DOES PRESERVATION PAY? Historic preservation investments are meant to save and protect a communi- ty’s architectural past. However, they may also come with financial benefits for today and the future. Loans to help homeowners reha- bilitate older houses may ultimately boost neighborhood property val- ues. A new study by Cleveland State University’s Center for Housing Research & Policy has quantified gains in market value among homes participating in local historic pres- ervation programs, as well as those nearby participating homes. The CSU center examined data from home equity loan programs administered by the Cleveland Res- toration Society (CRS). Since 1992, CRS’s Neighborhood Historic Pres- ervation Program has overseen more than 900 projects totaling $20 million in neighborhood reinvestment. CRS’s Heritage Home Program SM provides low-interest home improvement and rehabilitation loans to owners of homes built at least 50 years ago in five Cleveland wards and 13 other participating communities in Cuya- hoga County. Since 2001, the Heri- tage Home Program SM has overseen 320 projects valued at $11.2 million. Currently, the Neighborhood Historic Preservation Program provides loans as small as $5,000 up to $250,000 for residents of nine Cleveland wards. The Heritage Home Program SM pro- vides loans of $3,000 to $75,000 to rehabilitate qualifying homes. Assessing Cleveland Restoration Society’s Home Improvement Program By Brian Mikelbank Associate Professor of Urban Studies at Cleveland State University and Director of the Center for Housing Research & Policy
Transcript
DOES PRESERVATION PAY?
Historic preservation investments are meant to save and protect a communi-ty’s architectural past. However, they may also come with financial benefits for today and the future.
Loans to help homeowners reha-bilitate older houses may ultimately boost neighborhood property val-ues. A new study by Cleveland State University’s Center for Housing Research & Policy has quantified gains in market value among homes participating in local historic pres-ervation programs, as well as those nearby participating homes.
The CSU center examined data from home equity loan programs administered by the Cleveland Res-toration Society (CRS). Since 1992, CRS’s Neighborhood Historic Pres-ervation Program has overseen more than 900 projects totaling $20 million in neighborhood reinvestment. CRS’s Heritage Home ProgramSM provides low-interest home improvement and rehabilitation loans to owners of homes built at least 50 years ago in five Cleveland wards and 13 other participating communities in Cuya-hoga County. Since 2001, the Heri-tage Home ProgramSM has overseen 320 projects valued at $11.2 million. Currently, the Neighborhood Historic Preservation Program provides loans as small as $5,000 up to $250,000 for residents of nine Cleveland wards. The Heritage Home ProgramSM pro-vides loans of $3,000 to $75,000 to rehabilitate qualifying homes.
Assessing Cleveland Restoration Society’s Home Improvement Program
By Brian MikelbankAssociate Professor of Urban Studies at Cleveland State University and Director of the Center for Housing Research & Policy
Analysis of data on homes partici-pating in both CRS programs and es-timated market values from the Cuy-ahoga County Auditor’s office reveal that:• Participating homes had greater market value appreciation, on aver-age, than homes that did not receive CRS loans.• Homes near CRS program par-ticipants also tended to see greater appreciation in sale prices and market values than those that were not near CRS-participating properties.
In other words, the historic pres-ervation loans appear to benefit hom-eowners and the surrounding neigh-borhood as well.
PAYINg Off fOR HOmEOwNERSAlthough the CSU study examined sale prices for homes that had obtained CRS loans for rehabilitation work, the small number of actual transactions were insufficient to draw any reliable conclusions. Instead, the study turned to a broader sample: Cuyahoga County auditor assessments of market values. Each county auditor must undertake a major reassessment of all properties every six years. In Cuyahoga County, these reassessments occurred in 1994, 2000 and 2006. The CSU study compared how CRS program properties in Cleveland and the suburbs compared to other residential properties in their respective locations.
Whether they were in Cleveland or in the suburbs, CRS program partici-pants experienced a higher rate of appreciation. Between 2000 and 2006, the 123 loan program properties in Cleveland outpaced comparable home values by about 8 percentage points. On average, homes receiving a CRS loan were estimated to have appreciated by 33 percent during those six years. That com-pared to an estimated appreciation rate of 25 percent for the 117,859 reas-sessed homes in the city that did not receive CRS loans. When comparing the 1994 and 2000 reassessments, the median estimated appreciation was even greater: The 32 homeowners who had received CRS loans saw the values of their properties appreciate, on average, 43 percent, compared to 28 percent for similar properties.
Given that the Heritage Home ProgramSM did not begin until 2001, there were no suburban properties receiving CRS loans for the earlier reassessment period. Communities now participating in the program include Bay Village, Chagrin Falls, Cleveland Heights, East Cleveland, Independence, Lakewood, Lyndhurst, Parma, Pepper Pike, Rocky River, Shaker Heights, South Euclid and University Heights. Between 2000 and 2006, the median appreciation for the 96 suburban properties participating in the Heritage Home ProgramSM was 28 percent. That compares to a median appreciation of 21 percent for the roughly 277,000 residential properties reassessed.
Sales Price Appreciation in Proximity to CRS Program Properties
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0Cleveland
2002Cleveland
2003Suburbs
2003Cleveland
2004Suburbs
2004Cleveland
2005Suburbs
2005Cleveland
2006Suburbs
2006
An
nu
aliz
ed P
erce
nt
Ch
ang
e
■ Near
■ Not Near
6.9
6.0
8.2
5.55.9
3.9
6.05.7
4.8
3.8
6.0
5.6
4.2
3.7
5.1
3.4 3.6
3.0
BENEfITINg NEIgHBORSThe CSU study also examined whether the benefits of CRS program proper-ties “spill over” into the surrounding neighborhoods. Certainly, part of a home’s value is determined by its sur-roundings, particularly when it comes to how well neighbors keep up their properties. Neighborhood invest-ments not only play a role in improv-ing the quality of the housing stock, but they may signal that residents are committed to keeping up the neigh-borhood.
To examine the potential “spill-over effect” of CRS home improve-ment loans, the CSU study relied on Geographic Information System (GIS) data to identify properties within one-tenth of a mile of CRS program properties that had sold before the loan was obtained and after home improvements were completed. The study found that – in Cleveland and in the suburbs – appreciation rates were higher in proximity to properties re-ceiving CRS loans. In 2001, for exam-ple, sale prices for Cleveland homes near properties receiving CRS loans saw an annualized change of nearly 10 percent, compared to little more
Estimated Market Value Appreciation
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
42.8
27.9
32.7
25.0
27.6
20.6
Cleveland1994-2000
Cleveland2000-2006
Suburbs2000-2006
Per
cen
t C
han
ge
■ Loan
■ No Loan
Estimated Market Value Appreciation
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
36.9
27.828.7
24.9
27.6
20.5
Cleveland1994-2000
Cleveland2000-2006
Suburbs2000-2006
Per
cen
t C
han
ge
■ Near
■ Not Near
than 6 percent for homes not nearby. Sales in the suburbs from 2003 to 2006, showed similar gains: Those near CRS program properties saw price appreciations that were nearly 14 percent to 50 percent greater than those of homes not nearby.
An analysis of estimated market values also showed that homes near CRS loan program participants had higher rates of appreciation. For the 2006 reassessment of Cleveland homes, those near CRS program properties were estimated to have ap-preciated, on average, 29 percent over their 2000 market values. That com-
pares to 25 percent for houses not nearby. The 2000 reassessment estimated even greater growth in value – 37 percent – for nearby homes, compared to 28 percent for houses not near a CRS property. Among suburban properties, those near homes receiving CRS loans were estimated to have appreciated 28 percent over their 2000 valuations. That compares to a 21 percent apprecia-tion rate for homes not nearby.
STRENgTHENINg COmmuNITIESThe CSU study does not prove a direct cause-and-effect relationship be-
tween preservation loans and higher appreciation rates. Other variables may have contributed to the growth in market values. However, the study does indicate that, at the very least, Cleveland Restoration Society loan properties are part of something positive in the city and suburban housing markets. The small number of homes receiving preservation loans that actually sold during the years examined for the study may suggest other benefits of the programs: Less turnover and more neighborhood stability. Homeowners who invest in restoring their houses may be more committed to staying in them.
The $31 million that has been invested over the years as part of CRS’s Neighborhood Historic Preservation and Heritage Home programs is helping to build and fortify strong housing markets and strengthen neighborhoods in Cleveland and Cuyahoga County. From Bay Village to Chagrin Falls, from South Euclid to Parma, and throughout Cleveland’s wards, homeowners are finding that investment in their community’s architectural past can be aestheti-cally, culturally and financially rewarding.
ABOuT THE CENTERThe Center for Housing Research & Policy at Cleveland State University
studies critical housing supply and demand issues. In addition to undertaking a comprehensive inventory and analysis of the region’s housing stock and its conditions, the program also identifies and analyzes housing directions and trends useful for neighborhood and regional revitalization. For more informa-tion, visit the center’s web site at www.urban.csuohio.edu/housing or email Brian Mikelbank at [email protected].
