2011-06-25 / Top News

Preservation Is A Powerful Economic Tool, Rypkema Says

By Karen Gould

Donovan Rypkema of Washington, D.C., an international economics and preservation expert, visits Mackinac Island Tuesday, June 14. While here, he discussed the positive economic impact local historic districts have on communities. The Island is considering establishing two local historic districts in the downtown area. Mr. Rypkema’s presentation was offered free to the community. Donovan Rypkema of Washington, D.C., an international economics and preservation expert, visits Mackinac Island Tuesday, June 14. While here, he discussed the positive economic impact local historic districts have on communities. The Island is considering establishing two local historic districts in the downtown area. Mr. Rypkema’s presentation was offered free to the community. The staggeringly positive impact local historic districts have on communities around the world, from Cleveland, Ohio, to Zaanstad, Netherlands, where city leaders and property owners use preservation to protect and increase their property investments, was brought into focus on Mackinac Island Tuesday, June 14.

About 50 business owners, community leaders, residents, and state historic preservation experts heard a presentation by international economics and preservation expert Donovan Rypkema of Washington, D.C., principal of PlaceEconomics, an economic development consulting firm that specializes in downtown and neighborhood revitalization and the reuse of historic structures. He wrote a book for the National Trust for Historic Preservation, “The Economics of Historic Preservation: A Community Leader’s Guide,” and he teaches a graduate level class, The Economics of Preservation, at the University of Pennsylvania.

Mackinac Island may be one of the best historically documented areas in the state, but establishing guidelines through local historic districts to preserve historic structures in the downtown area, including those on Market Street, has become a contentious issue and debated in meetings and on Island streets since last fall.

Also last fall, the federal Advisory Council on Historic Preservation, which advises the White House on preservation policy and mediates among federal agencies on preservation issues, hired Mr. Rypkema’s firm to analyze the economic side of preservation. The report is not finished, he said, but some of the findings are, and he shared them during the meeting.

“Preservation is a powerful economic tool,” he said.

He focused on the big four economic impacts of historic preservation: jobs created from rehabilitation, local historic districts, heritage tourism, and revitalization of downtowns.

He gave the example of Delaware, which offered a tax credit program for those who preserved historic buildings. The program was set to expire last year and state legislators wanted to know if they should renew the program. Mr. Rypkema’s firm discovered that in Delaware, for $1 million of output in manufacturing, 9.2 jobs are created, resulting in paychecks worth $343,000.

When a new building was constructed, a total of 11.2 jobs were created, and $478,000 in paychecks. When $1 million was used to rehabilitate a building, 14.6 jobs were created, and $540,000 in paychecks.

“There are very few economic activities of any kind, the U.S. Department of Commerce has 527 categories of industries, very few of which have this combination of numbers of jobs created and household income generated,” said Mr. Rypkema. “Almost no industry of those 527 has as much local economic oomph as does rehabilitation of historic buildings.”

He listed similar results in Georgia and Connecticut.

There is the National Register of Historic Places, but in it “there is zero, zip, zilch, nada regulations, controls, limitations on what you can do as a private owner with a National Register building. You can build it up, tear it down, paint it red, white, and blue, do whatever you want to, no limitations.

“The only protections for historic buildings come at the local level. It’s a legitimate question to say, ‘What would happen to the property values if we have a local historic district?’ The default response is, it means another layer of regulation and another regulation must mean it’s going to hurt property values. Well, in fact, research shows the opposite.”

Establishing a historic district assures property owners that their neighbors will make appropriate choices and help preserve property values.

In Philadelphia, property values were considered in all areas. The properties that appreciated the most over a 30-year period were in the local historic districts.

While a listing on the National Register for a significantly historic property gives a premium to that property of about 14% relative to the market as a whole, being in a local historic district adds a premium of 22% to the value of that property, he said. Similarly, highly regulated Savannah, Georgia, has one of the largest local historic district neighborhoods in America, where property value gets a 21% premium, while those with individual landmarks increased 1.7%. The same was found in Louisville, Kentucky. Those who purchase property in a local historic district are paying a premium for the confidence that the landowner across the street “can’t do something to his property that’s going to have an adverse affect on my property.”

Protection is the biggest contributor to the property premiums in a local historic district.

“It’s the confidence that, not what I have to do, but what somebody else is not going to be allowed to do,” he said.

“It’s the issue of context protection,” said Mr. Rypkema. “The old clichĂ© that everybody knows, the three most important things in real estate are, and you all know the answer to that,” location, location, location, he said. “But think about what that means. Nobody says that the three most important things are roof, walls, and floor. It’s location, location, location, meaning that real estate, as an asset, is peculiar in that it gets its economic value not from inside the four lot lines, but from its context.”

The land role of historic districts is to protect the context within which a property exists, he added.

The downtown revitalization program offered by the National Trust For Historic Preservation and called Main Street has been around for more than 25 years and is one of the most effective.

“There is no program of economic development of any kind in America that’s remotely as cost effective as Main Street,” he said.

Since its beginning, about $45 billion in investment in chosen towns created 83,000 new businesses, 370,000 new jobs, and 200,000 new construction projects.

The State of Georgia used Main Street to increase small businesses in local towns.

Much of the tourism on Mackinac Island could be defined as heritage tourism. Heritage tourists spend about two times more than other tourists and stay longer, he said, and that contributes to businesses and taxes. Often, international visitors travel to historic sites.

In Cleveland, houses increased in value if they were in neighborhoods or near houses that were restored.

When property values increase, revenue to communities rises, he added.

The most sophisticated study in the world likely was done in Zaanstad, Netherlands, which revealed the positive impact of local historic districts.

The environment also benefits from preservation efforts. In Hartford, Connecticut, a building was renovated rather than torn down, a project that made an impact on the environment, he said. The waste of tearing down the building would have been equal to the waste of the entire town over a 21-day period and more.

“That one building, had it been thrown away instead of reused, would have wiped out the entire environmental benefit of the last 21 million aluminum cans that the people in Hartford throws into the recycle,” he said.

Preservation on Mackinac Island has made progress, he noted, but there are areas that need improvement.

“I really think that while there’s been plenty of good stuff done, I think there is also some examples that, if we were candid, we could all point out to where the property owner would have been better served if they had gotten some basic amount of design assistance,” said Mr. Rypkema. “Most of us want to do the right thing, it’s just a lot of us don’t know what the right thing is.”

Historic districts work best, he said, when four things are true: Clear, written guidelines are in place that are understandable; a person is available that the property owner can talk to before going before the Historic District Commission; the commission makes firm and consistent decisions; there is ongoing educational outreach to property owners, real estate agents, bankers, and others.

Following his hour-long presentation, Mr. Rypkema asked for comments and questions.

“I’d like to make one observation,” said R.D. Musser, owner and chairman of Grand Hotel, a National Historic Place. “I think you’ve made a pretty good case that we don’t need a historic district at all. I think much of what you suggested we’re doing here. We recycle buildings. We’re not in a position to create many more jobs. First of all, we don’t have any beds to put the employees in, and we have not increased nor decreased the numbers of businesses, I don’t think, very much. And I don’t know we ever will… I’m not sure we need another layer [of government] to tell us how to do it.”

One of the proposed local historic districts on the Island is in the downtown commercial area and he asked Mr. Rypkema if any existed in other communities.

Mr. Rypkema said he was not on the Island as a proponent or opponent to what is under consideration here, although there are “hundreds” around the country, including entire cities.

He later provided specific examples to the Town Crier, including the entire island of Nantucket and the downtowns of Guthrie, Oklahoma, and Rapid City, South Dakota, and the commercial district of Georgetown in Washington, D.C.

“There’s almost nothing you can dispute over historic preservation,” said developer and businessman Ira Green. “It’s very valuable. The question is what you do to mandate it.”

Mr. Green operates a bicycle rental business and owns several properties, including the centuryold McNally house on Main Street, which he plans to tear down and replace with a threestory hotel with retail shops.

Mr. Green said about 90% of the property owners on Mackinac Island already are following the Secretary of the Interior Standards for Historic Preservation guidelines.

Businessman Anthony Trayser said any property owner can do anything they want to their building, including tearing it down, and if most property owners are already following the guidelines and doing what a historic district would require, than why not establish it to protect the historic property that may not be protected by the 10% of owners who are not following the guidelines?

Mr. Rypkema agreed. “It’s that outlying possibility of someone doing it wrong, that’s why local historic districts work,” he said.

“I am not at all, I am not remotely somebody who says no building should be torn down,” replied Mr. Rypkema. “But I do think that it ought to be the last resort, that every other alternative be explored before we get there, and we look for tools to say, Does that make sense?”

He continued, “When you are the owner of a historic building, it is not sufficient to think about the rights of ownership. You have to think about the responsibilities of stewardship. We are temporary possessors of something generations before built, and we have a stewardship obligation for somebody else to have it.”

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