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Can historic districts dampen urban renewal?

by Adam Millsap on January 20, 2016

in City Life, Economic Policy, Property Rights, Regulation

Struggling cities in the Northeast and Midwest have been trying to revitalize their downtown neighborhoods for years. City officials have used taxpayer money to build stadiums, construct river walks, and lure employers with the hope that such actions will attract affluent, tax -paying residents back to the urban core. Often these strategies fail to deliver but that hasn’t deterred other cities from duplicating or even doubling down on the efforts. But if these policies don’t work, what can cities do?

Part of the answer is to allow more building, especially newer housing. One factor that may be hampering the gentrification efforts of many cities is the age of their housing stock. The theory is straightforward and is explained and tested in this 2009 study. From the abstract:

“This paper identifies a new factor, the age of the housing stock, that affects where high- and low-income neighborhoods are located in U.S. cities. High-income households, driven by a high demand for housing services, will tend to locate in areas of the city where the housing stock is relatively young. Because cities develop and redevelop from the center outward over time, the location of these neighborhoods varies over the city’s history. The model predicts a suburban location for the rich in an initial period, when young dwellings are found only in the suburbs, while predicting eventual gentrification once central redevelopment creates a young downtown housing stock.”

In the empirical section of the paper the authors find that:

… a tract’s economic status tends to fall rather than rise as distance increases holding age fixed, suggesting that high-income households would tend to live near city centers were it not for old central housing stocks.” (My bold)

This makes sense. High income people like relatively nicer, newer housing and will purchase housing in neighborhoods where the housing is relatively nicer and newer. In the latter half of the 20th century this meant buying new suburban homes, but as that housing ages and new housing is built to replace the even older housing in the central city high income people will be drawn back to central city neighborhoods. This has the power to reduce the income disparity between the central city and suburbs seen in many metropolitan areas. As the authors note:

Our results show that, if the influence of spatial variation in dwelling ages were eliminated, central city/suburban disparities in neighborhood economic status would be reduced by up to 50 percent within American cities. In other words, if the housing age distribution were made uniform across space, reducing average dwelling ages in the central city and raising them in the suburbs, then neighborhood economic status would shift in response, rising in the center and falling in the suburbs. (My bold)

To get a sense of the age of the housing stock in northern cities, the figure below depicts the proportion of housing in eight different age categories in Ohio’s six major cities as of 2013 (most recent data available, see table B25034 here).

age of ohio's housing stock

The age categories are: built after 2000, from 1990 and 1999, from 1980-89, from 1970-79, from 1960-69, from 1950-59, from 1940-49, and built prior to 1939. As the figure shows most of the housing stock in Ohio’s major cities is quite old. In every city except for Columbus over 30% of the housing stock was built prior to 1939. In Cleveland, over 50% of the housing stock is over 75 years old! In Columbus, which is the largest and fastest growing city in Ohio, the housing stock is fairly evenly distributed across the age categories. Columbus really stands out in the three youngest categories.

In a free market for housing old housing would be torn down and replaced by new housing once the net benefits of demolition and rebuilding exceed the net benefits of renovation. But anyone who studies the housing market knows that it is hardly free, as city ordinances regulate everything from lot sizes to height requirements. While these regulations restrict new housing, they are a larger problem in cities where demand for housing is already high since they artificially restrict supply and drive up prices.

A potentially bigger problem for declining cities that has to do with the age of the housing stock is historic districts. In historic districts the housing is protected by local rules that limit the types of renovations that can be undertaken. Property owners are required to maintain their home’s historical look and it can be difficult to demolish old houses.

For example, in Dayton, OH there are 20 historic districts in a city of only 142,000 people. Dayton’s Landmark Commission is charged with reviewing and approving major modifications to the buildings in historic districts including their demolition.  Many of the districts are located near the center of the city and contain homes built in the late 1800s and early 1900s. Some are also quite large; St. Anne’s Hill contains 315 structures and the South Park historic district covers 24 blocks and contains more than 700 structures. The table below provides a list of Dayton’s historic districts as well as the year they were classified, number of structures, acreage, and whether the district is a locally protected district. Seventy percent of the districts are protected by a local historic designation while 30 percent are only protected by the national designation.

dayton historic districts table

I personally like old houses, but I also recognize that holding on to the past can interfere with revitalization and growth. Older homes, especially those built prior to 1940, are expensive to restore and maintain. They often have old or outdated plumbing systems, electrical systems, and inefficient windows that need to be replaced. They may also contain lead paint or other hazardous materials that were commonly used at the time they were built which may have to be removed. Many people can’t afford these upfront costs and those that can often don’t want to deal with the hassle of a restoration project.

Also, people have different tastes and historic districts make it difficult for some people to live in the house they want in the area they want. As this map shows, many of the Dayton’s historic districts are located near the center of the city in the most walkable, urban neighborhoods. The Oregon district and St. Anne’s Hill are both quite walkable and contain several restaurants, bars, and shops. If a person wants to live in one of these neighborhoods they have to be content with living in an older house. The design restrictions that come standard with historic districts prevent people with certain tastes from locating in these areas.

A 2013 study that examined the Cleveland housing market determined that it is economical to demolish many of the older, vacant homes in declining cities rather than renovate them. This is just as true of older homes that happen to be in historic districts.

Ultimately homeowners should be free to do what they want with their home and the land that it sits on. If a person wants to buy a historic house and renovate it they should be free to do so, but they should also be allowed to build a new structure on the property if they wish. When a city protects large swathes of houses via historic districts they slow down the cycle of housing construction that could draw people back to urban neighborhoods. This is especially true if the historic districts encompass the best areas of the city, such as those closest to downtown amenities and employment opportunities. Living in the city is appealing to many people, but being forced to purchase and live in outdated housing dampens the appeal for some and may be contributing to the inability of cities like Dayton to turn the corner.

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