ECONOMICS UNIQUENESS

116 ■ THE ECONOMICS OF UNIQUENESS
regulation means less value”—an argument frequently used by those who oppose
heritage designation. In fact, the opposite has been proven to be true. Why? Later,
this chapter will identify a number of likely contributing variables to this value
premium, but the most basic reason comes from the real estate cliché: “Th e three
most important things in real estate are location, location, location.” But cliché
though it may be, there is an underlying reality that makes this premise valid.
Note that the cliché is not: “Th e three most important things are roof, walls, and
fl oor.” Th e majority of the economic value of a particular parcel of real estate
comes not from within the property lines but from its context; that is, its location
within a given neighborhood and its adjacent public facilities and natural
and cultural surroundings. Th at is why identical houses in Mexico City, Hanoi,
Prague, and Rabat will have dramatically diff erent values. But the comparison
doesn’t have to cross international borders. As anyone who has bought, sold, or
fi nanced real estate knows, even within a small city, the same house in a diff erent
neighborhood will command a diff erent, sometimes dramatically diff erent,
market value.
Th e economic role of land-use laws in general, and historic designation
in particular, is to protect the context within which the individual property
is situated. No one pays a premium for a heritage house for the privilege of
having to ask permission from some governmental body to put new shingles
on the roof. Rather a homeowner will pay a premium for the assurance that
the neighbor across the street will not be allowed to make inappropriate
changes to his house that will have an adverse visual and value eff ect on the
one’s own house.
A sampling of studies demonstrates how this pattern manifests itself in
the market place. A recent longitudinal study conducted in Philadelphia, Pennsylvania,
United States, looked at property value changes over an extended
period, 1980–2008 (Econsult Corporation 2010). Over this nearly 30-year timeframe,
properties in both local historic districts and National Register historic
districts saw rates of appreciation that outpaced the Philadelphia market in general,
as shown in fi gure 5.1. Further, the study found that “homes in local historic
districts enjoy an immediate 2 percent increase in values relative to the city average,
once local designation has taken place; and thereaft er, they appreciate at an
annual rate that is 1 percent higher than the city average.”
In Philadelphia, the value premium attached to the local historic districts is
8 percent greater than for the National Register districts. In Louisville, Kentucky,
United States, researchers at the University of Louisville found that, over the
period 2000 to 2007, properties in local historic districts commanded a premium
of between US$59,000 and US$67,000 and that properties in those districts
saw rates of appreciation 21 percent greater than in the Louisville market
as a whole (Gilderbloom et al. 2009).