Local Historic Districts and Property Values in Michigan Neighborhoods
Assessor data from four communities at three points over time was analyzed to reveal how local historic district designation affects property values in residential neighborhoods. The communities studied were Ann Arbor, Bay City, Grand Rapids, and Kalamazoo. The points in time for the snapshots were around the year 2000, 2010, and 2015/16.
The data was explored in two ways:
(1) overall patterns were identified across averaged collections of similar data from in and outside local historic districts, and
(2) more exhaustively, the study’s author applied a statistical technique that seeks to measure the effect of local historic designation, while holding constant all other factors that contribute to property value. In other words, this second approach (hedonic regression) breaks out and assigns weights to the various components that contribute to a property’s value to create true, apples-to-apples comparisons between properties inside local historic districts and similar undesignated properties nearby. The result is a determination of the actual value of local historic district designation and how it contributes to property values.
- In all communities and time periods studied, the property values in designated historic districts were higher than the comparable non-designated areas of the same community, regardless of whether the overall values were stable, increasing, or decreasing.
- In communities and time periods where there was an overall increase in property values, the homes in the designated historic districts generally increased at nearly the same or better rates than the comparable non-designated areas.
- In communities and time periods where there was an overall decrease in property values, the homes in the designated historic districts still fared better. While the rate of decreasing values was inconsistent between the designated historic and non-designated areas, the actual property values in designated historic districts always remained higher than non-designated neighborhoods.
Specific Findings of the Statistical Analyses:
Hedonic regression models were estimated and tested for each community to determine the actual value of local historic district designation and how it contributes to property values. In Ann Arbor, Grand Rapids, and Kalamazoo, historic designation contributed positively to property values in every year of the study.
- In the earliest year studied (between 2000 and 2004 depending on the community) in these communities, local historic district designation added between 11% and 35% in value when compared to similar non-designated properties.
- In 2010 in these communities, local historic district designation added between 10.6% and 28.5% in value when compared to similar non-designated properties.
- In 2015, in the same communities, local historic district designation added between 6% and 28.6% in value when compared to similar non-designated properties.
In Bay City, actual property values in the local historic district were consistently higher than similar properties outside the district in every year studied. Because of the small dataset for Bay City (27 undesignated and 64 designated houses), however, the hedonic regression approach was deemed statistically unreliable.
Whether similar collections of data are averaged or an in-depth hedonic regression technique is used to determine the value of local historic designation between similar properties in and outside local historic districts, the outcome is the same: local historic district designation enhances property values.