Friday, March 7, 2014

The Utah Heritage Foundation: Reducing your income since 1966

Since I’ve recently bemoaned the lack of density in SLC proper, thought I’d finally lay out more of
SLC Council: "This city will make a fine museum one day."
the policies that made it this way. Recall that these policies not only make us fatter, poorer, and less productive, but they also appear to be pushing people and jobs elsewhere in the state. (Note--this isn't a super positive post.)

One of the most important of these missteps is the fact that SLC is turning into one large historic district with a giant salty lake attached to it. SLC proper (which is the focus here) has written into its city code that historic preservation brings large environmental and economic benefits to the city. Much of their policy seems to be based on one very... uneconomic study done by Place Economics, which appears to be a firm that goes around the country telling cities how awesome historic preservation is (think of the Monorail salesman on the Simpsons).

While there are errors throughout the various versions of the report, for the sake of organization I’ll briefly discuss each header of the summary:

Jobs and Income—The report touts the fact that rehabilitating buildings leads to local jobs and income. If one digs in further (Table 4 here), they find UT preservation state tax credits directly contributed to 8 jobs in the state. Eight jobs! Imagine the building and construction jobs that would come if developers were actually allowed to build across SLC. Imagine the companies that would move downtown if rents weren’t so high due to a constrained supply of office space. It's strange that they don't address the costs imposed on local business via higher rents. The Economist's Ryan Avent describes these costs here and the large economic benefits of density (ie, the benefits of not preserving entire old neighborhoods) here.

Heritage Tourism—No one comes to Utah to see the Keith Mansion and no, people coming to Park City for Sundance aren’t coming because of the heritage. And you probably shouldn't mention Zion and Bryce NPs in a document touting the benefits of buildings preservation.

Rents and House Prices—Throughout the report the authors describe historic preservation as bringing economic benefits, as evidenced via higher house prices. What they fail to mention is the fact that when you decrease the supply of something its price goes up. What we've learned over the last twenty years is that people are moving to where there's cheap houses and cheap office space. If Logan house prices go up, that's good for the few people in Logan who can sell their house and move into a cardboard box, but a definite negative if the city ever wants to attract any future residents.

Historic preservation-induced economic boom or reduced housing supply?
Sustianability—The study touts preservation policies as being sustainable. But there’s nothing sustainable about preserving drafty old single family homes, other than the fact that new construction materials aren't used to replace it. But construction is a one-time environmental cost! Whereas the increased energy use and driving which is required by these low density policies remain until the policy changes. That low density policies are inherently unsustainable is described well by Harvard economist Ed Glaeser here.

Downtown revitalization—To repeat myself, it’s hard to revitalize something when your policies are designed to raise prices, inhibit growth in new apartment units, and effectively keep people out, as people are the key to revitalization.

Fiscal responsibility—Fiscal issues are certainly connected to the policies promoted by the Utah Heritage Foundation (who commissioned the study), but they’re exactly the opposite of what the author’s conclude. They say that “fiscal responsibility means being prudent with taxpayers’ dollars” and then go on to tout the investments our tax dollars have made via this tax credit. This is perhaps the saddest bullet of all. Currently our state is foregoing tax revenue to encourage the preservation of buildings. Since SLC has an inordinate amount of these historic districts, the tax credit is effectively keeping people out of Salt Lake, which makes it more costly per-block to maintain infrastructure, a police force, fire stations, libraries, rec centers, trash collection, and everything else a city does. The benefits of scale are real and by keeping people out the cost of such services go up for everyone else. Thus historic preservation is inherently fiscally IRresponsible.

Historic preservation should be touted for helping us appreciate Utah’s fine history. And that's fine as far as it goes, but we should all be cognizant of the sizable economic costs imposed on SLC because of it. These policies are why Salt Lake's population is barely growing.

Note: To really learn how preservation and restrictive zoning impact city prosperity, see the short, cheap ebooks The Gated City and The Rent is Too Damn High. This was a critical post, but sometimes there's no way around it. Where am I going wrong here? 

1 comment:

  1. While they have worthwhile aims, historical districts are often enacted as a conspiracy to protect property values. A historic district is a great way to ensure appreciating housing values. When rising demand meets a fixed supply, prices must go up!

    If you live in a great neighborhood, a historic district is also a very effective form of exclusionary zoning. No one is going to build cheap apartment, even if the land values are high enough to support them. The hassle associated with building in a historic district raises costs. And there is the ever-present risk that wealthy neighbors will sue.