Eyal Salinger. Supervisor: Professor Daniel Shefer. Center for Urban and Regional Studies Technion Israel Institute of Technology, Haifa, Israel

Transcription

1 The Economics of Conservation of Buildings with Cultural Heritage Value: The White City of Tel Aviv Eyal Salinger Phd. Research Supervisor: Professor Daniel Shefer Center for Urban and Regional Studies Technion Israel Institute of Technology, Haifa, Israel May 2014 This research was financed by the Israel Science Foundation

2 2

3 3

4 The Good Mixed Good Privately owned buildings designated for conservation - The good is produced by the private market - The good generates positive externalities. The benefit from the good accrues not only to the estate of the building s owners, but also to society 4

5 The good is produced by the private market 5

6 The good generates positive externalities 6

7 The problem In situations of externalities a competitive Market cannot function efficiently market failure occurs Government involvement is required 7

8 Incentives Policy Questions To whom incentives should be aimed? Private owners or entrepreneurs What kind of incentives would be most efficient? Direct/market based or Indirect 8

9 Incentives for Private Owners Private owners prefer grants, loan at preferable Rates Private owners want money 9

10 Incentives for Entrepreneurs google image 10

11 Policy implications questions What is the pace of conservation and who is the main actor in the process? What is the impact of the policy on the value of designated buildings? 11

12 Before After google image What is the cost? 12

13 The economic impact of conservation regulations - The restrictions and requirements of historic conservation regulations impose extra costs on building owners. Building materials Skilled labour Construction techniques Time 13

14 Construction techniques 14

15 Architectural and historical values Of designated buildings The architectural and historical values Of designated buildings will reveal themselves After a substantial investment in their conservation 15

16 The economic impact of conservation regulations - Demolition of buildings designated for historic conservation is forbidden. - Designated buildings lack the option to demolish and rebuild - For Designated buildings, market anticipations for new local plans, are restricted 16

17 What are the options? Private owners of non designated buildings can: 1. Do nothing 2. Sell their building 3. Renovate 4. Demolish and rebuild 17

18 What are the options? Private owners of designated buildings can: 1. Do nothing 2. Sell their building 3. Conserve 4. Demolish and rebuild 18

19 What are the options? Entrepreneurs buying a designated building know they cannot demolish and rebuild therefore pay a price reflecting the current development Opportunities The value of a designated building with the option to demolish is thus theoretical. 19

20 The lack of the option to demolish - The myopia assumption - The perfect foresight assumption Amin K., Capozza D. R. (1993) Sequential Development Journal of Urban Economics, Vol. 32, pp Brueckner J. K. (1981) A Dynamic Model of Housing Production Journal of Urban Economics, Vol. 10, pp The option to demolish and rebuild (repeatedly) Williams J. T. (1997) Redevelopment of Real Assets Real Estate Economics, Vol 25(3), pp

21 Empirical studies The impact of historic conservation on property prices Most empirical studies report that historic designation has a positive impact on property values, most often in the form of historic district Designation. Coulson, N.E., Lahr, M.L (2005) Gracing the Land of Elvis and Beale Street: Historic Designation and Property Values in Memphis, Real Estate Economics, 33(3), Leichenko, R.M., Coulson N. E., Listokin D. (2001) Historic preservation and residential property values: an analysis of Texas cities, Urban Studies, 38(11), Ford, D.A. (1989) The Effect of Historic District Designation on Single-Family Home Prices, AREUEA Journal, 17(3), pp

22 Empirical studies The impact of historic conservation on property prices Recent literature has focused on the problen of Endogeneity And unobservable variables in standard Hedonic analysis The location of historic districts Ahlfeldt, G.M., Holman, N., and Wendland, N. (2012). An assessment of the effects of conservation areas on value. A report for English Heritage. LSE. Heintzelman M.D. Altieri J. A. (2013) Historic Preservation: Preserving Value? Journal of Real Estate Finance and Economics 46 pp Lazrak, F., Nijkamp, P., Rietveld, P., Rouwendal, J. (2010) The market value of listed heritage: An urban economic application of spatial hedonic pricing. VU University, Amsterdam, Working Paper. Noonan, D. S., Krupka, D. J. (2011) Making or Picking Winners: Evidence of Internal and External Price Effects in Historic Preservation Policies, Real Estate Economics, 39(2),

23 The study area: The White City of Tel Aviv 23

24 The study area: The White City of Tel Aviv 24

25 The Conservation Plan Approved on buildings were selected for conservation 187 of which, those possessing most unique architectural value, come with severe restrictions, were no additional construction is allowed. the plan allows for these buildings transferring development rights (TDR) to a different plot, subject to an assurance of conserving the building. The development rights to be transferred include remainder development rights not used in the plot and additional development rights as an incentive for conserving the building. 25

26 Municipality policy To help promote the conservation of buildings: The municipality of Tel Aviv has established a fund to coordinate between sellers and buyers of the development rights to be transferred. The municipality gives economic support to apartment owners in buildings scheduled for conservation not under severe restrictions; this support includes loans at preferable rates and grants to finance the conservation of the building. 26

27 Main data sources 1. Field surveys: Physical survey 4 groups of buildings: Buildings designated for conservation Buildings not designated for conservation Not conserved/ not renovated Conserved/renovated Door to door survey 2. Tax authority data base; Real estate appraiser firm; Secondary data sources A B C D 27

28 Private owners: the probability of conserving The Binary Choice Model (Logit Model) Factors affecting the probability of conserving designated buildings and renovating non-designated buildings All Buildings Variables Sign POSSIBILITY OF ADDING AN ELEVATOR - NUMBER OF OWNERS - Designated Buildings Variables Sign NUMBER OF OWNERS - PROTECTED TENANTS - BALCONY - DEVELOPMENT_RIGHTS + 28

29 29

30 30

31 Results: Private owners: the probability of conserving The probability of conserving a designated building is lower than that of renovating a non designated building, the extent of this probability depending on the attributes of the building. Entrepreneurs were seen to carry out most of the activity associated with conserving designated buildings 31

32 The value of Designated buildings The White City is certainly an attractive location Location was a major criteria in the selection of buildings for conservation In the White City Designated buildings are usually located in attractive location creating urban areas with a high concentration and a high exposure of designated buildings 32

33 Results - The value of Designated buildings The Hedonic Price and Difference-in-Difference method. Entrepreneurs pay most significantly for location A premium of approximately 6% is found in the price Of apartment units in concentrated conservation areas. This is ascribed to positive externalities that conservation generates. A premium of approximately 14% is found in the price Of apartment units in designated buildings, if the building was conserved prior to the sale transaction. 33

34 Results - The value of Designated buildings TDR policy is in most cases found to be efficient and sufficient enough to cover for the increased cost of conservation TDR is applied only for designated buildings under severe restrictions For other designated buildings, not under severe Restriction, the lack of the option to demolish is more Pronounced. 34

35 TDR Policy implications in Tel Aviv In 5 1/2 years since the conservation plan was approved: 20 plans for transferring development rights were approved 18 designated buildings participated in these plans, Transferring a total of 12,400 sqm to receiving plots The development rights value is converted to the values of development rights in the receiving plot. As a result receiving plots received a total of 24,400 sqm. the conversion rate on average is approximately 2 Bat-Chen Marx, seminar paper MRE program, Technion Israel institute of Technology (continuing education), 2014 : 35

36 Designated building under severe restrictions transferring development rights google image 36

37 The plot receiving the development rights google image 37

38 The amount paid for the development rights must be invested in conserving the building google image 38

39 Development rights transferred from each building in שינקין 65 0,00% אנגל 8 דיזנגוף 149 יהודה הלוי 6 החשמל 10 אלנבי 11 רוטשילד 64 קרל נטר 2 קלישר 23 נחלת בנימין 5 מקוה ישראל 23 חיסין 28 הנביאים 5 הגלבוע 14 ברנר 4,6 בלינסון 6 אלנבי 62 אחד העם 20 18,11% 52,27% 42,34% 71,15% 61,69% 54,92% 48,88% 39,75% 57,59% 50,00% 73,06% 75,98% 51,86% 49,66% 2,88% 15,75% 100,00% 100,00% 100,00% 13,32% 18,64% 41,91% 23,10% 45,08% 28,85% 5,13% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% זכויות שהועברו בתב"ע ה- 1 זכויות שהועברו בתב "ע ה- 2 זכויות שהועברו בתב "ע ה- 3 זכויות שהועברו בתב"ע ה- 4 זכויות שהועברו בתב "ע ה- 5 זכויות שהועברו בתב "ע ה- 6 Bat-Chen Marx, seminar paper MRE program, Technion Israel Institute of Technology (continuing education)

40 Transferring plots and Receiving plots Bat-Chen Marx, seminar paper MRE program, Technion Israel Institute of Technology (continuing education)

41 Ownership: private owners or Corporation מגרש מקבל Receiving plot בניין לשימור - מגרש מוסר Transferring plot תאגיד פרטי+תאגיד פרטי private Corporation + Private corporation Bat-Chen Marx, seminar paper MRE program, Technion Israel Institute of Technology (continuing education)

42 TDR Policy implications in Tel Aviv An estimation of the market for transfering development rights: 170 buildings Reminder development rights 93,670 sqm. Development rights given as incentives 52,630 sqm. Total development rights to be transferred 140,000 sqm. Conversion rate 2 Total development rights received by receiving plots 280,000 sqm. This counts for only 3.3% of the total additional development rights planned for Tel Aviv, according to the local plan Bat-Chen Marx, seminar paper MRE program, Technion Israel Institute of Technology (continuing education)

43 Summary and conclusions We suggest a local plan determining TDR policy, applying TDR policy for all designated buildings. incentives should be aimed/adjusted more to apartment owners who are interested in conserving their building. Incentives should differentiate based on building s characteristics and the complexity involved in conserving the building. Our analytical model (the logit model results) can perform as a tool for determining the incentives to be given for each building. 43

44 Thank you! Eyal Salinger 44

45 Methodology The Binary Choice Model (Logit Model) Alternative i: to conserve/renovate the building Alternative j: not to conserve/renovate the building Ln P n (i) 1-P n (i) = V in (B, O) P n (i) - the probability of choosing alternative I B - vector of building characteristics O - vector of ownership characteristics 45

46 Methodology (cont.) The Hedonic Price Model Phj = Ph(S, B, L) Phj - Price of housing unit j S B L - vector of structural characteristics - vector of building characteristics - vector of location characteristics 46

47 47

48 The good is produced by the private market 48