With\u00a0over 600 designated throughout Scotland\u00a0and\u00a0a staggering 9,800 in England, Conservation Areas afford protection to the cr\u00e8me de la cr\u00e8me of our built heritage and environment, for which there is seemingly no direct market. With the designation\u00a0owners’ property rights are restricted. Changes to the external appearance of buildings and\u00a0choice of materials limited and\u00a0the\u00a0cost of altering and maintaining buildings to a certain standard is in many if not most cases increased. The policy directly\u00a0imposes a cost on individual owners and occupiers, but all in the name of a greater public good, which recent surveys suggest 92% of the population supports.<\/p>\n
unsympathetic alterations causing the loss of traditional architectural features … loss of front gardens to parking … lack of co-ordinated or poor quality street furniture and paving … \u00a0traffic domination and cluttered\u00a0pedestrian environment … loss of traditional shopfronts<\/p>\n
[Problems which Conservation Areas are designed to overcome<\/a>]<\/p><\/blockquote>\n
So how can it be justified? Can it be purely on the grounds of a positive external heritage effect? And what if\u00a0the social benefits exceed the private costs of maintenance? Is there some intergenerational inequality, whereby residents today\u00a0pay the costs for future generations to perhaps enjoy? Is there a case for additional support – for these areas will also have more listed buildings with additional development restrictions than non designated areas, in the way that farmers get subsidy\u00a0to farm wildlife. Environmental subsidies are justified because\u00a0markets fail to protect landscapes, wildlife and countryside, for as the rural saying goes, “you can’t eat the view.”<\/em> Well the jury is out on market failure it seems and I see no sign of incentives for householders any time soon.<\/p>\n
There is a counter argument that the designation\u00a0eventually benefits the owners of buildings in Conservation Areas by:<\/p>\n
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- positive enhancements and measurable effects on quality and value of the built and natural environment; and<\/li>\n
- removing uncertainty vis a vis\u00a0future changes in the character of a location (removing caveat emptor).<\/li>\n<\/ol>\n
And there are other less\u00a0tangible benefits too, which may provide benefits – tangible and intangible:<\/p>\n
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- a unique sense of place-based identity<\/li>\n
- greater community cohesion<\/li>\n
- a decision making environment\u00a0which is positively skewed to\u00a0protection and regeneration.<\/li>\n<\/ul>\n
A recent study by the London School of Economics<\/a> (LSE) aims to\u00a0see if the market accounts for the designation, and also quantify some of the intangibles.<\/p>\n
What LSE found was that houses in Conservation\u00a0Areas in England sell for 23% above the\u00a0average (\u00a3172k against an average transaction price of \u00a3139k)<\/strong>, which by any stretch of the imagination is an attractive\u00a0premium [1. The transaction data include 1 million sales\u00a0back to 1995, so don’t get excited\/depressed\u00a0by the absolute value – it is a bit meaningless]. Even when the researchers adjusted for\u00a0location and type of property, the premium was 9% above the average.<\/p>\n
The\u00a0premium is highest in residential, suburban and areas with Article 4 status (where even more\u00a0restrictions apply) but\u00a0is likely to be\u00a0lower\u00a0in urban\u00a0and mixed\u00a0areas. But here is the rub,\u00a0the sign goes\u00a0negative, and\u00a0below the average, if the Conservation Area is deemed to be “at risk” (-8.7%) or has received grants (-29.3%), namely the Townscape Heritage Negative (THI) which was funded through the National Heritage Lottery fund (there was a scheme not so long ago right here in Dunbar).<\/p>\n
Commercial areas too are negative with\u00a0total transaction values \u00a38k less than the average of \u00a3139k. The picture in at risk and deprived areas is stark whether you use total transaction value (averaging \u00a3127k and \u00a399k respectively) or the average per metre squared value (\u00a31,372\/m2<\/sup> and \u00a31,041\/m2<\/sup>).<\/p>\n
The research doesn’t answer the counterfactual, so one\u00a0cannot conclude one way or the other whether deprived areas and those receiving funding would have done\u00a0better or\u00a0worse without the designation. Still it\u00a0is not that hard to imagine that\u00a0without the designation the discounts would be even more marked, though the researchers go out of their way to avoid implying this.<\/p>\n
LSE did their study in England in 2012, but there is no reason\u00a0to believe that things should be significantly different in Scotland\u00a0and\u00a0it\u00a0would be useful and interesting for similar work to be done here, this was after all the first time a study of this depth and breadth has been conducted.<\/p>\n
The research also showed that Conservation Areas have had stronger house price “appreciation” than other areas, albeit the effect was very small but statistically significant. There are lots of interesting findings embedded in the dense report, such as the fact that the closer your property is\u00a0to the centre of the Conservation Areas the more it will sell for, strongly suggesting that people really value being surrounded by a greater density of heritage. The\u00a0premium persists\u00a0for properties outside the Conservation Area too, declining from the boundary outwards for almost a kilometre.<\/p>\n
The finding that premia were higher the more\u00a0distinctive and attractive residents perceived an area to be seems hardly surprising, but sometimes you have to restate the bleeding obvious. But how is it that when an area is in decline that\u00a0public money alone seems unable to reverse it? Is it that the capex\/opex is insufficient. Or is\u00a0there a tipping point, beyond which private investors are unwilling to risk their own money? \u00a0If the local policies and commercial environment are unfavourable, or there is a high risk of bad neighbour developments, a few people will invest (because it is cheaper), but most will not, as\u00a0they perceive the risk is too great.<\/p>\n
But\u00a0if you’ve heard from local shopkeepers that it is all plannings’ fault<\/em>, they\u00a0are wrong.\u00a0LSE observed no\u00a0overall universal negative attitude toward planning regulations in England (ok, they probably didn’t ask m\/any\u00a0shopkeepers and the Scots may be more cynical). But wait for it, those\u00a0who had applied for permission were generally more positive than those who had not. So, clearly those that don’t know what they are talking about, well er … really don’t know what they are talking about.<\/p>\n
What the research set out to uncover was whether there was evidence of market failure. If I interpret it correctly, the evidence suggests that the market has ‘capitalised’ the value in richer areas, but there may be\u00a0distortions in the policy as it favours owners in\u00a0residential and suburban areas, for whom paying a premium for attractiveness combined with\u00a0stability is important.\u00a0The policy on its own is unable to\u00a0address adequately the\u00a0deeper structural, social and economic factors at play which keep\u00a0those properties in deprived or\u00a0“at risk”areas depressed. The same applies to\u00a0commercial areas, which are by implication less attractive and unstable for homeowners, owing to the vicissitudes of\u00a0the nighttime economy, uncoordinated or rather incoherent\u00a0policy application and weak enforcement by the local authority. That, and the\u00a0absence of any specific policies that are favourable to\u00a0residents (e.g. a small amount of resident parking can have a number of very +ve effects, signalling also that real people live there), lead to\u00a0generally very low levels of private investment, except of the highly speculative sort, all of which conspires to depress or at best\u00a0hold back asset values.<\/p>\n