Why the Prices of Houses in Historic Districts are Higher Than Most
The New York City Independent Budget Office (IBO) published a study detailing how the designation of historic districts in the city has affected home prices. The IBO found that prices for homes in historic districts have been consistently higher than those outside historic districts. In the report’s introduction, the IBO evaluates the relationship between historic districts and the correlation of higher property values.
Potential drivers of higher home prices in historic districts are the guarantee that neighboring homes will remain largely unchanged as the exteriors are protected and federal tax benefits can also be utilized to rehabilitate the historic homes to incentivize homeowners to maintain their properties. In other areas, a buyer could purchase a valuable home only to see other houses on the block torn down or dramatically altered later, changing the look and feel of the neighborhood and theoretically depressing the value of any remaining homes.
In a historic district, all homes are held to similar requirements and drastic changes to the neighborhood are less of a threat. While the IBO mentions that some homeowners fear the loss of property rights that occur in a historic district, their report shows that those restrictions don’t negatively impact home values.
In many cases, federal tax benefits exist for the purchasing or rehabilitation of homes in historic districts. This incentive not only makes historic districts more attractive to buyers but may also increase the value of the property for resale. These tax benefits should be partially capitalized into the price of the historic property.
The aesthetic and charm of a historic neighborhood gives buyers a sense of quality, something that might be lacking in neighborhoods with mixed housing. Districts that are important to a community’s history are more likely to be preserved and may represent a specific style or styles of architecture making it more attractive to some buyers.
The report’s conclusion notes that while the findings support a correlation between home prices and inclusion in a historic district, “there is not sufficient evidence to conclude that districting itself causes higher prices”. However, there are some compelling reasons to believe that homes in historic districts will maintain value despite the restrictions that property owners in those district face. Based on this study, properties in historic districts have increased in price at a higher rate than properties not included in historic districts, therefore property value is more likely to appreciate in a historic district.
For information on the preservation and restoration of historic homes in New York, contact Scott Henson Architect.