Historic Buildings and Rehabilitation Expenditures: A Panel Data Approach

Abstract

This paper examines the relationship between the characteristics of buildings and their assessed value in a historic area in Winnipeg, Manitoba Canada. Using a unique panel data set, we use a hedonic model to examine the factors that have affected the market value assessments of a set of historic and non-historically designated buildings. Using a number of estimators, we find that controlling for a number of key characteristics of buildings, that the assessed value of a building is higher for some classes of historic buildings. In addition, we estimate a two stage Heckman sample selection model, to determine the factors that influence the rehabilitation decision, and the effect of those expenditures and other building characteristics on the change in assessed values of buildings. We find that the expenditures on renovations contribute significantly to the change in assessed values of buildings, although less than might be expected. We provide a rationale for this result and also discuss the factors that influence the probability of renovation of a building as well as the change in their assessed values. Apart from the above, a number of interesting empirical results are also reported which may be used as input into the design of cost effective rehabilitation strategies for historic preservation.