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January 27, 2005

Heritage commissions and perverse incentives

A visit to the Rookery and the Robie House last week and this week's death of Philip Johnson (America's second-most-beloved Nazi, behind Colonel Klink) have got me thinking about architecture.

The current owners of a potentially lucrative piece of land are perturbed that an eccentric relative persuaded the Los Angeles Cultural Heritage Commission in a whimsical moment to designate a 22-foot stack of beer pallets as a historic monument. The multi-million-dollar sale is being delayed as neighbors use the garbage pile's monumental status to legally block the creation of an apartment complex. (Jessica Garrison, "Does It Stack Up as Art?", Los Angeles Times, Jan. 26). In Washington, New York, and Illinois, clever lawyers have a running business generating sizable federal tax breaks with "historic facade easements" for wealthy homeowners--who don't mind paying to make the commitment, because, in the case of Washington, DC, the city already bars changes to most facades in historic districts, and the prestige of the trust donation may actually improve the property value. Indeed, competing trusts in Washington are in litigation with one another over whether the newer entity's plaque for an essentially identical service infringes the incumbent's trademark. (Joe Stephens, "Loophole Pays Off on Upscale Buildings", Washington Post, Dec. 12 and links therein; John Metcalfe, "Plaque Attack", Washington City Paper, Dec. 3).

One downside of the city regulations, which can, with the stroke of a pen, severely limit the freedom of a land-owner without compensation for lost land-value, is that it creates perverse incentives for a building owner who has a potential white elephant on his or her hands. Houston was the home of James Wines's marvelous 1975 Indeterminate Facade Best Products showroom; when Best Products went out of business, a new owner brought in the wrecking ball without warning in July 2003. Sure, he might have asked preservationists to buy the building from him or face it going to a more economic use, but why risk them going to the courts to attempt to get an injunction? In the game theory of preservation, where preservationists have access to the power of the court to sidestep a negotiated settlement, an economically-minded owner will sometimes pre-emptively operate in secrecy, and some buildings that might have been preserved won't be because of the distortion to the bargaining process caused by the government intervention.

Posted by Ted Frank at 08:59 AM | TrackBack (2)




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