As Jim McPherson mentioned yesterday, there’s already a criteria in place to evaluate whether a building is worth saving or not, and that is the Phoenix Historic Property Register. There is also the National Register which is essentially the same but slightly different. Here’s a look at what they require…
The Phoenix Historic Property Register Criteria:
The Phoenix Historic Preservation Commission shall evaluate each parcel of property within an area that is included in the application for a demonstrated quality of significance in local, regional, state, or national history, architecture, archaeology, engineering or culture, according to the following criteria:
1. Associated with the events that have made significant contribution to the broad patterns of our history; and/or
2. Associated with the lives of persons significant in our past; and/or
3. Embody the distinctive characteristics of a type, period or method of construction or that represent the work of a master or that possess high artistic values or that represent a significant and distinguishable entity whose components may lack individual distinction; and/or
4. Have yielded or may be likely to yield information important in the understanding of our pre-history or history of the city of Phoenix.
1. Are at least 50 years old; or
2. Have acheived significance within the past 50 years if the property is of exceptional importance.
1. Retain sufficient integrity of location, design, setting, materials, workmanship, feeling and association to convey their significance.
The Arizona and National Historic Property Register Criteria:
Properties eligible for listing on the National Register of Historic Places generally must be fifty years or older and must meet the following criteria of significance and integrity.
Criteria of Significance: Properties are evaluated in relationship to major historic and prehistoric themes in a community, state, or the nation. A property may be significant if it relates to any one or more of the following four aspects of American history:
1. Association with historic events or activities
2. Association with an important person in history
3. Distinctive design or physical character, or
4. Potential to provide important information about prehistory or history.
Criteria of Integrity: A property must also maintain enough of the original qualities that make it significant. These qualities of integrity include: location, design, setting, materials, workmanship, feeling, and association.’
What’s Great about the Criteria
They are holistic, looking at several different factors of significance including architectural design, historic events, historic people or ways to educate about a certain time and place. This ensures that a wide range of properties are eligible for historic designation. It’s also what we have and we should use it.
Why these Criteria Should be Used Whether or Not a Property Owner is going for Historic Designation:
Some historic properties will never be designated, whether it’s due to lack of interest from the owner, or maybe the owner prefers the flexibility of NOT being on the register, or maybe they just don’t want to go through the hassle. This reminds me of what’s happening with LEED (Leadership in Energy and Environmental Design) certification. Many property owners never opt to actually pursue LEED certification, but they build their building to those standards betting that a greener building is a more valuable building.
Those of us who care about historic preservation need to sell this same idea – that a historic building is a more valuable building. Once this equation is made in the hearts and minds of the market, then historic preservation will take care of itself.
But it has to pencil out financially for property owners. If we look at building to LEED standards again, you can be sure that it almost always means higher upfront costs for the owner. But more and more, owners are able to pencil out the financial benefits of green building as they see life-cycle returns on their green investments. Plus owners are able to sell the added value of a green building to their market. A portion of the market wants to know they are doing their part for the environment and are sometimes willing to pay a premium to buy a green building. Or they know that the premium they’re paying will more than pay itself back through energy savings in the long run.
So how can we encourage developers to think the same way with historic preservation? Right now the thinking is that a historic building requires an immense amount of money to rehabilitate and in the end is it going to be worth it, does all that rehabilitation and money ADD VALUE for the owner? It’s a more difficult argument than the green argument because we don’t have energy savings to fall back on. But I think it’s still possible. It’s still possible to sell the added value of history even though it’s intangible to the market.
Once the property owner is able to charge a premium for a historic building then it becomes worth it for her to save and rehabilitate it. And when I say “worth” it, I mean really worth it to the developer – financially.
So I ask you, how can we make historic preservation pencil out for property owners? How can we make it the more lucrative option instead of the money pit it is now in the minds of developers? Somehow green building is slowly making this shift which leads me to believe, it can happen with historic preservation too.
Photo from Virtual Assist.Tags: blooming rock, historic preservation, LEED, national historic register, phoenix, Phoenix Historic Property Register, taz loomans, vanishing phoenix
Speaking of value added, data from Phoenix, Tucson, and elsewhere in Arizona and the U.S. consistently show that historic designation increases property values compared to similar, undesignated neighborhoods and buildings. Historic designation also makes properties eligible for state and federal tax credits for rehabbing or restoring. – Jonathan, Tucson
Jonathan, you’re right in that there are tangible financial benefits to getting designated unlike getting LEED certification which is more of a financial burden.
If you want to answer the question of how historic properties can be seen as more valuable, you have to look past the developer to the resale market.
Green building has taken off because the resale market recognized increased value. Buyers recognized the increased quality and efficiency of a certified building, which reduces operating and maintenance costs, and renters are willing to pay more because green buildings are more productive (natural light and ventilation, indoor air quality, etc.). Of course, quality buildings always existed, but the market, mostly made up of money people, not designers, could not tell the difference. The new factor is the “seal of approval” aspect of the LEED system, that marks the quality buildings from the less so.
The “added value” benefits of preservation that Jonathan mentions are well documented, but I think more on a historic district and neighborhood scale. There is less data on the increased value of individual buildings, particularly on the commercial side, which is really what I think we are talking about. It is certainly there, but much harder to quantify because there are so many variables.
Historic buildings have pluses and minuses to a developer. The problem is that the minuses often outweigh the pluses. Pluses: the intangible qualities such as character, coolness, “historicity”; also incentives available including tax credits and grants. Minuses: higher construction costs, higher maintenance costs, (usually) higher energy costs, (often) lack of flexibility, increased regulation, and worst of all bigger “unknowns”.
If you can figure out how to codify this so that a developer has certainty that if he does a historic project right, he will make more money, I will nominate you for the preservation awards next year!
Bob, thanks for your comment! I totally agree. Yes, it would be great to be able to make the business case for historic preservation and to codify it in some way.
It sounds like a good project to take on, especially here in Phoenix, where money talks louder than almost anything else.
Donovan Rypkema’s The Economics of Historic Preservation has a lot of information on this topic. Here’s a few of his points:
HP is a counter-cyclical strategy that stabilizes local economies
Its ideal for attracting small businesses
It allows cities to compete with new suburbs
It is often the catalysts for revitalization.
Dr. Bill Collins at SHPO has a spent a lot of time tracking property values in Maricopa County to determine the true impact of historic designation on residential properties. The outcome was that in most cases, as Jonathan stated above, the historic neighborhoods increase as a greater rate than comparable non-historic neighborhoods. Coronado is the best example of this. The weakest example is the Oakland Historic District which has a large amount of rentals. Oakland’s property values did not decline, they remained consistent with comparable non-historic neighborhoods.
We’ve theorized that historic districts hold their value in times of economic downtown better than non-historic areas. As of yet, Dr. Collins has not had time to update his research to see if this is true.
One of the main reasons for the property value increase appears to the state property tax reclassification program available for non-income producing properties which reduces property taxes by roughly one half.
While there are incentives for commercial historic properties, they not quite comparable to the non-historic ones mentioned above. There has been talk in the past of changing the legislation to make the commercial incentives better. Of course, in the last legislative session bill was put forward to eliminate the program altogether.
Bob’s made very good and, sadly, very accurate points. Compliance with building codes alone have crushed many commercial HP projects. As have underwriters who don’t know how to handle historic properties and thus refuse to insure them.
As to your statement about a greener building being more valuable, let’s not forget the National Trust’s catchphrase: The greenest building is one already built. It could be as simple as popularizing that catchphrase or creating preservation standards similar to LEED (maybe something Arizona Preservation Foundation could do).
I was told the other day about someone who had replaced all the windows in their old home with energy efficient ones for $90,000 so they could save $900 a year. Apparently they had not done the math to find that it would take 100 years to recoup their costs. If they’d asked me I would’ve told them to keep their original windows and install storm windows & if they’re worried about solar load to plants some shrubs or put up an awning.
Eric, thank you so much for your comment. I’ll be sure to take a look at the The Economics of Historic Preservation. It’s great that we have in place some government incentives to save historic buildings like the property tax break you mentioned. And thank goodness this break is still around, or else developers would have absolutely no reason to keep historic buildings.
The tipping point for historic preservation will come once there are market incentives as well as government incentives in place for historic preservation. So you and Bob are right that maybe the key lies in popularizing historic preservation, making it trendy and cool. And yes, riding the green wave is smart too, because it’s true that the greenest building is the one already built.
Eric has mentioned the intersection of HP and green building, i.e. “The greenest building is one already built.”
One thing that those of us in USGBC can do is to work to change the LEED system to get more points for existing building reuse and/or to include historic preservation points specifically. If an historic building is a LEED building, you have achieved what Taz suggests – established the link between HP and economic value.
Unfortunately, at this time LEED and historic standards are almost always at odds because of the heavy emphasis on energy efficiency. While there are a few projects making the attempt, to my knowledge there are not yet any LEED certified, intact historic buildings in Arizona.
The LEED standards must change to encourage, rather than discourage, preservation.
Bob, check out this 200 year old hotel in Massachusets that received LEED silver: http://www.ecohomemagazine.com/news/2010/03/massachusetts-historic-landmark-attains-leed-silver.aspx.
But I bet it was a tremendous struggle to get the certification and keep the historic integrity of the house because as you mention the two are at odds. But as we know, they shouldn’t be at odds and LEED does need to incorporate and incentivize historic preservation instead of making it difficult.
You ask the question in your article “how can we encourage developers to think the same way with historic preservation?”
One way that we could do that is through creating a hybrid Tax Increment Financing (TIF) / Historic Preservation Tool. TIF can be a very useful tool used for Historic Preservation in relation to Redevelopment. Downtown Phoenix could use this as a major reinvestment tool that would give developers the means and financing to develop and preserve historic properties.
For those that are not familiar, when a TIF district is established, the most recent total equalized assessed valuation for the district is determined. This is known as the “EAV”. As the TIF district is developed, its total EAV will grow. That portion attributable to the increase in EAV, known as the “tax increment”, is placed in a special fund and is spent for redevelopment purposes as outlined in the “TIF District.”
For example, if a TIF district is designated and the total EAV is $100,000. This is the base. After a few years of development and improvements, the total EAV is $150,000. The property taxes paid on the increment EAV of $50,000 goes back into the TIF District; the property taxes paid on the base EAV of 100,000 is collected by the varying taxing bodies. That $50,000 can be applied to developers as an incentive to preserve historic structures and a means for leverage financing.
Not to downplay the topic of conversation, but as of right now, we are hearing TIF in the news as to how we can develop around the Glendale Entertainment Corridor, and as a means to pay for a new stadium for the Chicago Cubs Spring Training Facility in Mesa. I do know that Tucson has utilized a TIF District for the renovation of historic venues Fox and Rialto Theatres. So you ask how to make historic preservation a lucrative option, TIF seems to be a viable answer.
Aaron, thanks for the great overview of this TIF tool. It sounds promising! The two examples you used that are taking advantage of this tool are larger scale projects. Do you think this could be used for smaller scale urban developments?
Since we’re brainstorming here (and dreaming a bit too), it would be great if the State of Arizona would adopt legislation creating credits against state taxes to provide incentives for the appropriate rehabilitation of historic buildings.
Thirty-one states now offer a state historic investment tax credit. Dudley Ventures, a real estate development company housed in an historic building in the Phoenix Warehouse District, has worked on numerous preservation projects OUTSIDE of Arizona because of the “better” mix of incentives.
In this dismal economic climate and with a state legislature that most likely would be unresponsive, the time is not right. But maybe one day!
For background, courtesy of the National Trust for Historic Preservation, click on http://bit.ly/StateHistoricITC
Jim, thanks for this info on state tax credits for historic rehabilitation. Yes, I think this kind of legislation would go far to encourage preservation, but you’re right that our pro-development legislature will see to it doesn’t happen on their watch.
I think this is the gridlock that occurs with the erroneous notion that you either have to be in the pro-preservation camp or the pro-development camp.
Why can’t you be in both? This third option is where I think the answer lies for Arizona.
[…] week, I asked how we can make historic preservation a more lucrative option. Today, Aaron Kimberlin tells us about one way to do just that – Tax Increment […]
On a trip back east to Raliegh NC I was was able to attend a preservation meeting with a friend of mine. I was shocked that half the people in the room and even some of the board members were developers. They were not “at war” but working together. Preservation ideas were being integrated into development ideas for profit and preservation. Because of the early desparate need for a war mentality to save what was left of the historical structures in Phoenix there emerged this division, it was needed and it served its purpose. However it is time to move on, to bring in the developers and welcome their ideas, and their private resources to the table. Until the two sides come together and “develop preservation” we will continue to live in the aftermath of the war. As in every war both sides loose. We can begin by discarding the absolutist terms of “preservation” and “development” and adopt a “revitalization” mindset that accomplishes both goals. I have yet to see developers and preservationist “talk” a civil tone without threats, attorneys, back and forth legislation, and outlandish newpaper communiques…….Think of the resources that developers could bring to the effort if we worked together……just a dream I saw in Raliegh NC a while back……
Wow Wayne, what a novel idea! You’re right, a collaboration with developers is the only way to move forward. We will save so many more buildings that way, in an economically viable way. Everybody wins. It’s not easy to get past the us against them mentality, but I think dialogue and education are going to get us there. Thanks for your comments.