Donovan Rypkema Discusses The Economics Of Historic Preservation

Posted by Heather Benson on

Donovan Rypkema is principal of PlaceEconomics. It's a real estate and economic development consulting firm based in Washington D.C. He visited Vermillion for the the Missouri Valley Historic Preservation Conference, where he gave the keynote speech.

Rypkema is a leading authority on the economics of historic preservation. He teaches a class on the topic at the University of Pennsylvania. He's author of the book "The Economics of Historic Preservation: A Community Leader's Guide." The book has become the essential reference for anyone needing to articulate a financial argument for historic preservation.

The following conversation has been edited for web use.  You can listen to the original in its entirety here.

Lori Walsh:                            

Welcome to In The Moment. I'm Lori Walsh. Donovan Rypkema is principal of Place Economics. It's a real estate and economic development consulting firm based in Washington, DC. He visits Vermilion for the Missouri Valley Historic Preservation Conference on May 16th through the 18th where he'll give the keynote speech. He is a leading authority on the economics of historic preservation. He teaches a class on the topic at the University of Pennsylvania, and he's author of the book The Economics of Historic Preservation: A Community Leader's Guide. That book has become the essential reference for anyone needing to articulate a financial argument for historic preservation. He's on the way to Vermilion now, and he joins us on the phone from the road. Welcome to In The Moment. 

Donovan Rypkema:         

Thanks for having me.

Lori Walsh:                            

Thanks for pulling over and spending some time on your road trip talking to us on the phone.

Donovan Rypkema:         

Sure. I'm at a Pennsylvania road stop and just worked within 5 minutes, so it's great.

Lori Walsh:                            

Alright, so, have you been to South Dakota before? Is this the first time?

Donovan Rypkema:         

No, no, I grew up in South Dakota, I went to college at the U, and I lived there for the first 35 years of my life, so South Dakota is home.

Lori Walsh:                            

I did not know that, well, welcome back. Tell us what, when we talk about heritage resources, what are we talking about exactly, how broad is that?

Donovan Rypkema:         

Well, it can be very broad. Our focus of our firm is only on the built heritage, so, historic buildings, and even that has a broad definition, there's also intangible heritage and other kinds of things that constitute our whole heritage, but in our economic analysis, we usually focus on the built part of the heritage. 

Lori Walsh:                            

And, how much has our knowledge of, sort of, the economic benefits of preservation grown since, you know, say the 70's or 80's, what do we know now that we didn't know before?

Donovan Rypkema:         

A lot, frankly, and part of the reason is, nobody gets involved in historic preservation or saving their historic neighborhood to calculate compounded, discounted internal rate of return, so there's just not a natural link between people who are advocates for the built character of their communities and people like me who do numbers, deep calculations. So there was really a reluctance when to ask the question, recognizing that public heritage has more values than economic values. But over the last 25 years, actually, there's been done a lot of research about the multiple contributions that heritage makes to the local town.

Lori Walsh:                            

And what are some of those benefits, how do you articulate them to people who are in communities who are trying to make decisions?

Donovan Rypkema:         

Sure, well, we're really in the business of economic development, and so we don't advocate for historic preservation with historic preservation as an end, we argue for it as a means to a lot of things, including its economic impact, and that manifests itself in a greater labor intensity, so it means local jobs, it means a difference in property value appreciation, which means money in the pockets of homeowners, it means a central role in downtown revitalization, it means a lower level of foreclosure patterns in historic districts, it means an incubator for small and startup businesses, there's a whole range of contributions that historic buildings make that aren't because of some stupid gargoyles. It's really of the kind of character and quality of those buildings.

Lori Walsh:                            

So, how do you look at a building, and say it's not just a fun architectural feature, like a gargoyle, how do you know when something is worth saving? What are you looking for?

Donovan Rypkema:         

Yeah, that's a great question, and certainly age is part of that, character is part of that, and certainly there are buildings that merit individual land markings, but what really creates the economic increment, the preservation premium, is not so much individual buildings but in neighborhoods, where the context of historical sources is saved, and then there's a kind of confidence in investing there, in opening a business there, in shopping there, so it's less the individual building characteristics than it is the context of the whole historic neighborhood that in most cases is really what adds the economic value.

Lori Walsh:                            

So I think most people, or many people, think first in a town, a downtown, in a revitalization of downtown, how central is, you know a downtown or a main street building location to this conversation?

Donovan Rypkema:         

It's really, really of vital importance. Most of my career in the last 35 years has really been dealing with downtown revitalization, big cities, small towns, everything in between. And I've got to tell you this, I can't identify a single instance, any place, which the same success story in downtown revitalization or historic preservation wasn't a key component of that effort. Not one. And, conversely, the very expensive failures in downtown revitalization have nearly always had the destruction of a historic building at the top of their agenda. Again, it depends on the community and the part of the country and the sophistication of the local leadership of the relative role that that plays, but I just can't- I'll give you an example. Here's a great success story in downtown revitalization where the use of their historic buildings wasn't part of it's start.

Lori Walsh:                            

How did you get involved in this? Growing up in South Dakota, going to the U, how did you get to where you're at from there?

Donovan Rypkema:         

Yeah, sheer capitalist greed. I was living in Rapid City, my hometown, as a real estate appraiser and small scale developer, and I was following the federal tax laws regarding real estate, mostly because I was teaching some continuing ed courses for real estate brokers, and I stumbled on this federal tax credit, this tax benefit for restoring historic buildings. And I'd tell these brokers, all of whom were making more money than I was, hey we've got to have some historic buildings around here, there's this new tax credit. And everybody would kind of nod and say yeah but nobody did anything. And then kind of out of the blue I got a call from Vermilion, from the State Historic Preservation Office, saying, hey, we've got a little grant money and if we give you some money, we've got an eye on this building in Rapid City, and would you buy it and rehabilitate it? Well, I didn't have any money, but they'd give me some, I'd get started.

So, that's what happened. I started, got tax credits for my wife and I, and all the sudden what I realized, was there's this whole world of people who call them historic preservationists, all of whom talked about real estate, none of whom knew anything about real estate, so I kind of just made a detour in my career and kind of made myself a translator between the world of historic preservation and the world of economics of real estate. 

Lori Walsh:                            

So, Donovan, are there, you know, the challenges that you have to overcome to sort of save some of these historic structures, are they financial challenges, or are they more, you know, philosophical challenges where people just have to think more broadly about what matters and how they could leverage it from a financial standpoint?

Donovan Rypkema:         

Yes and yes. Sometimes it is the challenges of the building itself. Very frequently, frankly, you can build some crappy building out of the sea brick and styrofoam beams cheaper than you can do a rehabilitation. If quality is part of the equation, historic preservation will always be a competitive alternative, but that's one of the real reasons for the benefit of tax credits and incentives for historic preservation. The public policy and I was [inaudible 00:08:03] government nature, IFU, so the public policy defense of incentives is not to make rich developers richer, it really is to say there's lots of values that emerge from the rehabilitation historic buildings that are non-economic values. There's social and cultural, environmental and economic development and aesthetic, a whole range of non-economic values that really the building owner is not the beneficiary of, the rest of us are. 

So, our providing incentives is leading a way to make a payment, or a partial payment, on those kind of public good benefits that emerge from historic preservations, so that's on the building economics itself. But there's also often the challenge of politics. That somebody takes the position of, you know, I have an inherent right to do whatever I damn well please, you can't be telling me I can't tear this building down. There's many parts of the country that's an issue. Sometimes there's an issue again, and that's why I prefer kind of historic districting than individual landmarking, they say, hey you're going to put some restrictions on my building that I can't tear it down, but the guy across the street can do it. And that's right. And that's a legitimate kind of argument. 

And so, that's why if you can kind of create the context, create the protection on a neighborhood level, there's more equity and a more reinforcement of those mutual values. And then sometimes there's a problem of simply the understanding. You know, when you hear the horror stories that sometimes emerge about a ridiculously expensive cost of a historic rehabilitation project, I'm telling you, 99 times out of 100 it's because you have an architect or a general contractor or both who have never done it before. So it really is an issue of having experience in how to do it so it's cost effective.

Lori Walsh:                            

One of the arguments is always sustainability. These, you know, old buildings are not necessarily as green or as environmentally friendly. I bet you've heard that question lots.

Donovan Rypkema:         

I have, and you know, God bless the environmentalists, but for 30 years, they've been lying to us. They've been making that argument, oh that's drafty old thing you've got to tear it down and throw it away. Absolute, unequivocal, unmitigated nonsense. And let me give you just a little factoid about that. A few years ago when Bloomberg was the mayor of New York City, great businessman, he wanted to put New York City on the path to be the most sustainable city in the world. And so, good businessman that he was, he said well, first we've got to see where we are, so he then ordered this energy audit of tens of thousands of buildings in New York City. Didn't have anything to do with preservation, he just wanted to know, who's using the energy, who's not. Lo and behold, the least energy used per square foot were buildings built before 1929. Every decade afterwards, there was more energy use per square foot, not less. So the sheer idiocy that, oh yeah those buildings, they are the opposite of green, it's proponent by people who wanna put those lead silver stars on their buildings and don't quite know what they're talking about.

Furthermore, there's a great research organization, the Preservation Green Lab, that was set up a few years ago by the U.S. National Trust, who did really, good, sophisticated, peer-reviewed, engineering analysis, and they took a series of building typologies, series of climates in the U.S. and said, alright let's measure out the energy efficiency of a retro-fitted historic building, if the windows leak, you've got to fix the windows, no question about that, if the heat system is old, you've gotta replace it, but let's look at one of these green gizmo buildings in terms of energy usage and in comparison to rehabilitating a historic building and making it energy efficient. Well, it costs, it takes ten to eighty years to recover the energy cost of building that damn green gizmo building cost, and they're not gonna last any 80 years. Almost every building typology and almost every climate in America, in fact, the most efficient, energy efficient, sustainable environmental approach was rehabilitating an old building, not building some goofy green gizmo.

Lori Walsh:                            

Issues of accessibility are always a challenge for some of these older properties. 

Donovan Rypkema:         

They are. And it used to be an issue to address, well what's really interesting is, in the last 25 years is that good architects and people who are familiar with the kind of important ingredients, components of historic buildings really found very good, sensitive ways to accommodate these accessibility issues without either denying people access nor screwing up what's kind of historically significant about the building. Again, you need to find the architect who's done it before, who knows what he or she's looking for, but to think that that can't be done is nearly always not the case.

Lori Walsh:                            

How does this fit in to a community's tourism strategy? What difference does that make for visitors to a community, you know, what historic buildings have been preserved and how?

Donovan Rypkema:         

Well, that's a wonderful question, and my lifetime goal, and I'm getting old, so it's gonna have to be reached pretty soon, is when somebody says economics and historic preservation in the same sentence that the default response is not, oh you must mean heritage tourism. Really, it's an important element, it's just one of the many ways that historic buildings are contributors in the local economy, but, to answer the question, a really interesting pattern, and through every place we've looked in the U.S. and lots of international studies as well, is that heritage visitors stay longer, spend more per day, and visit more places than do people who go to a community and don't care about [inaudible 00:13:39] more than people just going to the beach or play golf. True not only of U.S. domestic visitors, but international visitors, too, who come to the U.S.      

Furthermore, particularly in the international side, if an international visitor is coming to the U.S., and they're going to one state, that's going to be Florida, New York, or California, for those of us in the other 47 states, we have to be willing to attract those visitors willing to go more than just one of those three states, and it's in the heritage visitors that are much more likely to do that than visitors who don't care about it.

Lori Walsh:                            

How do we build, now, when we look at a new building or new structure with an eye toward the future, and, you know, building something that someday, somebody will want to save?

Donovan Rypkema:         

Yeah, I think that's a great question. That's what we ought to do. And I'm going to give you an analogy, and I apologize for it, but I just haven't been able to come up with a better one. When I was growing up, I lived in Rapid City but my dad was in part in the cattle business. And in the cattle business, when you buy a new bull or a registered cow, it doesn't have to be the best one in the herd, but it has to be better than the average of the herd or nothing can happen but the quality overall's been pushed down. And conversely when you're pulling out animals and stops one of the you don't get rid of the best ones, you get rid of the worst ones. That's how we ought to think about our town and cities. 

Every building we add doesn't have to be the best one in town, but it has to be better than the average we've got already, or nothing can happen. The physical quality of the town declines. And conversely, when we decide to take something down, and I'm not one to say it's never tear anything down, sometimes we have to, but it ought to be the crappy stuff and not the good stuff. And that's the only way that, overtime, we can build the overall quality of our city and that ought to be our nation looking at a new building saying we ought to be building buildings today that 50 years from now or 60 years from now is gonna be lunatics holdings signs in front of it say don't tear this building down. That's how we have quality, sustainable cities.

Donovan Rypkema's Presentation at the Missouri Valley Historic Preservation Conference:


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