Market Urbanism

Liberalizing cities | From the bottom up

“Market Urbanism” refers to the synthesis of classical liberal economics and ethics (market), with an appreciation of the urban way of life and its benefits to society (urbanism). We advocate for the emergence of bottom up solutions to urban issues, as opposed to ones imposed from the top down.

Historic preservation: Bad for neighborhood diversity

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Even while the likelihood of tax reform in 2015 is questionable, historic preservationists are actively lobbying to save the historic preservation tax credit from the chopping block. Currently, developers who renovate historic buildings can receive up to a 20% tax credit, significantly reducing the cost of renovation relative to redevelopment. New York Preservation League President Jay DiLorenzo is leading the effort to increase the historic preservation tax credit to 30% rather than eliminating the break. Those in support of the tax preference argue that  preservation makes neighborhoods more affordable, more walkable, and even more conducive to innovation than neighborhoods in which market incentives guide re-use versus redevelopment incentives. 

A recent study by the National Trust for Historic Preservation and the Preservation Green Lab supports these claims:

Findings from the three study cities show that mixing buildings from different vintages—including modern buildings—supports social and cultural activity in commercial and mixed-use zones. Many of the most thriving blocks in the study cities scored high on the diversity of building-age measure. Scale also played an important role. Grid squares with smaller lots and more human-scaled buildings generally scored higher on the performance measures than squares characterized by larger lots and structures. These results support the concept of adding new infill projects of compatible size alongside older buildings.

Preservationists frequently point out that Jane Jacobs favored preserving old buildings with her famous quote:

Cities need old buildings so badly it is probably impossible for vigorous streets and districts to grow without them…. for really new ideas of any kind—no matter how ultimately profitable or otherwise successful some of them might prove to be—there is no leeway for such chancy trial, error and experimentation in the high-overhead economy of new construction. Old ideas can sometimes use new buildings. New ideas must use old buildings.

Boston's North End

Boston’s North End

She favored preservation for both the cheap rent that older and perhaps run down buildings could provide for new businesses  and for the aesthetic qualities and level of density that walk-up buildings in traditional neighborhoods provide. She correctly identifies that a variety of rental rates within neighborhoods and blocks allows for diversity and vibrancy that isn’t possible when rental rates are constant across the buildings in a neighborhood. Preservationists and perhaps Jacobs herself attribute this correlation is to entrepreneurs finding inspiration in old buildings rather than new businesses locating in their cities’ least expensive buildings.

However, both Jacobs and preservationists today fail to acknowledge that the cities and neighborhoods where preservation is strongest have uniformly high rents and low diversity because preservation efforts have led to insufficient building supply. Jacobs contrasted preservation with government-led urban renewal efforts relying on eminent domain to raze and reconstruct entire blocks and neighborhoods. She correctly points out that the resulting new construction would be more expensive than protecting old buildings from eminent domain. But this is a false dichotomy. Market-led redevelopment is very unlikely to result in uniform new construction. More likely, developers will gradually redevelop or renovate parcels as it makes sense to do so, creating blocks and neighborhoods with buildings of varying ages that are affordable to diverse residents and businesses of various types.

Ed Glaeser finds that in New York City, per-square-foot real estate prices have risen an order of magnitude more rapidly than prices outside of these districts from the 1980s to the 2000s. Neighborhoods like New York’s Greenwich Village and Boston’s North End are undeniably charming, but today they’re home to universally expensive housing and retail, hardly the bastions of diversity that Jacobs espoused.

Undoubtedly, local level preservation rules that create historic designations are more distortive than the historic preservation tax credit which marginally encourages developers to renovate rather than redevelop. But incentivizing historic preservation over new construction makes cities more  expensive by reducing supply. Some types of “creative class” businesses might truly prefer to locate in older buildings with character, but old buildings only support diversity of land use to the extent that they provide cheaper space than new construction. Slum clearance is no longer driving high real-estate costs in the most expensive neighborhoods. Historic preservation is now the culprit, ensuring that old buildings go to those wealthy enough to afford them rather than providing inexpensive space for new businesses.

Comments

  1. This is complete nonsense. Historic preservation is not at all at odds with either livability or affordability. In cites with high rents and exclusivity, developers don’t build low-income or affordable housing, they build to maximize their profits. That means simply a greater abundance of unaffordable housing. Preservation benefits everyone and honors both our past, our present and future. “Market” formulas of any kind add to our problems. Legislate rent controls, affordable housing, AND historic preservation. We’ve done it before and we can do it again. More than anything else, regulations and laws are what keep cities affordable — the market is a formula for dystopia.

  2. a)Those in support of the tax preference argue that

    1)preservation makes neighborhoods more affordable
    Only if the new was going to be less dense, or at the expense of higher prices elsewhere in the city
    2), more walkable,
    Primarily because new construction falls under current regulations which generally make walkable neighborhoods illegal
    3)and even more conducive to innovation than neighborhoods in which market incentives guide re-use versus redevelopment incentives.
    Only if they actually do make it cheaper.

    b)She correctly points out that the resulting new construction would be more expensive than protecting old buildings from eminent domain. But this is a false dichotomy. Market-led redevelopment is very unlikely to result in uniform new construction.

    There is no false dichotomy here. Jacobs is not fighting the market. She was fighting the government and its use of eminent domain to destroy vibrant market based neighborhoods to build sterile ghettos. This just seems to be an odd misreading of preservationists arguments onto Jacobs.

  3. “Historic preservation is not at all at odds with either livability or affordability.”

    When cities require that the aesthetics of a domicile must be kept up to historical standards and the materials themselves must be historical, it’s going to be at odds with affordability.

    “In cites with high rents and exclusivity, developers don’t build low-income or affordable housing, they build to maximize their profits. That means simply a greater abundance of unaffordable housing.”

    This is true. The first rule of a successful business is to maximize profits. Often, however, businesses will exploit historical value in order to draw people. In DC, this is so common that the DC Historical Society’s top patrons are investors looking to exploit the possibility that one of the former owners of a property was someone important to DC’s history (sometimes, just a congressperson will do).

    “Preservation benefits everyone”
    This is a pretty big generalization.

    “and honors both our past, our present and future.”
    Who is us?

    ” “Market” formulas of any kind add to our problems.”

    Do you mean free-market?

    “Legislate rent controls, affordable housing, AND historic preservation.”

    You can’t legislate affordable housing, without undesirable consequences, often because such projects are built by the lowest bidder. That isn’t to say that a completely free-market approach to regulation is going to be helpful. As you noted businesses are in the game to maximize profits. This is the case whether there’s heavy legislation or not. Affordable housing has less to do with the housing itself as much as it has to do with the local community being able to afford it.

    “We’ve done it before and we can do it again. More than anything else, regulations and laws are what keep cities affordable — the market is a formula for dystopia.”

    Like the Bronx housing projects that led to mass arsons?

  4. I should have been more clear — in the passage above from Death and Life, Jacobs is contrasting allowing old buildings to remain in use versus eminent domain as you say. However, one of the tools she used to fight government intervention of slum clearance or highway building was the creation of historic districts: http://www.downtownexpress.com/de_155/janejacobs.html. In retrospect, fighting eminent domain with historic preservation has had the effect of making some of the neighborhoods she loved incredibly expensive, whereas the outcome might have been different if activists simply opposed eminent domain.

  5. You just contradicted your entire thesis at the end when you said:

    “… old buildings only support diversity of land use to the extent that they provide cheaper space than new construction.”

    Yes, new construction is more expensive than existing. new building stock will be more expensive for owners or renters, because the higher cost for land + new construction means the investor needs to pass it on to the customer.

    Just look at any new construction built in NYC the past several years.. Is any of it affordable? No. This is why the new administration is going to now require affordable housing in new construction.. It has gotten that bad!

  6. Hi!

    As implied in my previous Tweets(“True_Urbanism@yahoo.com), it seems to me that the comments in this blog post with regard to Jane Jacobs are way off base and based on misinformation.

    As much as I like Disquis (because of the editing feature), I dislike the nesting feature of their comments. So I will post my comment (or, perhaps, comments) separately in this thread.

    2014 09_05 ST — 09:03 pm
    Benjamin Hemric
    ( follow on Twitter at True_Urbanism@yahoo.com )

  7. THE ABOVE MARKET URBANISM POST IS
    NOT
    AN ACCURATE DESCRIPTION OF
    JANE JACOBS’ THOUGHTS ON HISTORIC PRESERVATION — PART I

    Hi!

    I hope to add more lengthy comments about this blog post at a later time, but first I think it would be helpful to get a better idea of exactly what is being said in the post — and what it is being based on.

    Judging from the link posted in the reply above, to a “Downtown Express” article, it seems to me that two separate controversies are being incorrectly mixed together.

    One controversy was in 1961, when Jane Jacobs’ home and her dense, mixed use neighborhood were threatened with destruction via a tower-in-the-park urban “renewal” scheme. This scheme would have wiped out the neighborhood, including many businesses of a light industrial nature and created very little (if any) new housing. (I forget the details, but I believe if one subtracts the units being destroyed from those being created, there may even have been a net loss!)

    Jacobs and her neighbors fought this via a “conventional” fight against city hall. If I remember correctly, they won by fighting the wrongful designation of their neighborhood as blighted. They did NOT oppose this scheme via landmarks designation. (Besides, the landmarks law hadn’t even been passed yet.)

    Jacobs was also involved in the efforts to designate large parts of Greenwich Village as an historic district. But this was not part of the fight against urban renewal, and it was essentially a very different argument. I hope to write more about this in another comment.

    Benjamin Hemric
    (follow on Twitter at True_Urbanism@yahoo.com )
    2014 09_06 ST — 9:10 pm

  8. THE ABOVE MARKET URBANISM POST IS
    NOT
    AN ACCURATE DESCRIPTION OF
    JANE JACOBS’ THOUGHTS ON HISTORIC PRESERVATION —
    PART II

    Emily Washington wrote:

    Preservationists and perhaps Jacobs herself attribute this correlation to entrepreneurs finding inspiration in old buildings rather than new businesses locating in their cities’ least expensive buildings.

    Benjamin Hemric writes:

    In my opinion, this seems pretty clearly an incorrect understanding of what Jacobs actually wrote on old buildings — as opposed to what people “say” she wrote. Although Jacobs likely wrote about old buildings throughout “Death and Life,” I think it’s fair to say that the largest group of comments — and her “major” statement is in chapter 10, “The need for aged buildings.”

    Right off the bat, at the beginning of the chapter, she writes the following (the added emphasis is mine):

    Condition [of diversity] 3: The district must MINGLE buildings that VARY in age and condition, including a good PROPORTION of old ones.

    Cities need old buildings so badly it is probably impossible for vigorous streets and districts to GROW without them. By old buildings I mean NOT museum-piece old buildings, NOT old buildings in an excellent and EXPENSIVE state of rehabilitation — although these make fine ingredients — but also a good lot of plain ordinary, low-value old buildings, including some rundown old buildings.

    If a city area has only new buildings, the enterprises that can exist there are automatically LIMITED to those that can support the HIGH COSTS of new construction. . . . .

    – – – – –

    I think if one reads through the chapter, it is quite plain that Jacobs is saying that entrepreneurs need old buildings because new businesses are risky and need cheap rents.

    Benjamin Hemric
    (follow on Twitter at True_Urbanism@yahoo.com )
    2014 09_06 ST — 09:38 pm

    PS: If I have time, I hope to make further comments on this blog post.

  9. Benjamin, thanks for you thoughtful comments. I agree that Jacobs insightfully identified that the diversity of building age is key to providing affordable space for new businesses that would, in turn, create a diversity of uses in a neighborhood. In Death and Life she says nothing about entrepreneurs finding inspiration in old buildings or traditional neighborhoods.

    In my sentence you quote above, I was pointing out that historic preservationists ignore her point that the reason new ideas need old buildings is because they need cheap rent. I was purely speculating (I did say “perhaps”) that Jacobs thought old buildings could benefit new businesses beyond their cheap prices. I think this is possible because of her stated preference for neighborhoods with traditional city densities like those of Greenwich Village and because of her activism behind the creation of historic districts. I don’t claim that she ever said that entrepreneurs need old buildings because they’re old, and she certainly never said that in Death and Life.

    You say I’m misinterpreting Death and Life, but what I’m saying is that I’m talking about her views on historic preservation as a whole, beyond the text of that book and taking into consideration that she fought for the creation of historic districts. At the time she lobbied for the creation of a historic district in the West Village, the neighborhood had “a good lot of plain ordinary, low-value old buildings, including some rundown old buildings,” but today the neighborhood has no low-value buildings. Today, the universally expensive rent limits the potential for neighborhood diversity there and historic preservation exacerbates this problem.

    If you have a chance, I’d love any additional sources you have on her work in support of historic districts. Did she see that over time, historic preservation would drive prices higher even if a neighborhood has high density and diversity at the time the district is created?

  10. THE ABOVE MARKET URBANISM POST IS
    NOT
    AN ACCURATE DESCRIPTION OF
    JANE JACOBS’ THOUGHTS ON HISTORIC PRESERVATION —
    PART III
    I hope in this comment to address some additional errors I see in the above post — as well as address Emily’s response to my previous comments.

  11. Hello,
    An interesting article with a new look at Jane Jacobs and the historic preservation regulatory apparatus of carrots and sticks; but I think the larger determinant of urban neighborhoods and districts within a city is really the shape, strength, future trendlines, and current condition of the local economy and where the employment centers are based and also the function of the “local culture” and what it in its market response values, in other words where do people pay money to have a place to work or live. I have lived and worked all over this nation and I have observed very carefully local market conditions and the varying real estate values over the years. Also in the United States, we have very divergent “currency zones” where what the dollar will buy in terms of a real estate asset in one community will vary greatly in another depending on the strength of the local economy and population growth trends. And of course, the local regulatory police powers of zoning, planing, and the building codes have a great effect on real estate values. Many interpretations of the building codes restrict upper floor uses in older buildings when I think life safety issues could be addressed with some careful thought and a more problem-solving approach to reuse of older buildings would open up lots of unused floor area that sits above a first floor store with some retail functions with vacant apartments above. Personally, I think most of Euclidean zoning needs to kept as just a reference of what not to do in terms of creating a vital local neighborhood, but “form” and “performance” type planning would have value systems to use in determining what makes sense on a particular parcel of land and further considering what is the “carrying capacity” of the local infrastructure. Carrying capacity relates to the existing community facilities that are readily available; if there is a lack of excess capacity, then is there is a quid pro quo of a payment by the developer for authority to build a new development with the payment going into a capital projects fund. I would advocate the idea of a market of development rights where locations close to mass transit would have a high redevelopment potential but to realize this higher density potential the developer would need to buy development rights from surrounding areas and there could be some of these developer paid funds to community funds to develop and keep affordable housing and local business operations. Also, I think community urban land trusts that would acquire land and provide it for redevelopment, but keeping a lid on the underlying value of the land from pricing out succeeding generations of renters/owners of the commercial and residential building stock built on this land trust owned land. Finally, historic preservation and local designations of individual buildings or districts are expressions of what a community values and what it believes is important in terms of the community’s character. If one is displeased with things within one’s community then one needs to get engaged in the local political process and organize like-minded citizens. And if the local market forces are so strong and not in the direction you find comfortable that is another issue that requires thought about what are the options.

  12. THE ABOVE MARKET URBANISM POST IS
    NOT
    AN ACCURATE DESCRIPTION OF
    JANE JACOBS’ THOUGHTS ON HISTORIC PRESERVATION —
    PART IV
    E Washington wrote [added numbering is mine — BH]:
    [1] Jacobs contrasted preservation with government-led urban renewal efforts relying on eminent domain to raze and reconstruct entire blocks and neighborhoods.
    [2] She correctly points out that the resulting new construction would be more expensive than protecting old buildings from eminent domain.
    [3] But this is a false dichotomy.
    [4] Market-led redevelopment is very unlikely to result in uniform new construction. More likely, developers will gradually redevelop or renovate parcels as it makes sense to do so, creating blocks and neighborhoods with buildings of varying ages that are affordable to diverse residents and businesses of various types.
    B Hemric writes:
    Simply stated, not only are the above arguments NOT Jane Jacobs’s arguments but they overlook what J Jacobs really wrote.

  14. Hmm, funny that there’s no rent control in Boston then. On the flip side, East Palo Alto does have rent control, unlike other peninsula cities, and is cheaper than any surrounding municipalities.

    Maybe there’s something more complex going on?

  15. Chris Stevenson, you make good points but I must correct your last sentence: What burned in the Bronx was NOT public housing but mostly prewar market-built buildings. And the fires were generally not caused by arson.

  16. “Preservationists frequently point out that Jane Jacobs favored preserving old buildings with her famous quote…”

    It’s precisely their frequent citation of this quote that makes me wonder if contemporary preservationists even understand her argument. I think Benjamin nailed it: Jacobs was not at all a “preservationist” in the sense we understand this practice today.

    “Preservation” as practiced today means bringing old buildings up to an “expensive state of rehabilitation,” be they reno’ed brownstones, thoroughly modernized cast-iron commercial buildings, new buildings contained within renovated historic shells, whatever. And I think these are great!

    BUT this means that these buildings are NOT “aged buildings” – they are for all practical purposes just like new construction, which means they can only accommodate residents and businesses that can shoulder the cost of extensive rehabilitation (the equivalent of new construction).

    “Aged buildings,” on the other hand, are merely buildings that are cheap because they haven’t been brought up to modern standards of convenience. Maybe they don’t have central AC, or elevators, or fire stairs, or up-to-date wiring, or off-street parking, or handicapped bathrooms.

    Oddly enough, today’s unrealistic, gold-plated building codes may actually be helping maintain a supply of aged buildings in some high-demand cities: cheaper to strip-mine an outdated building for rents than bring it up to expensive modern standards. But in weak-demand cities, the same codes may be inhibiting the incremental replacement/rehabbing of an excessive supply of aged buildings.

    Maintaining a supply of aged buildings has nothing to do with historic preservation per se. Jacobs argued that a neighborhood should be like a granary, in which some new buildings are always aging into the affordable buildings of tomorrow, and in which some aged buildings are always being replaced by (or thoroughly modernized into) new buildings.

    Because so many urban American neighborhoods were built rapidly in the 19th century with a limited range of building types, we’re still struggling to balance this granary: our neighborhoods tend to fall into two extremes in which either almost nothing can be replaced (your average single-use Brooklyn brownstone ‘hood), or the decay gets so serious that everything has to be replaced at once (your average single-use North Philly rowhouse ‘hood or Rust Belt frame house ‘hood).

  17. The article could have used some statistics. Even in cities with long-term preservation programs like New York, you are generally talking about 3-5% of the building stock having some local preservation designation. Is it hard for a market to get by with free reign on 95%?

    Granted, Manhattan island has as much as a quarter of its building stock in historic districts, and this argument has been used by housing activists to argue that landmarking prevents affordable housing, so it is amusing to see the same argument being used on the other side of the aisle regarding commercial real estate. Moreover, the assumption that landmarking equals a freezing of density or use is just wrong – that’s zoning.

    I love Glaeser’s book and taught a graduate seminar around it but was never swayed by his landmarking argument because he never quantified or correlated it in a meaningful way.

  18. THE ABOVE MARKET URBANISM POST IS
    NOT
    AN ACCURATE DESCRIPTION OF
    JANE JACOBS’ THOUGHTS ON HISTORIC PRESERVATION —
    PART V of V

    Although I think I’ve addressed the major issues raised by the original post and by E Washington’s response to Part II, in this comment I’d like to make more explicit and, perhaps, clarify, what I understand to be Jane Jacobs’ thoughts on landmarks and historic districts. My previous comments in this thread (except, maybe, Part III) have focused mostly on how her writings on “aged” buildings were not really about historic preservation, but about economic development. So the question, then, is what did Jacobs think (or, write or say) about landmark preservation and historic historic districts themselves.

    Let me add at the beginning that I haven’t had time to search through my materials for specific sources, so this comment is not as well documented as I would have liked.

  19. “But incentivizing historic preservation over new construction makes cities more expensive by reducing supply.” Stated without citing any data or studies. It’s a simple common sense notion. Simple common sense notions unsupported by data or studies don’t have a very strong track record for accuracy.

  20. There needs to be mechanisms to keep local vacancy rates at ~5%. That is where rents stabilize. Have clauses that allow for increase in height or scale, but with setbacks and sky exposure plane above a certain story count. Maintain architecture style, but increase scale, or have some way to generate funds for housing nearby.

  21. It was divestment + arson. As the budget and population shrank, the City commissioned Rand Corp to come up with savings. Among the ideas, they came up with carefully considered firehouse closures.

    When it came time to implement the plan, the middle class and white neighborhoods revolted. Consequently, the firehouses in black and poor areas got the majority of the cuts. Yes, there was arson, but property neglect by slumlords, abandoned buildings used for illicit activity, pyromaniacs, kids playing with fire also loom large. Smoking and heating crack led to fires. As did hazardous fires used by homeless to keep warm.

  22. Take a look at vacancy rates for the areas you mentioned. You can have very restrictive regulations, but if you have a surplus of housing your housing costs will be stable or falling.

  23. Sure – there are many factors that add up to make price of housing.

    But yes, in general it’s supply and demand, more so than any one off issue like “whether or not there’s rent control.”

    You could have zero rent control, but if you make it ridiculously convoluted to permit new construction, you’ll also squeeze prices up…

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