Historic preservation, property values, and tax rates: A municipal-level analysis

From a theoretical perspective, the potential effect of historic preservation on home prices is ambiguous. Nonetheless, empirical evidence to date, while by no means conclusive, overwhelmingly suggests the application of historic preservation policies for older towns and neighborhoods. In fact, some advocate for more stringent ordinances and standards. Interestingly, however, the effect of preservation efforts on tax rates has not been investigated. In this paper, we discuss from a theoretical perspective the direction tax rates might take in light of such programs.  

New Jersey is an ideal testing ground since it is among the most developed states in the union and has a relatively large share of residential structures that are over a century old. Using data for New Jersey municipalities from 2000 and 2008, we test to determine how municipalities with various historic preservation programs have performed during the period in terms of the change in both property values and tax base. Our findings are mixed. However, we find that select national-level historic preservation programs are associated with increases in home values under certain model specifications. We also find select national-level preservation programs to be associated with decreases in tax rates. The net effect on tax bases appears to be neutral.