Conservation areas seem like an uncontroversial policy. They protect the visual appearance of historic neighbourhoods – for example, by preventing your neighbours installing modern ‘improvements’ such as PVC windows.
But this
protection comes at a cost: you can no longer renovate your less-than
watertight roof, add that conservatory you always wanted, or chop down the tree
in your garden that is blocking your light. These costs and benefits are
considered by would-be buyers and will therefore capitalise into your house price.
So the obvious question is: if you were a homeowner, would you
want to be designated or not? This leads to a further question: can homeowners
game the designation process to their advantage? These are the questions I try
and answer in new research for SERC, working with my colleagues Gabriel Ahlfeldt, Kristoffer Moeller and Nicolai Wendland.
Let’s
imagine a scenario where conservation areas (CAs) are designated by an
all-powerful ‘social planner’, who acts according to homeowner interests. Heritage-rich
neighbourhoods would get CA status because the benefits of preservation will
outweigh the costs of the restrictions. In turn, CA designation should increase
house prices in those neighbourhoods.
If
designation status was solely determined
by heritage, the planner would quickly run out of neighbourhoods to designate.
But as we can see, new CAs have been designated in every year since the
policy's introduction in 1967:
Figure: Percentage of all CAs designated in
each year
So what’s
driving the newer designations? Neighbourhoods’ ‘heritage’ is fairly fixed, but
the value placed on heritage can change a lot with neighbourhood composition. Areas
that are gentrifying, for example, typically have rising shares of
higher-income homeowners with degrees . These incomers have substantial buying
power, and are both willing and able to pay more for 'heritage' - especially if
it is secured by conservation area status.
Since
gentrification increases the potential returns to CA status we should see
designation continue even as the stock of 'historic' neighbourhoods
is used up. In these newer CAs, 'heritage' status becomes more subjective.
In our paper
we test these predictions. First we examine the link between gentrification and
designation, using data on conservation areas provided by English Heritage and on
neighbourhood composition from the UK Census (1991 and 2011). We find that a 1%
increase in the degree share is associated with an 11% increase in the
designated land share – a strong effect.
Second, we
test our house price predictions by examining over 1 million property transactions.
As predicted, we find a zero price effect immediately on CA designation,
followed by subsequent house price growth.
This tells
us that designations appear to adhere to homeowner economic interests, implying
that they can influence the process. How might this happen in practice? Local
politicians like doing popular things, and CA designation is certainly popular
with homeowners, who tend to turn out in force in local elections. In the UK, public
engagement is also actively encouraged when neighbourhoods are nominated as
potential conservation areas. Since homeowners are typically better able to
form special interest pressure groups this may work to their advantage. All
this supports the ‘homevoter’ hypothesis that homeowners have a strong
influence over the political decisions that affect house prices. When you play
the game of zones, then, you
win if you own.
