Historical Preservation Districts and Home Sale Prices: Evidence from the Sacramento Housing Market

During the past two decades, cities have turned increasingly to historic preservation of residential and commercial property as a method to help revive declining metropolitan areas. Sacramento, California, established historical preservation districts in an attempt to protect and maintain older structures while simultaneously increasing their value. Historic preservation, however, imposes strict rules on property owners that make property improvement more expensive than it otherwise would be. This paper uses hedonic price theory on a sample of residential properties in Sacramento to test whether positive externalities resulting from an historic preservation designation outweigh the potential negative impact of a cumbersome set of rules. The findings suggest that an historic preservation designation has a net positive impact on property values in four of the six preservation districts in the sample.