Why Are Houses in Historic Districts Worth More?

The studies mentioned previously look at the effect of both national historic district designation (by the federal government) and local historic district designation (at the city level). The findings are that both national and local designations increase property values. Historic districts that have both national and local designations, like Boston-Edison, saw the largest added property values.

But why does designation of a historic district affect property values? There may be a combination of factors at work, depending on the type of designation.

One factor is prestige: nationally designated historic districts are perceived as prestigious, well-known neighborhoods, and the desirability of the address adds to the market value of the houses in the district. That factor is certainly at work in Boston-Edison: when Realtors sell homes in Boston-Edison, they almost always advertise the location, because they know that a Boston-Edison location adds value.

Another factor is "market certainty": locally designated historic districts typically have standards for property renovations, demolitions, and new construction - in Detroit; these are set by the Detroit Historic District Commission. These standards ensure that the character of the neighborhood as a whole remains stable, which means that houses within the neighborhood are good long-term investments, which in turn boosts property values throughout the neighborhood. In fact, the greatest positive impact on Historic District values occurs when residents of the district understand historic district standards and the city actively and consistently enforces them.

It's Not Only Higher Property Values...

Not only does "market certainty" mean that property values in historic district are higher generally, it also means that property values tend to be more stable, and are less affected by economic downturns. Historic district designation also brings other benefits, such as increased levels of home ownership and longer residence by both homeowners and renters. In addition, designated historic districts tend to have higher rates of participation in neighborhood associations (like HBEA) and associated neighborhood improvement projects, which enhances public spaces in the neighborhood and again boosts property values throughout the neighborhood.

However, the property value bonus associated with historic district designation, particularly local designation, isn't free. The more the historic district guidelines and restrictions are followed, the more active the Detroit Historic District Commission staff is, the more educated and engaged neighbors are, the more stable the neighborhood character is and the higher everyone's property values are.

References

• Edward Coulson (2016) Local Historic Districts and Property Values in Michigan Neighborhoods, Michigan Historic Preservation Network.
• Jonathan Mabry (2007) Benefits of Residential Historic District Designation for Property Owners.
• Nashville Metro Historic Zoning Commission (2016) Historic Districting Does Not Have a Negative Effect on Property Values.
• Donovan D. Rypkema (2002) "The (Economic) Value of National Register Listing," CRM 25(1):6-7.