How Does Landmarking Affect Property Values and Development?

crown heights historic district st johns editThe Crown Heights Historic District on St Johns Place

The half-century-old Landmarks law has played a valuable role in protecting the historic fabric of New York City’s neighborhoods, but it also limits the production of housing—particularly affordable housing—in neighborhoods with large historic districts.

Support for the law coalesced around the doomed fight to save the original Penn Station, a stunning Beaux Arts masterpiece designed by McKim, Mead and White in 1910 and demolished by 1965. Its intention was to keep historic buildings from being demolished or dramatically altered, and to encourage contextual development in the city’s oldest or most architecturally unique neighborhoods. Instead, the specter of landmarking or historic districts are frequently used to stonewall development, even if it would create valuable market-rate or affordable housing.

As an example, a fascinating story in Crain’s earlier this month lays out the controversy surrounding the Park Lane Hotel on Central Park South, where developer Steven Witkoff wants to redevelop the 46-story building into a 1,200-foot condo tower. The Municipal Arts Society, a vocal preservationist group who helped ensure the passage of the original Landmarks law, felt that an unknown group was trying to designate the hotel to stop Witkoff’s condo project, rather than preserve its facade.

MAS executive director Margaret Newman may have hit the nail on the head when she told Crain’s, “Landmarking shouldn’t be used as a tool to prevent development. If we need better zoning, then we need better zoning. That’s the lesson of the Park Lane Hotel.”

Similarly, land use lawyer Sami Naim, the vice president of Law and Policy at MAS, asked during a panel on landmarking last night at the Museum of the City of New York, “Is the [landmarks] law achieving its purpose? Is it overly defensive?”

How landmarks affect development and affordability is a major talking point for organizations on both sides of the issue, and a quick perusal through reports from the Historic Districts Council and the Real Estate Board of New York illustrate how the same set of housing data can be used for pro- and anti-landmarking arguments.

But the best and most recent study on the issue was released last year by the Furman Center. HPD Commissioner Vicki Been worked with Harvard economist Edward Glaeser and a group of housing policy experts to crunch the numbers on property values and new construction in historic districts across the five boroughs.

After designation, construction of new units in historic districts drops 21% citywide and 24% in Manhattan, according to their research.

Interestingly, they also find properties sell for 20% more in neighborhoods that are either calendared or designated as historic districts. That’s the case in every borough except Manhattan, where landmarking actually hurts sales prices. In high-density areas with potential for tall towers, property values suffer because “the value of the unused development capacity is higher.”

REBNY also notes that 1,300 units of housing were built on designated properties between 2003 and 2012, but only 100, or 7.6%, were constructed as affordable housing.

It’s also important to remember that 25% of Manhattan is landmarked, compared to 3% of the rest of the city. And these high-density neighborhoods with large swaths of historic districts are also the ones that can support the production of affordable housing. Neighborhoods with high market-rate rents and zoning for tall towers are the places where affordable housing development is most likely to pencil out, according to the Furman Center.

The counter-argument is that historic districts help preserve older, rent-stabilized buildings that are susceptible to redevelopment or demolition. Unfortunately, this isn’t always the case. Developers regularly force or buy out rent-regulated tenants in order to begin condo conversions in pricey, historically protected neighborhoods like the Upper West Side, Park Slope and Brooklyn Heights.

So if the de Blasio administration wants to build 80,000 affordable rentals over the next decade, it may be time to consider how the city can encourage new construction in historic districts.

Designation creates extra hurdles, and it’s not only because the property might be more expensive. Getting LPC approval for a project can be long and costly, since architects often make multiple trips to present revised plans before the commission will approve a modification or new building.

“I’ve always advocated for more rules, rather than a certificate of appropriateness,” said Meredith Kane, a former LPC commissioner who moderated the panel on the landmark law. She explained that more rules and a staff review process could help speed up approvals for new buildings or alterations, rather than hosting hearings on certificates of appropriateness for every decision.

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3 Comments on "How Does Landmarking Affect Property Values and Development?"

  1. Penn Station opened in 1910, not 1911 and was demolished from 1963-66.
    The Park Lane Hotel has no architectural merit whatsoever. There is nothing “art deco” about its facade.

  2. Anthony C. Wood | June 21, 2015 at 11:40 am |

    It is disappointing to see the perpetuation of the myth that the Landmarks Law originated out of the fight over Penn Station–its roots go back at least 50 years before that and by 1950 the President of MAS was specifically calling for such a law. A visit to the Museum of the City of New York’s exhibit, Saving Plac: 50 Years of New York City Landmarks, will set the story straight. More disappointing is the advancing of another myth–that preservation is a key barrier to affordable housing. With only some 3% of NYC under any landmark regulation, it is hard to keep a straight face when REBNY and others try to advance the argument that the landmarks law is a serious impediment to the production of affordable housing. They should look elsewhere for the real causes of the affordable housing crisis and quit scapegoating preservation for political reasons. REBNY has been gunning for the landmarks law since it was passed in 1965 despite preservation’s 50 year track record of being a boon to the city’s economy.

  3. You would have to see the high land values in Manhattan as purely the value of their location to make this argument, ignoring the value created by the preservation of design quality and place-making that characterizes landmark districts. Would the Upper East Side be as valuable as it is if Fifth, Park, and the streets in between were rebuilt as Sixth Avenue style high rises? How about if the West Village were rebuilt along the lines of Riverside West? Likely not. I think it’s reasonable to say that much of the residential value of these (and other) areas is precisely because of the preservation of qualities deemed valuable.

    Another major flaw here is the assumption that the construction replacing landmarked blocks would necessarily yield affordable housing. If the land at issue in Manhattan is as valuable as it is purported to be, then affordable housing would STILL not pencil out. Affordable housing is the red herring that REBNY uses to try and make the purely profit-centered idea of limiting the expansion of landmark designation (or even removal of designation) seem virtuous. I mean, they’d change their tune if the city allowed only 100% affordable housing to be built in those previously landmarked districts…

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