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The Higher ED Blog: Heritage properties are better economic assets than you think

Michelle Madden / April 4, 2016

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The Higher ED Blog: Heritage properties are better economic assets than you think

Economic development is about progress. It’s right there in the title: economic development. In a field that is forward-looking by definition, it can be difficult to sell the idea of heritage preservation.  The designation of heritage properties—and the restrictions imposed by those designations—are often perceived as anti-progress, standing in the way of newer and more exciting building projects. In the words of the Heritage Canada Foundation’s former executive director Brian Anthony, ‘Conventional wisdom sees the conversion of heritage property as a frill, or worse, a net cost without economic benefit’.

In a paper for the University of Waterloo’s Year 3 program for economic developers, Something old is something new: The role of heritage preservation in economic development, Rebecca Goddard-Bowman challenges this perception and makes the case that heritage preservation both has many economic benefits and has a role to play in economic development . She found compelling evidence of preservation’s ability to generate direct economic benefits, spur community revitalization, and bolster tourism. She also has advice for communities reconsidering their heritage policies.

Benefits of heritage preservation

While the main point of heritage preservation is about protecting its historical or cultural value, there are many positive impacts that emerge beyond that foundational goal.

Since economic developers love to talk about jobs and investment, we’ll start there.   One study on historical rehabilitation in the State of New Jersey found that rehabilitation creates 18.4 jobs per million dollars invested in residential construction and 19.3 jobs per million in non-residential construction. That’s compared to 16.4 and 16.7 jobs, respectively, for new construction.  Rehabilitation doesn’t just create more jobs but better ones too, as they are typically higher skill and higher wage than regular construction jobs. In real numbers, that study reports that $123 million dollars was invested in historic properties across New Jersey over the course of one year, and it resulted in an estimated 4,600 jobs, $156 million in income, and $41 million in tax revenues. Impressive returns can also come from projects on a smaller scale. For example, over the course of five years, the City of Victoria’s Heritage Tax Incentive program spurred the rehabilitation of 34 heritage buildings in the downtown core, which injected $225 million in new private funding into the city, and created 600 residential units.

Communities faced with the decision to designate or not designate should not be concerned that heritage preservation will scare off prospective developers and investors. It’s true that not every developer is interested in property rehabilitation, but for those with the interest and expertise, it is less expensive on average to rehabilitate a large commercial property than it is to build on a clear site. Further, the returns on adaptive reuse (using an old building/site for a new purpose, like housing) are “almost always higher” than new construction. The reasons for this are likely due to the properties’ central locations, interesting architecture, quality materials, or some combination of the above. Some buyers and lessees may even be drawn in by the history of some properties and the tales they can tell.

From a municipality’s point of view, heritage preservation and rehabilitation is a win for the coffers. A building that is improved and occupied will result in greater property values and therefore greater property taxes. While not all rehabilitated buildings are designated, those that are have proven their value. An Ontario-based study of 3,000 properties in 24 communities found that 74% of heritage designated properties perform average or better than average in the market, and values tend to be resistant to downturns. Another study from the US found that in fast growth regions, residential properties in historic districts sold for 7 to 9% higher than comparable properties. In slow growth regions, the impacts were even greater, with sales prices 20 to 24% higher. Even nearby undesignated homes saw a bump in values, so long as they were within 300 feet (a so called ‘halo effect’).

Heritage sites, properties, and districts are also great assets for tourism. Statistics on culture and heritage tourists vary depending on their definition, but by at least one account, more than half of US travelers (54%) seek out historic or architecturally-significant sites and exhibits, and a third say they stroll around a destination to observe its buildings and architecture. Among Canadians, the respective numbers are 57% and 39%. Data could not be found for Canada, but heritage tourists reportedly generated $244 million in Colorado in 2008 and $423 million annually in New Jersey between 1993 and 1995.

Heritage policy development

Policies on heritage preservation largely reside at the local level, with some support from the provincial and federal governments. Since these policies are largely ad-hoc, Rebecca created a checklist for municipalities to consider when creating or updating their policies.

heritage policies

Clearly, each community should consider its individual needs, and work with relevant local stakeholders, but this list may provide a good starting point for discussions.

What historic buildings are sitting empty in your community? Is there an eyesore with the potential to be great? Is there a fabulous historic building at risk of being demolished? There’s no time like the present to take stock of your heritage assets and make the best possible use of them.

 

About the authors

Michelle Madden is the editor of Higher ED. She is also the Outreach Manager for the Economic Development Program and a graduate of the LED master’s program.  She has authored many Higher ED articles sharing information relevant to economic development practitioners, and has written several on behalf of students. She has published several of her own blogs on economicdevelopment.org as well. Follow her on Twitter at @michelle_mad.

Rebecca Goddard-Sarria has many years of experience in marketing, retail, business consulting, and economic development. After moving from Toronto to Cobourg, Ontario, Rebecca formed her own consulting business specializing in retail operations and downtown revitalization. She continued her work in business development as a Business Consultant for the Northumberland Business Self-Help Office through the Ministry of Enterprise, Innovation and Opportunity, and then as the Economic Development Officer for the Municipality of Port Hope. Rebecca has a B.A.A. (Bachelor of Applied Arts) in Retail Management from Ryerson University. She received her Certified Economic Developer Fellowship Designation, Ec.D.(F), in 2003.

About the series

Higher ED: Insights for the Next Economy is a platform for students, guest speakers, staff and faculty of the University of Waterloo’s professional and graduate economic development programs to share knowledge with the field at large. The series takes works destined for an academic audience and reworks them into a fresh, easy-to-digest blog article.

Established in 1988, the Local Economic Development program is the only master’s program in Canada devoted solely to local economic development. It offers a balance between theory and practice by combining coursework, a major research paper, an internship, and weekly seminars featuring guest speakers. Students are prepared for careers in local, community, or regional economic development.

The Economic Development Program is a nationally-accredited provider of professional training. It delivers certification programs and seminars that offer a deep understanding of the Canadian context in a convenient block format. Peer learning is combined with informative lectures and practical case studies to provide dynamic instruction that is beneficial for junior and senior-level practitioners.

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