In Lafayette, Indiana, 11 endangered historic properties have been identified by the Wabash Valley Trust for Historic Preservation (the Trust). The Trust has determined these properties be worthy of preservation. But what should be done and who should do it?
Who Determines Value?
A market-based system can simultaneously reconcile all the conflicting and complementary valuations. The Trust believes the properties have value. What creates value in these properties? Architecture? Location? History? Time? Current market factors? Probably all of the above, but in varying proportions depending on who is doing the valuation. One person has no interest and another an intense interest. Hence the value can range from zero to unquantifiable depending on who is doing the valuation. Set aside the issue of who determines what is “Historical.”
One may value the location with no regard for the structure. Another may value the architectural style with no regard for the history of the structure (think Lincoln slept here). Yet another may value the historical significance (Lincoln slept here) with no regard for the location.
A market-based system can simultaneously reconcile all the conflicting and complementary valuations by allowing those values to be expressed based upon the individual’s interest in the property.
Terms and conditions mutually agreed to by buyers and sellers determine the value which is expressed as a price. A seller of a historical property can preserve it via restrictive covenants incorporated into the deed and stipulate the architectural style, square footage, use of property and other conditions of preservation, to which a buyer who agrees and accepts the risk of owning the property.
Market Interference and Undefinable Objectives
Contrary to mutual agreement, an authoritarian system ignores the variety of valuations and eliminates those that are not consistent with the desired outcome. Through zoning regulations (Historic Property Overlay Zones), taxation, and grants, third party interference is used to achieve the desired result with no risk to those making the rules. The result is not the product of the reconciling process open to all, but rather an arbitrary goal that ignores all interests other than the “preferred.“
A market-based approach allows for individuality to be realized. Under the promise of “improving the quality of life,” “maintaining the character of a neighborhood,” or other banners with no objective meaning, elected and/or appointed officials use laws and regulations to impose their collective imagination of what they want property to look like.
The individual who wants to raze the 100-year structure and replace it with an avant-garde design is just as concerned with the “quality of life” or “neighborhood character” as the individual who desires to maintain or restore property to the original aesthetic.
Individuals see things differently, and a market-based approach allows for individuality to be realized. A market approach allows all who are interested in the property the opportunity to express that interest. An authoritarian approach dismisses all interest not in favor of the singular interest of the subjective goal.
Market interference creates more problems than it solves:
Property values are distorted. The use of zoning regulations can simultaneously increase the value of a property and decrease the value of another in the same zone, thereby conferring an artificial gain to one and robbing another. An “Historic” designation can create demand for a property that would likewise not be realized by a similar property in a non-historic zone. Diminution occurs when grandma’s house, at the corner of Main and First, is determined to have historical value and should be preserved. Whereas a market-based transaction would determine the ‘dirt’ to be far more valuable for development than the house for preservation.
Individuality and, consequently, innovation are stifled. Consider the builder of the Victorian home 150 years ago; it potentially would never have been built. The house he razed then, could have been deemed “historic.” Today’s modern architecture is the future’s historic property, but only if it is built.
Uncertainty is created. As Supreme Court Justice Clarence Thomas lamented, "Though citizens are safe from the government in their homes, the homes themselves are not." While Kelo vs. New London is not a case involving historic preservation, it does illustrate the precarious nature of property rights in light of intervention. “Buyer beware” takes on a whole new meaning.
The worst that can be said about a market-based system is that somebody is not going to “get their way.” The same is true in an authoritarian system, but at least in a market-based system, grandma will potentially be able to afford retirement.
What should the Wabash Valley Trust for Historic Preservation, or anybody, do to preserve the endangered buildings? Buy the property.