)

Abstract

The State of California enacted the Mills Act in 1972. This act allows local municipalities the option of setting up a historic designation program. The main feature of the program is to allow the owners of historic buildings a reduction in their property taxes in return for an agreement to not alter the exterior façade of the designated building. This paper uses hedonic regression analysis to estimate the impact of the historic designation on the value of single-family residences in the City of San Diego. The results suggest that the designation creates a 16 percent increase in housing value. This is higher than the capitalization of the property tax savings would suggest, implying market value in the historic designation itself. The Mills Act represents an innovative approach to historic structure management and may provide guidance to governments elsewhere in the U.S. as well as internationally when designing historic preservation programs.

Suggested Citation

  • Andrew Narwold & Jonathan Sandy & Charles Tu, 2008. "Historic Designation and Residential Property Values," International Real Estate Review, Global Social Science Institute, vol. 11(1), pages 83-95.
    • Handle: RePEc:ire:issued:v:11:n:01:2008:p:83-95
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    References listed on IDEAS

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    1. Hamilton, Bruce W, 1976. "Capitalization of Intrajurisdictional Differences in Local Tax Prices," American Economic Review, American Economic Association, vol. 66(5), pages 743-753, December.
    2. Donald A. Coffin, 1989. "The Impact of Historical Districts on Residential Property Values," Eastern Economic Journal, Eastern Economic Association, vol. 15(3), pages 221-228, Jul-Sep.
    3. David E. Clark & William E. Herrin, 2000. "The Impact of Public School Attributes on Home Sale Prices in California," Growth and Change, Wiley Blackwell, vol. 31(3), pages 385-407.
    4. Coulson, N Edward & Leichenko, Robin M, 2001. "The Internal and External Impact of Historical Designation on Property Values," The Journal of Real Estate Finance and Economics, Springer, vol. 23(1), pages 113-124, July.
    5. Deborah Ann Ford, 1989. "The Effect of Historic District Designation on Single‐Family Home Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(3), pages 353-362, September.
    6. Geoffrey K. Turnbull & Jonathan Dombrow & C.F. Sirmans, 2006. "Big House, Little House: Relative Size and Value," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(3), pages 439-456, September.
    7. Peter F. Colwell & Carolyn A. Dehring & Nicholas A. Lash, 2000. "The Effect of Group Homes on Neighborhood Property Values," Land Economics, University of Wisconsin Press, vol. 76(4), pages 615-637.
    8. Elena G. Irwin, 2002. "The Effects of Open Space on Residential Property Values," Land Economics, University of Wisconsin Press, vol. 78(4), pages 465-480.
    9. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-475, June.
    10. David E. Clark & William E. Herrin, 1997. "Historical Preservation Districts and Home Sale Prices: Evidence from the Sacramento Housing Market," The Review of Regional Studies, Southern Regional Science Association, vol. 27(1), pages 29-48, Summer.
    11. Oded Palmon & Baron A. Smith, 1998. "New Evidence on Property Tax Capitalization," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 1099-1128, October.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Gabriel Ahlfeldt & Kristoffer Möller & Sevrin Waights & Nicolai Wendland, 2012. "On prisoner's dilemmas and gilded cages: The economics of heritage preservation," ERSA conference papers ersa12p783, European Regional Science Association.
    2. Mirko Moro & Karen Mayor & Seán Lyons & Richard S J Tol, 2013. "Does the Housing Market Reflect Cultural Heritage? A Case Study of Greater Dublin," Environment and Planning A, , vol. 45(12), pages 2884-2903, December.
    3. Vicki Been & Ingrid Gould Ellen & Michael Gedal & Edward Glaeser & Brian J. McCabe, 2014. "Preserving History or Hindering Growth? The Heterogeneous Effects of Historic Districts on Local Housing Markets in New York City," NBER Working Papers 20446, National Bureau of Economic Research, Inc.
    4. Faroek Lazrak & Peter Nijkamp & Piet Rietveld & Jan Rouwendal, 2014. "The market value of cultural heritage in urban areas: an application of spatial hedonic pricing," Journal of Geographical Systems, Springer, vol. 16(1), pages 89-114, January.
    5. Velma Zahirovic-Herbert & Karen Gibler, 2014. "Historic District Influence on House Prices and Marketing Duration," The Journal of Real Estate Finance and Economics, Springer, vol. 48(1), pages 112-131, January.
    6. Jagoda Adamus, 2023. "How Much Are Public Spaces Worth? Non-Market Valuation Methods in Valuing Public Spaces," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 2, pages 66-89.

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    More about this item

    Keywords

    historic designation; housing values; hedonic model;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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