The Costs of Historic Districts: More Than Just Property Values

This past week, Bloomingdale resident and real estate agent JC Blount and Bloomingdale Civic Association board member and ANC representative Dr. Bertha Holliday published an analysis purporting to show that designating Bloomingdale a historic district will not lead to a rise in housing prices in the neighborhood.

I’m very appreciative that Dr. Holliday and Ms. Blount are engaged in this analysis. I agree that trying to answer the question of how designation will impact our neighborhood’s already pressing affordability crisis is central to this debate. Unfortunately, I disagree that this particular analysis and data set are sufficient to answer this major question, or that it’s the right question to ask in the first place.

Chart from the Holliday-Blount analysis

The first issue is that the sample size considered here is exceedingly small. The LeDroit data set contains only 14 sales. At that small of a number, a couple of outliers one way or another can greatly impact the results.

Second, the analysis does not attempt to control for some of the obvious variables that could lead to said outliers — variables like condition of the property, amenities, lot size, relative location on the block (corner lot vs. mid-row), etc.

But most importantly, this analysis is looking at the wrong time period. If ultimately we’re trying to measure the impact of designation, we need to look at the changes that took place at the time of designation. In this case, LeDroit earned its designation in 1974, so I don’t think prices from the last six months are particularly applicable to answering that question.

More broadly though, I think it’s important to address the genesis of this analysis in the first place. The authors make clear that they feel like opponents of historic designation such as myself are misleading neighbors by claiming HD will “cause the cost of houses to soar.” (A similar concern was expressed last month by former BCA president Pat Mitchell when she  described my initial post and our flyer as fearmongering akin to a zombie apocalypse.)

Both of these critiques seem overly concerned with an argument I’m not particularly making (property values) and somewhat silent on the one I’m highly focused on (repair and renovation costs).

The reality is that trying to find an academic consensus on the impact of historic designation on property values is notoriously difficult This search of scholarly literature, for example, brings up 3,500 results.  A large number of those studies do find an upward pressure on prices, while others don’t. I think it’s safe to say that the housing market is a complicated dynamic and none of us know for certain what will happen if designation goes through. To that end, I’m also perfectly comfortable conceding that it is unlikely the impact of this singular change alone will lead to “soaring” prices or that “lots of people will lose their homes.” The reality is the answer to that argument is not central to the case against historic designation.

Because while we don’t know exactly what will happen with home prices, we do know with 100% certainty that more neighbors will face more costs (both monetary and in terms of time) when trying to repair or renovate their homes. Depending on the scope of work, that may be a few hundred dollars more or it may be tens of thousands of dollars more. As long as the rules limit options and require additional layers of approval, there will be some increased hardship on some people.

That’s obviously true of all regulations, though, and I’m not attempting to argue for laissez-faire homeowner rights. We don’t let homeowners use lead paint because we’ve collectively decided children’s health is more important. We require buildings conform to certain energy efficiency standards to limit our collective impact on our environment. And I’m sure builders could make houses cheaper if they didn’t have to follow proper fire code standards, but we rightly value the safety of the whole neighborhood more.

My point is that the question is not whether there will be a burden, but whether the benefit is worth that burden. To me, ensuring that the houses on my block look a certain way just doesn’t rise to the same level of something like the health and safety of our citizens and environment. In this case, I’d rather prioritize helping keep the costs of home-ownership as affordable as possible for everyone in Bloomingdale, particularly our low-income neighbors.

I think reasonable people can disagree on that, but I think we should be honest that’s the debate we’re having.

10 thoughts on “The Costs of Historic Districts: More Than Just Property Values”

  1. The statistical analysis in the Blount/Holliday study involved use of the t-test of means (averages) between samples. The t-test was SPECIFICALLY DEVELOPED TO ANALYZE SUCH DIFFERENCES BETWEEN RELATIVELY SMALL SAMPLES. In the Blount/Holliday study, the findings of ‘no difference’ gain added validity as the samples analyzed are not partial but 100% samples of all house sales (per MRIS) during a 6-month period.

    The issue of wherther HP is or is not associated with increased cost of home purchase is extremely germane to a discussion of HP. Sales costs serve to drive the taxable value of properties. For example, when a house on a block is sold by a developer for more than $1 million, it serves to increase the taxable value of every house on the block. REQUIRED ANNUAL PROPERTY TAXES are second only to mortgage expense as a MAJOR annual reoccurring expense of homeownership. The study imdicated that most likely HP will not contribute to the increasing property taxes of Bloomingdale homes.

    Finally HP ONLY IMPACTS THE FRONT FACADE AND FRONT ROOFLINE OF A HOUSE (and the unattached side facade of a corner house). This means most homeowners will deal with HP only when they seek to replace or repair their FRONT WINDOWS OR DOORS. The additional HP costs for these items will be no where close to “tens of thousands of dollars”. HP does NOT address exterior paint colors, systems (plumbing, electrical, HVAC etc. ) or interiors. If you wish to tear out every interior wall in your house you need not get HP permission — but of course DCRA review will be required
    JUST THE FACTS

    1. I’m not really sure I understand the statistical analysis that is being employed here. You’re just comparing the sale and per square ft prices in two abutting neighborhoods during the same time period. First, its a pretty small sample set. Second, wouldn’t it have been more beneficial to compare all neighborhoods that went through and received HD status both pre- and post- status, controlling for the overall changes in the DC market (just regress those neighborhoods over the total market). This doesn’t really tell me anything except that the average sale price in LD is lower than Bloomingdale (as is the average square footage in your small sample, so that would make sense) and that the average $/sq ft is higher in LD (also makes sense as slightly smaller homes have, on average, a higher $/sq ft than larger homes). I’m certainly not an expert in econometrics, and if I’m missing something, obviously tell me, but this doesn’t seem like a correct statistical analysis.

    2. Also, the mean $/sq ft for the Bloomingdale sales is off. You quote that 38 properties have been included, but there’s actually 39. I’d check your math, something is wrong.

  2. Thanks Dr. Holliday,

    Appreciate your response! Definitely agree that a t-test is a tool used to analyze small sample sizes of data, but I think it’s still the case that a more significant sample size would give us a more confident answer one way or another.

    Also, my main point here is that even if we are confident that LeDroit and Bloomingdale are not priced differently, that says nothing about why. It could be that LeDroit is more expensive because of HD but less expensive because of smaller houses. Or Bloomingdale could be offsetting a non-HD discount with closer acccess to more amenities. I’m not saying either of those are true, just that the t-test for this data doesn’t answer that question. To be much more confident about the source, I think we’d want to look at prices in any given neighborhood before and after it is designated, such that we can isolate the difference to that specific change.

    I definitely agree this question is germane to the conversation, and I do think there’s a lot of data to suggest property increases are possible because of designation, but I also don’t think that’s the totality of the affordability concern. As such, I think the argument against HD is still substantial even if we can’t answer this question one way or another.

    Finally, I agree most residents won’t face costs at the high end of that range, but it is certainly the case that some people will need or choose to make serious renovations on their houses, and those numbers are very much in the conversation from experiences in other neighborhoods. For example, the average amount of the Historic Homeowner Grant Program that helps homewoners in historic districts pay for repairs and renovations (and which is currently out of funds) is around $20,000. Again, most people won’t see those kinds of prices, but even differences of a few hundred to a few thousand can be significant expenses for many neighbors.

    1. The real point is how to preserve the exceptional architectural value that Bloomingdale has. Why preserve it. Because the neighborhood has a uniquely powerful heritage and is currently prime target for interests that are at the least very careless in approaching it and threaten to destroy it.
      So how do we protect this? Is HD the solution or is UNESCO listing for instance a better option etc. But the need to protect it is real and paramount because the threat is imminent. Thisnisnnot a political question.

      Finding the resources to help neighbors upkeep the neighborhood is a different and political question.
      It is also a much simpler problem to solve once the concensus around the exceptional value of the neighborhood has been established.
      Citizens can then vote for a representative who will uphold these values.

      But a preservation solution needs to be found NOW while the threat is highest. HD is in this context an easy and ready tool. HD was expressly designed for that purpose. It would be ill-inspired not to use this tool.

      Best.
      Jean-Christophe Deverines.

      1. Thanks for your comment Jean-Christophe! I think you outline the difference in opinion here well.

        I definitely hear that many people feel like something they love about the neighborhood (the particular matching of architecture) is under threat. I think ultimately we disagree on the size of that threat, and it’s importance relative to the affordability crisis.

        In the last 20 years without historic designation, what percentage of the ~2,000 houses in the neighborhood have been modified so significantly as to no longer contribute to the character? Certainly no more than 10%. 5%? Is it even double digits?

        In that same time period, how many working and middle class neighbors have moved away (or wanted to move here and could not). A new report out this week says our zipcode had the highest change in household income (+163%) from 2000-2016 among the top 20 most gentrified zip codes in the country: https://www.rentcafe.com/blog/rental-market/real-estate-news/top-20-gentrified-zip-codes/

        Making sure that the fixed income/working/middle class neighbors we still have left are able to stay here and enjoy all of the new benefits of the neighborhood seems to me the prime challenge for us to solve as a community. That’s why I think we should be particularly nervous about changes that could make that challenge even harder.

  3. Thank you Nick for your reply to my comment! I am especially pleased that you agreed that my statistics were appropriate for comparisons of the small samples. Thus I presume this means that the finding of no significant differences in the recent purchase prices in the two abutting neighborhoods (Bloomingdale – no HP and Ledroit Park –HP District since 1973) with similar hisory, heritage and housing types –should not be ignored in the HP discussion.

    However you also note that it would be more effective to identify whether differences in such prices exist before and after a given neighborhoood gains HP designation. I disagree. Any changes in prices that are associated with a single event typically are incremental and accumulative, as it takes time for folks to discover that the neighborhood is HP and what that means, and to develop an increased demand , if any, for the designated neighborhood. The elegance of the Blount/Holliday study is that LeDroit Park is not only very similar in history and character to Bloomingdale and abuts it, but also has had HP designation for 45 years — a time span that unquestionably enables assessment of the full-blown impact of HP.

    Of course, purchase costs of homes and related property tax assessments are driven primarily by ‘market’ forces including supply and demand. The later probably explains why buyers are willing to pay more per sq ft for small houses (less than 1000 sq ft) in Ledroit . Bloomingdale has very few small houses. Thus the supply of these relatively affordable small houses is limited , while the demand is higher. Likewise, market forces are also reflected in the recent increase in developer activity (I get about 2 emails/ postcards everyday from persons wanting to buy my house) . For example, a developer buys a single-family rowhouse, renovates it into 2 condos that are sold for $800,000 to $900,000 each. The combined taxable value of the renovated rowhouse is now at least $1.6 million. And as a result, the property taxes of neighboring rowhouses increase. I repeat again: Property taxes are a significant factor in affordability of both homeownership and renting.

    The Blount/Holliday study suggests that HP designation does not add to increases in property taxes — but developer activity will. HP will serve to reduce (but by no means eliminate) developer activity and ensure that major renovations are compatible with the existing streetscape and the unique architectural character of Bloomingdale — both of which bespeak that this is a community where history, heritage, and architecture are respected and valued.

    Many older long-term Bloomingndale residents have experienced the negative impact of racial housing covenants, redlining, legally sanctioned retricted accesss to both federal and private mortgage financing, and most recently gentrification. And as you have noted, despite of all of this, these residents honored the architecture so that it might remain a very special, nearly pristine jewel. These residents are resilient and deserving of our respect and concern.

    However, I fear the focus of your ardent concern for Bloomingdale’s older and lower-income residents may be somewhat misplaced. Rather, I trust that you and I along with the many residents who love this neighborhood and seek to protect it, will work to reduce the laisse-faire impact of many of its recent developers (who always seem to have development strategies that are 1-step ahead of recent changes of law), and engage the hard politics (should HP designation be granted) for ensuring Bloomingdale is eligible for grants for HP repairs and that funding for such grants is greatly increased.

    Bertha Holliday – Commissioner, ANC 5E07

    1. How did you control for differences in quality of homes in your study? While, with a large sample size many of these differences will get averaged out, with such a small sample any significant difference in renovated vs. un-renovated will massively skew the results.

      I disagree on your assessment that looking pre and post-HD designation would not be useful. This is a classic case of an event driven question and should be analyzed as such. Like I said, really all your study says is that in a small sample size, smaller square foot homes in LeDroit Park have a lower average sale price and a higher $/sq ft than Bloomingdale homes. That’s not really a meaningful outcome, and really is just common sense looking at market prices all across the DC area.

    2. Also, you limited your time period to the last 6 months. What happens if you look back further? Though you caught the tail end of the summer, you also caught the slower winter market. What if you went back a year? 2 years? I’d look at it myself, but I don’t have access to the MRIS data.

    3. Also, you limited your time period to the last 6 months. What happens if you look back further? Though you caught the tail end of the summer, you also caught the slower winter market. What if you went back a year? 2 years? You’d certainly have more data. I’d look at it myself, but I don’t have access to the MRIS data.

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