Article: Dealing with Development Pressure: Preservation Strategies for Desirable Neighborhoods

February 25, 2009 · Filed Under Events and News 

By Elizabeth Sappenfield   

From North Carolina Preservaion (Fall 2008)

The real estate boom of the 2000s left its mark on many historic neighborhoods. But there are preservation tools available to protect these neighborhoods against increasing development pressures.

In many of our cities, former streetcar suburbs are now highly desirable urban neighborhoods. They are sought after for their convenient locations, mature trees and landscaping, access to amenities and their comfortable community feel. There are many reasons for their popularity beyond their historic houses. While many people love the details of older homes (the hardwood floors, detailed moldings, unusual windows, etc.), others can’t see past the small closets, creaky floors and divided floor plans. The desirability of these neighborhoods and the overall rise in the real estate market have led to rising property values that can become a double-edged sword.

As values have appreciated through the decades, older residents have seen their property values triple, quadruple or more. The accumulated equity can be a blessing, but the corresponding higher tax assessments can be a burden for residents who want to stay in their homes. The trouble really begins when residents look at their assessment, and the land value exceeds the house value. This is the tipping point after which it becomes financially feasible to buy a parcel, demolish a house and rebuild.

Generally known as the “rule of three,” the financial model behind teardowns works when a builder can sell a new home for three times what he paid for the lot (old house included). It is a combination of the real estate market and the city’s regulatory environment that enables this model. The builder has to be able to build a house that is large and fancy enough to sell for triple the price, and someone has to be willing to buy it.

It can be hard for preservation advocates to argue against market forces that bring a rising tide that supposedly floats all boats. Yet they see all too clearly the tidal wave of large new houses that is swamping the more modest homes in their neighborhood. The successful advocate will get city officials, residents, and (some) builders to understand that a neighborhood is more than just a collection of individual houses. The character of the neighborhood, defined by its houses, landscapes, parks and streets, is the context, the webbing that connects individual houses and their residents to each other and the city.

As the old real estate maxim says, value is all about location, location, location.

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