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Economic Benefits of Preservation

Economic Benefits of Preservation Session, “Sustainability and Historic Preservation” by Donovan Rypkema

Donovan Rypkema

Donovan Rypkema, Principal of PlaceEconomics, was educated at Columbia University, where he received a Masters of Science degree in Historic Preservation.  He has lectured widely on economic and preservation issues relating to rehabilitation, community development and commercial revitalization. His specific fields of consultation include feasibility analyses for real estate and market analysis, economic revitalization of downtowns and neighborhood commercial centers, and the rehabilitation of historic structures.  He is author of several publications, including Community Initiated Development, The Economics of Rehabilitation, the Downtown Real Estate Development Series and others. His articles have appeared in numerous periodicals and journals. His book, The Economics of Historic Preservation: A Community Leader’s Guide, (The National Trust for Historic Preservation, 1994) is now in its second printing and is widely used by preservationists nationwide.

The article below contains excerpts from Donovan D. Rypkema’s presentation, Sustainability, Smart Growth and Historic Preservation, given at the Historic Districts Council Annual Conference in New York City, on March 10, 2007.


PART I:

A Broadway producer who once told an aspiring playwright, “If you can’t write your idea on the back of my business card, you don’t have a clear idea.” So I’m going to begin by giving you this entire presentation at a length you can put on the back of your business card.

1. Sustainable development is crucial for economic competitiveness.

2. Sustainable development has more elements than just environmental responsibility.

3. “Green buildings” and sustainable development are not synonyms.

4. Historic preservation is, in and of itself, sustainable development.

5. Development without a historic preservation component is not sustainable.

So that’s my presentation – everything I say now is just fill. I’m very fortunate that much of my work in the last few years has been international. And what I’ve discovered is this: much of the world has begun to recognize the interrelationship and the interdependency between sustainable development and heritage conservation; but much less so in the United States. I’m not so sure we’ve really learned those lessons in America, or at least we have not yet broadly connected the dots. Far too many advocates in the US far too narrowly define what constitutes sustainable development. Far too many advocates in the US think that so-called green buildings and sustainable development are one in the same. They are not.

Sustainable development is about, but not limited to, environmental sustainability. There is far more to sustainable development than green buildings such as:

• Repairing and rebuilding historic wood windows would mean that the dollars are spent locally instead of at a distant window manufacturing plant. That’s economic sustainability, also part of sustainable development.

• Maintaining as much of the original fabric as possible is maintaining the character of the historic neighborhood. That’s cultural sustainability, also part of sustainable development.

But if we don’t yet get it in the United States, others do. There’s an international real estate consulting firm based in Great Britain – King Sturge – that has been at the forefront in broadening and communicating the concept of sustainable development. Their framework of sustainable development certainly includes environmental responsibility but also economic responsibility and social responsibility. I’m going to take the liberty of expanding the third category into social and cultural responsibility. They further identify these important nexus: for a community to be viable there needs to be a link between environmental responsibility and economic responsibility; for a community to be livable there needs to be a link between environmental responsibility and social responsibility; and for a community to be equitable there needs to be a link between economic responsibility and social responsibility.

When we begin to think about sustainable development in this broader context the entire equation begins to change – and includes more than simply, “Does this building get a LEED gold certification” or “Is that development making sure that the habitat of the snail darter isn’t being compromised?” When we begin to think about sustainable development in this broader context the role of historic preservation in sustainable development becomes all the more clear.

Let’s start with the environmental responsibility component of sustainable development. How does historic preservation contribute to that? Well, we could begin with the simple area of solid waste disposal. In the United States, almost one ton of solid waste per person is collected annually. Solid waste disposal is increasingly expensive both in dollars and in environmental impacts. So let me put this in context for you. You know we all diligently recycle our Coke cans. It’s a pain in the neck, but we do it because it’s good for the environment. Here is a typical building in a North American downtown – 25 feet wide and 100 or 120 or 140 feet deep. Let’s say that today we tear down one small building like this in your neighborhood. We have now wiped out the entire environmental benefit from the last 1,344,000 aluminum cans that were recycled. We’ve not only wasted an historic building, we’ve wasted months of diligent recycling by the good people of our community. And that calculation only considers the impact on the landfill, not any of the other sustainable development calculations like the next one on my list – embodied energy.

Embodied energy is defined as the total expenditure of energy involved in the creation of the building and its constituent materials. When we throw away an historic building, we are simultaneously throwing away the embodied energy incorporated into that building. How significant is embodied energy? In Australia, they’ve calculated that the embodied energy in he existing building stock is equivalent to ten years of the total energy consumption of the entire country. Much of the “green building” movement focuses on the annual energy use of a building. But the energy consumed in the construction of a building is 15 to 30 times the annual energy use.

Razing historic buildings results in a triple hit on scarce resources. First, we are throwing away thousands of dollars of embodied energy. Second, we are replacing it with materials vastly more consumptive of energy. What are most historic houses built from? Brick, plaster, concrete and timber. What are among the least energy consumptive of materials? Brick, plaster, concrete and timber. What are major components of new buildings? Plastic, steel, vinyl and aluminum. What are among the most energy consumptive of materials? Plastic, steel, vinyl and aluminum. Third, recurring embodied energy savings increase dramatically as a building life stretches over fifty years. You’re a fool or a fraud if you say you are an environmentally conscious builder and yet are throwing away historic buildings, and their components.

Let me put it a different way – if you have a building that lasts 100 years, you could use 25% more energy every year and still have less lifetime energy use than a building that lasts 40 years. And a whole lot of buildings being built today won’t last even 40 years.

The EPA has noted that building construction debris constitutes around a third of all waste generated in this country, and has projected that over 27% of existing buildings will be replaced between 2000 and 2030. So you would think that the EPA would have two priorities: 1) make every effort to preserve as much of the existing quality building stock as possible; and 2) build buildings that have 80 and 100 and 120-year lives, as our historic buildings already have.

Instead what are they doing? They are sponsoring a contest to design buildings that can be taken apart every couple of decades and reassembled. Now I’m all for reusing building materials when structures have to be demolished, but to design buildings to be taken apart is to consciously build in planned obsolescence, and planned obsolescence is the polar opposite of sustainable development. And even if this approach met the environmental responsibility component of sustainable development – which it does not – it is the antithesis of the cultural and economic elements of sustainable development.

Here is this federal agency that is supposed to be our country’s lead entity for promoting and fostering sustainable development. Last fall they issued their five-year strategic plan, complete with goals, objectives, and standards of measurement – 188 fact-filled pages. How many times was the phrase “sustainable development” mentioned? Exactly twice – both times in footnotes. Once because a document they were citing had “sustainable development” in its title and the other because the database they referenced was maintained by the UN’s Division for Sustainable Development. How can you be the agency responsible for sustainable development when “sustainable development” never appears in your strategic plan? Oh, and by the way, the number of times that “historic preservation” was mentioned in the strategic plan? Zero.

Within the plan, the EPA has an element targeted to construction and demolition debris. The objective is “Preserve Land” and the sub-objective is “Reduce Waste Generation and Increase Recycling.” But they have missed the obvious – when you preserve a historic building, you are preserving land. When you rehabilitate a historic building, you are reducing waste generation. When you reuse a historic building, you are increasing recycling. In fact, historic preservation is the ultimate in recycling. At most perhaps 10% of what the environmental movement does advances the cause of historic preservation. But 100% of what the preservation movement does advances the cause of the environment.

And when I’m told that the fast changing needs of households and businesses cannot be met in historic buildings, I respond in polite company, “nonsense” and in less polite company, “bullshit.” Identify for me any use you can come up with in today’s economy, and I’ll find you an example of that use being accommodated in a historic building. The functional adaptability of historic buildings is one of their great under-recognized attributes. You cannot have sustainable development without a major role of historic preservation, period. And it’s about time we preservationists start hammering at that until it is broadly understood.

Part II.

My technical background is as a real estate appraiser and in the appraisal field there is a concept of functional obsolescence. Functional obsolescence is when a building or its components no longer meet the utility demands of the marketplace. Functional obsolescence is real, but for many developers, real estate owners, architects, and city officials, the response to functional obsolescence is demolition. But the alternative environmentally responsible response is adaptive reuse. In real estate language, functional obsolescence represents the loss of utility, but adaptive reuse is the reinsertion of a new utility into an existing building.

But be careful when you hear that phrase functional obsolescence, because it is often mis-assigned. And my favorite example of that is here in New York City. I lived there in the mid 1980s. And at the time, the conventional wisdom of architects, developers, and many city officials was that all those class B and C office buildings in lower Manhattan had to be razed because they were functionally obsolete. Those 28-year-old MBAs on Wall Street, making $600,000 a year ought to be making big contributions to preservation organizations in the city. Why? Because had preservationists not stood up and said, "Like hell are you going to tear down all those 1920s office buildings" those investment bankers wouldn’t have their $3 million condos in those very structures.

On the commercial side, if we want to begin to mitigate the endless expanse of strip center sprawl it is critical that we have effective programs of center city revitalization. Throughout America over the last decade, we have seen downtowns come back and reclaim their historic role as the multifunctional, vibrant, heart of the city. Now this is the area where I do most of my work. I typically visit 100 downtowns a year of every size, in every part of the country. But I cannot identify a single example of a sustained success story in downtown revitalization where historic preservation wasn’t a key component of that strategy. Not a one. Conversely, the examples of very expensive failures in downtown revitalization have nearly all had the destruction of historic buildings as a major element. That doesn’t mean, I suppose, that it’s not theoretically possible to have downtown revitalization and no historic preservation, but I haven’t seen it, I haven’t read of it, I haven’t heard of it. Now the relative importance of preservation as part of the downtown revitalization effort will vary some, depending on the local resources, the age of the city, the strength of the local preservation advocacy groups, and the enlightenment of the leadership. But successful revitalization and no historic preservation? It ain’t happening.

The closest thing we have to a broad-based sustainable development movement is known as Smart Growth. There is no movement in America today that enjoys a more widespread support across political, ideological, and geographical boundaries than does Smart Growth. Democrats support it for environmental reasons, Republicans for fiscal reasons. From big city mayors to rural county commissioner, there are Smart Growth supporters everywhere and support is growing and becoming broader. The Smart Growth movement also has a clear statement of principles, and here it is:

-Create range of housing opportunities and choices

-Create walk-able neighborhoods

-Encourage community and stakeholder collaboration

-Foster distinctive, attractive places with a Sense of Place

-Make development decisions predictable, fair, and cost effective

-Mix land uses

-Preserve open space, farmland, natural beauty and critical environmental areas

-Provide variety of transportation choices -Strengthen and direct development toward existing communities

-Take advantage of compact built design.

But you know what? If a community did nothing but protect its historic neighborhoods it will have advanced every Smart Growth principle. Historic preservation IS Smart Growth. A Smart Growth approach that does not include historic preservation high on the agenda is missing a valuable strategy and is stupid growth, period.

Historic preservation is vital to sustainable development, but not just on the level of environmental responsibility. Remember that the second component of the sustainable development equation was economic responsibility. So let me give you examples in this area.

A frequently under-appreciated component of historic buildings is their role as natural incubators of small businesses. It isn’t the Fortune 500 who are creating the net new jobs in America. 85% of all net new jobs are created by firms employing less than 20 people. One of the few costs firms of that size can control is occupancy costs/rents. In both downtowns but especially in neighborhood commercial districts a major contribution to the local economy is the relative affordability of older buildings. It is no accident that the creative, imaginative, small start up firm isn’t located in the corporate office "campus", the industrial park or the shopping center - they simply cannot afford the rents there. Older and historic commercial buildings play that role, nearly always with no subsidy or assistance.

While I’m often introduced as a preservationist, what I really am is an economic development consultant. At the top of the list for economic development measurements are jobs created and increased local household income. The rehabilitation of older and historic buildings is particularly potent in this regard. As a rule of thumb, new construction will be half materials and half labor. Rehabilitation, on the other hand, will be sixty to seventy percent labor with the balance being materials. This labor intensity affects a local economy on two levels. First, we buy an HVAC system from Michigan and lumber from Oregon, but we buy the services of the plumber, the electrician, and the carpenter from across the street. Further, once we buy and hang the sheet rock, the sheet rock doesn’t spend any more money. But the plumber gets a hair cut on the way home, buys groceries, and joins the YMCA - each recirculating that paycheck within the community.

Many people think about economic development in terms of manufacturing, so let’s look at that. Across America for every million dollars of production, the average manufacturing firm creates 23.9 jobs. A million dollars spent in new construction generates 30.6 jobs. But that same million dollars in the rehabilitation of an historic building? 35.4 jobs.

Other areas where historic preservation adds to the economic responsibility of sustainable development include heritage tourism. Wherever heritage tourism has been evaluated, a basic tendency is observed: heritage visitors stay longer, spend more per day and, therefore, have a significantly greater per trip economic impact.

Perhaps the area of preservation’s economic impact that’s been studied most frequently is the effect of local historic districts on property values. It has been looked at by a number of people and institutions using a variety of methodologies in historic districts all over the country. The most interesting thing is the consistency of the findings. Far and away the most common result is that properties within local historic districts appreciate at rates greater than the local market overall and faster than similar non-designated neighborhoods. Recent analysis indicates that historic districts are also less vulnerable to the volatility that often affects real estate during interest rate fluctuations and economic downturns.

Like it or not we live in an economically globalized world. To be economically sustainable it’s necessary to be economically competitive. But to be competitive in a globalized world a community must position itself to compete not just with other cities in the region but with other cities on the planet. And a large measure of that competitiveness will be based on the quality of life the local community provides, and the built heritage is a major component of the quality of life equation. This is a lesson that is being recognized worldwide.

A great study just released last month in Australia reached this series of conclusions: 1) a sustainable city will have to have a sustainable economy; 2) in the 21st century, a competitive, sustainable economy will require a concentration of knowledge workers; 3) knowledge workers choose where they want to work and live based on the quality of the urban environment; and 4) heritage buildings are an important component of a high quality urban environment.

From the Inter American Development Bank we get, "As the international experience has demonstrated, the protection of cultural heritage is important, especially in the context of the globalization phenomena, as an instrument to promote sustainable development strongly based on local traditions and community resources. If the IADB gets it, why doesn’t the EPA?

Certainly among the most competitive cities in the world is Singapore. But here’s what Belinda Yuan of Singapore National University says, "the influences of globalization have fostered the rise of heritage conservation as a growing need to preserve the past, both for continued economic growth and for strengthening national cultural identity."

What neither the supporters nor the critics of globalization understand is that there is not one globalization but two - economic globalization and cultural globalization. For those few who recognize the difference, there is an unchallenged assumption that the second is an unavoidable outgrowth of the first. Economic globalization has widespread positive impacts; cultural globalization ultimately diminishes us all. It is through the adaptive reuse of heritage buildings that a community can actively participate in the positive benefits of economic globalization while simultaneously mitigating the negative impacts of cultural globalization.

Part III.

There are some ways that heritage conservation contributes to sustainable development through environmental responsibility and through economic responsibility. But I saved the third area - cultural and social responsibility for last, because in the long run it may well be the most important.

First, housing. In the United States today we are facing a crisis in housing. All kinds of solutions - most of them very expensive - are being proposed. But the most obvious is barely on the radar screen - quit tearing down older and historic housing. Houses built before 1950 disproportionately are home to people of modest resources - the vast majority without any subsidy or public intervention of any kind. So you take these two facts - there is an affordable housing crisis and older housing is providing affordable housing and one would think, "Well, then, a high priority must be saving that housing stock." Alas, not so.

In the last three decades of the 20th century, we lost from our national inventory of older and historic homes 6.3 million year-round housing units! Over 80 percent of those units were single-family residences. A few of those burned down or were lost to natural disasters, but the vast majority of them were consciously torn down - were thrown away as being valueless. And today millions of American families are paying the cost by paying for housing they cannot afford. 

Certainly not every one of those houses could or should have been saved. But if even half were retained instead of razed, the picture today would be much different for the millions of Americans inadequately or unaffordably housed. For the last thirty years, every day, seven days a week, 52 weeks a year we have lost 577 older and historic houses. For our most historic houses - those built before 1920 - in just the decade of the 1990s, 772,000 housing units were lost from our built national heritage. But when there are policies to conserve older housing stock, we are meeting the social responsibility of sustainable development.

But at least as important as the affordability issue is the issue of economic integration. America is a very diverse country - racially, ethnically, educationally, economically. But on the neighborhood level, our neighborhoods are not diverse at all. The vast majority of neighborhoods are all white or all black, all rich or all poor. But the exception - virtually everywhere I’ve looked in America - is in historic districts. There rich and poor, Asian and Hispanic, college educated and high school drop out, live in immediate proximity, are neighbors in the truest sense of the work. That is economic integration and sustainable cities are going to need it.

Earlier I mentioned the labor intensity of historic preservation and the jobs it creates as part of the economic component of sustainable development but I want to mention it again in the social context. Those aren’t just jobs. They are good, well-paying jobs, particularly for those without formal advanced education. That too should be part of our social responsibility within sustainable development.

I told you that I work in the area of economic development. Economic development takes many forms - industrial recruitment, job retraining, waterfront development, and others. But historic preservation and downtown revitalization are the only forms of economic development that are simultaneously community development. That too is part of our social responsibility.

So I want to return to the premise with which I started. Green buildings are part of, but in no way are a synonym for sustainable development. That is not to say that we should not all be very pleased that preservationists are beginning to try to enlighten the green building people. Preceding the National Trust conference in Pittsburgh last fall was held a National Summit on the greening of historic properties. This was an excellent step forward and I certainly don’t have any quarrel with any of their conclusions or recommendations. I am certainly not wedded to the Secretary of the Interiors Standards for the Rehabilitation of Historic Buildings. And if the Secretary’s Standards have to be adjusted to be more environmentally sensitive, so be it. But I am very concerned that in our rush to make nice with the green building people we will forget this is about sustainable development, not about green buildings. Here’s this great report. Green buildings mentioned 53 times; sustainable development mentioned exactly zero times.

Of course, the big accomplishment of the U.S. Green Building Council is the development of the LEED certification system. In the pilot stage is a checklist for evaluating neighborhood development. And it’s fine. 114 total possible points, including up to a gigantic 2 points if it’s an historic building. But if you look at the individual line items in the checklist, at least 75% of the goals of those items are automatically met if you rehabilitate an historic building. If we really need such a checklist, it ought to be 200 points and you start out with 75 points for being an historic building.

I’m not sure we need platinum plaques on porches. But if we do, they should be for sustainable development, not for green buildings. And, in fact, just such a checklist has been devised in Great Britain. Using the three elements of sustainable development, this scoring system includes such elements as "functional adaptability", cultural importance, cultural adaptability, lovability, local amenities, and embodied energy as well as energy consumption, ecological attributes, etc. This certainly includes green building attributes, but within a broader sustainable development context.

Environmentalists cheer when used tires are incorporated into asphalt shingles and recycled newspapers become part of fiberboard. But when we reuse an historic building, we’re recycling the whole thing.

Finally, I’d ask you to take a moment and think of something significant to you personally. Anything. You may think of your children, or your spouse, or your church, or god, or a favorite piece of art hanging in your living room, or your childhood home, or a personal accomplishment of some type. Now take away your memory. Which of those things are now significant to you? None of them. There can be no significance without memory. Now those same things may still be significant to someone else. But without memory they are not significant to you. And if memory is necessary for significance, it is also necessary for both meaning and value. Without memory nothing has significance, nothing has meaning, nothing has value.

We acquire memories from a sound or a picture, or from a conversation, or from words in a book, or from the stories our grandmother told us. But how is the memory of a city conveyed? Here’s what Italo Calvino writes, "The city ... does not tell its past, but contains it like the lines of a hand, written in the corners of the streets, the gratings of the windows, the banisters of the steps, the antennae of the lightening rods, the poles of the flags, every segment marked in turn with scratches, indentations, scrolls." The city tells it own past, transfers its own memory, largely through the fabric of the built environment. Historic buildings are the physical manifestation of memory and it is memory that makes places significant.

What is the whole purpose of the concept of sustainable development? It is to keep that which is important, which is valuable, which is significant. The very definition of sustainable development is the "...ability to meet our own needs without prejudicing the ability of future generations to meet their own needs." We need to use our cities, our cultural resources, and our memories in such a way that they are available for future generations to use as well. Historic preservation makes cities viable, makes cities livable, makes cities equitable.

I particularly appreciate that the broadened concept of sustainable development is made up of responsibilities - environmental responsibility, economic responsibility, and social responsibility.

Next year, of course, is an election year. And every side in every race will be supported by dozens of advocacy movements. Most of them are "rights" movements, and I’m for all of those things - rights are good. But I would suggest to you that any claim for rights that is not balanced with responsibilities removes the civility from civilization, and gives us an entitlement mentality as a nation of mere consumers of public services rather than a nation of citizens. A consumer has rights; a citizen has responsibilities that accompany those rights. Historic preservation is a responsibility movement rather than rights movement. It is a movement that urges us toward the responsibility of stewardship, not merely the right of ownership. Stewardship of our historic built environment, certainly; but stewardship of the meaning and memory of our communities manifested in those buildings as well.

The social/cultural components of sustainable development can be addressed at the neighborhood level, in fact that is the most effective scale for those issues to be addressed. That's why neighborhood level historic preservation advocacy is so important. YOU are the sustainable development movement in your city. The EPA, the Green Building Council and far too many environmental activists just haven't figured that out yet.

Sustainability means stewardship. There can be no sustainable development without a central role for historic preservation. That’s what you all are doing today, and future generations will thank you for it tomorrow.