<p>Bernadette Lowell Urban Economics Historic Designation and its Effect on Durham Home Prices</p><p>Introduction</p><p>Historic designation and the process of historic preservation have saved homes and commercial properties across the country from being torn down for newer construction. As space becomes sparse in larger cities, occasionally it is necessary to tear down these properties, however this can cause unpleasant construction and “mismatched” neighborhoods with homes from many different eras. Through national and local historic designation, owners can receive tax breaks and other incentives to keep their home in its original, historic form.</p><p>Durham is a prime example of a city that would need historic designation. </p><p>Although it is not lacking for open land, there is a rich history in many downtown buildings and homes that needs to be preserved. Tobacco factories line downtown streets along with many homes dating back to the 1920s and 30s. </p><p>Durham has sought to preserve its local historic resources by “inventorying historically significant structures in the City and County, designating local historic districts and landmarks, establishing and supporting the Historic Preservation </p><p>Commission (HPC), and nominating properties and districts for listing on the </p><p>National Register of Historic Places.”(City of Durham) The HPC meets throughout the year to approve changes for any historic home and possibly designate new neighborhoods. Homes in any of the designated neighborhoods are taxed at 50% of the properties’ value. (City of Durham) However, with this local designation come certain restrictions. In order for any change to be made the exterior of the building, Bernadette Lowell Urban Economics the owner must receive approval in the form of a Certificate of Appropriateness after a meeting with the HPC. (City of Durham)</p><p>A few homes and neighborhoods in Durham are also nationally designated. </p><p>According to the National Register of Historic Places website, Durham county has 77 listed historic places and districts. 1Although this can mean some federal tax breaks, there are little to no restrictions on any changes to the homes.</p><p>Historic neighborhoods in Durham</p><p>This study primarily looks at homes in two of the city’s seven historic districts. The Lakewood Park Historic District (Fig. 1), in southwest Durham, was listed as a national historic district in 2003. (Lakewood Form) It includes the blocks </p><p>2002-2112 Chapel Hill Road; 1601-1907 West Lakewood Avenue; 1406-1602 James </p><p>Street; and 1809-1819 Bivins Street. (Lakewood Form) According to the application for historic designation, the buildings were built in 3 “generations” from 1902-1920, during the 1920’s, and in the mid 1930’s. These houses progressed from one-story homes with “modestly stylish Queen Anne features” to bungalows and into the </p><p>“Minimal Traditional style.” (Lakewood Form) Many of these homes retained a high level of integrity throughout the years, making them prime candidates for historic designation and preservation. Each contributing home was constructed before 1952 and maintains enough of the original design and workmanship to be considered historic.</p><p>1 http://nrhp.focus.nps.gov/natreghome.do Bernadette Lowell Urban Economics The Holloway Street District (Figure 2) was nationally designated in 1985 and is also considered to be a local historic district. The neighborhood, located much closer to the downtown area, dates back to the 1860’s, though it was reported in the application that many of the homes only date back to the 1880s through 1920’s. At the time of designation, many homes were “intact but deteriorated,” with some left vacant and vandalized. (Holloway Form)</p><p>Data </p><p>For the following regressions, I primarily used data from Zillow.com, which listed the number of bedrooms and bathrooms, square footage, lot size, year built, date and price of last sale, and their own “Zestimate.” This number is Zillow’s own estimate of the home’s market value.2</p><p>The Lakewood Park Historic District has 83 designated properties. Of these, </p><p>13 were commercial properties, vacant lots, or did not have enough information on </p><p>Zillow, and 8 others were considered “multifamily” and were not included in the regression. These 62 homes in the district had an average Zestimate of $163,167 with a median of $154,112 and were on average built in 1931 with a median of </p><p>1924. (Figure 3) </p><p>The historic neighborhood was compared with the surrounding area, which is not historically designated on the national or local level. Using similar constraints</p><p>—no multifamily or commercial properties— and removing any home without information on Zillow, 48 properties were chosen. These homes had an average </p><p>2 http://www.zillow.com/wikipages/What-is-a-Zestimate/ Bernadette Lowell Urban Economics Zestimate of $115,824 with a median of $108,780. On average they were built in </p><p>1950. (Figure 4)</p><p>The Holloway Historic District has 29 total homes. Seven of these had no information on Zillow and another three were considered multi-family. Of these 18 total homes, the average Zestimate was $165,739 with a median of $139,378. On average, the homes were built in 1931 with a median year of 1928. (Figure 5) The </p><p>Holloway homes were compared with 84 surrounding homes. These homes had an average Zestimage of $69,912 with a median of $62043. They were, on average, built in 1934 with a median of 1925. (Figure 6)</p><p>Regression3</p><p>For the following regressions, I used the formula lnZestimate=F(Historic, </p><p>Characteristics) where Historic is a dummy variable for historic designation, and </p><p>Characteristics include number of bedrooms and bathrooms, the square footage, lot size, and year. This hedonic model is in semi-log form, which implies that the coefficients for each explanatory variable are the percentage change in price with each one unit increase in that variable. From these variables, it is clear that there will be correlations between these explanatory variables, designation specifically being negatively correlated with year and positively correlated with other features of the house. Including all available Characteristics variables decreases the bias of the Historical variable.</p><p>3 The following regressions are similar to those used in Historic Preservation and residential Property values: An Analysis of Texas Cities, which was presented in my literature review. Bernadette Lowell Urban Economics For my initial regression, I only included Historic as an independent variable. </p><p>In the Lakewood neighborhood, designation was found to have a positive influence on the Zestimate, with a coefficient of .317 and a t ratio of 5.52. (Figure 7) For homes in the Holloway district, designation had a positive influence on the Zestimate with a coefficient of .738 and a t ratio of 8.66. (Figure 8) Though both historic neighborhoods had a similar mean price, this initial regression reveals a significantly stronger influence of historic designation on the Holloway district. This could also be clearly seen through the mean Zestimates of the neighborhoods, as it is evident that the area surrounding the Holloway neighborhood contains considerably cheaper homes.</p><p>Following this regression, I included the rest of the independent variables for the characteristics of the home. In the Lakewood neighborhood, historic designation had a similarly high, statistically significant coefficient of .105 and a t ratio of 2.63. </p><p>(Figure 9) This implies that, even after taking into account the structure of the home, historic designation brings a 10% increase in property value for the </p><p>Lakewood neighborhood.</p><p>However, in the Holloway neighborhood, Designation had a coefficient of </p><p>-.0019, though with a t ratio of -0.03. (Figure 10) Unfortunately, it is hard to draw any conclusions from this regression, as it is statistically not significant. Inclusion of a wider set of observations and explanatory variables could ultimately help this regression analysis.</p><p>Conclusions Bernadette Lowell Urban Economics From these regressions, I can conclude that the Lakewood historic designation significantly increases property value compared to the surrounding homes with the given data. Unfortunately, I cannot draw any conclusions after performing regressions on the Holloway District data.</p><p>If it is true that historic designation has lead to increased property values, then there are some potential policy issues that Durham will face. If these homes are in poorer areas, then an increase in property value could drive way poorer residents. If a neighborhood is locally designated, there is also an added burden to keep the home in its original form—requiring any change or fix to be approved by the HPC. In order to keep these homes affordable and less burdensome, there will need to be policy to keep residents in their historic home.</p><p>In order to conduct a better analysis of the impact of historic designation on home prices in Durham, this study would need more observations. As there are seven locally designated and fifteen nationally designated neighborhoods, there could be a large change in the outcomes with these homes included in the analysis.</p><p>This data set also did not include other variables about the features of the homes. Although they might not be significant, if a home has a garage, an attic, or basement could factor in to the property value as well as what the home is made of or even if it has been foreclosed on in the past. With these, the regressions might be more accurate.</p><p>One final inclusion to this data set could also be time. This regression does not show how the home prices have changed since the historic designation. A follow Bernadette Lowell Urban Economics up study could look into whether or not these home prices have increased or decreased more rapidly than those homes in the surrounding blocks. Bernadette Lowell Urban Economics Index Figure 1</p><p>Figure 2</p><p>Map taken from: http://durhamnc.gov/ich/cb/ccpd/Documents/Historic %20Preservation%20Information/Historic_Resources_34x44_020312.pdf Bernadette Lowell Urban Economics</p><p>Figure 3 Lakewood Historic Homes (N=62) Zestimate Bed Bath Sq. Ft. Lot Year built Mean 163167.25 2.803 1.45 1663.11 12097.37 1931.09 Median 154111.5 3 1 1560.5 11260 1924.5</p><p>Figure 4 Lakewood Non-historic Homes (N=48) Zestimate Bed Bath Sq. Ft. Lot Year built Mean 115824.72 2.52 1.30 1086.97 10822.89 1950.52 Median 108780 2 1 938 9648.5 1949.5</p><p>Figure 5 Holloway Historic Homes (N=18) Zestimate Bed Bath Sq. Ft. Lot Year built Mean 165738.66 3.944 2.805 2771.5 12620.22 1930.94 Median 139378 4 2 3071 10018.5 1927.5</p><p>Figure 6 Holloway Non-historic Homes (N=84) Zestimate Bed Bath Sq.Ft. Lot Year built Mean 69912.46 2.821 1.52 1262.43 7244.46 1934.84 Median 62043 3 1 1140 6817 1925 Bernadette Lowell Urban Economics Figure 7 Lakewood Neighborhood, first regression</p><p>Figure 8 Holloway neighborhood, first regression</p><p>Figure 9 Lakewood Neighborhood, second regression Bernadette Lowell Urban Economics Figure 10 Holloway Neighborhood, second regression Bernadette Lowell Urban Economics Cited</p><p>"Historic Preservation." City of Durham. N.p., n.d. Web. 29 Mar. 2013. http://durhamnc.gov/ich/cb/ccpd/Pages/HPC%20Items/Historic-</p><p>Preservation.aspx</p><p>Individual Property Form for Holloway Street District. June 1984. </p><p>Http://www.hpo.ncdcr.gov/nr/DH0188.pdf.</p><p>Leichenko, Robin, N. Edward Coulson, and David Listokin. "Historic </p><p>Preservation and Residential Property Values: An Analysis of Texas Cities." Urban </p><p>Studies 38.11 (2001): 1973-987. Sage Journals. Web. 4 Feb. 2013.</p><p>USDI/NPS Registration Form-Lakewood Park Historic District. 07 Mar. 2003. </p><p>Http://www.hpo.ncdcr.gov/nr/DH2541.pdf.</p>