Do Old Houses Behave More Like Classic Cars?

Matthew Yglesias has used analogies similar to this in the past to describe how, theoretically, looser development restrictions should be in the benefit of existing home owners. One would think that these existing homeowners would benefit from tight regulations. In actuality, unbundling the complex good of "housing" as a physical depreciating product located on a speculative land investment, one sees why being able to do more with that land would be more advantageous to someone who owns it.

This applies to the vast majority of housing stock in the United States, but things begin to fall apart when you look at the very urban areas that are most affected by high rents caused by supply restrictions. Maybe a suburban tract home built in 1994 is a depreciating asset, but a Brooklyn brownstone is a collector's item.

Discounting the location and condition of a house, a house with historical charm and "good bones" will be worth more than a similar sized modern house. At first brush, it would seem that a historical house may behave similarly to a collectible car: depreciating at first and then appreciating as it becomes more classic and rare. But, there are a few more effects going on here.

There are two countervailing effects I can think of that effect historic houses in a neighborhood. First, lets ignore the positive externalities dense construction provide (stick with me here...) and consider only the fact that new construction is valued less than historic construction. As a neighborhood gets more and more new construction, the neighborhood as a whole begins to decline in value, which in turn causes each of the house + land bundles to decline in value as well. On the flip side of this, imagine being the one leafy side street with handsome townhomes in a neighborhood of imposing apartment buildings. Your house is now a collector's item, and even before taking into account the positive externalities of densities, your townhome would have positive price pressures because it is now a rarity.

One thing that's clear from all of this is it's slightly incorrect to put off more aesthetic concerns like this as people not thinking about money, as Matthew ends his article with. The complexities explained in his last article are not only non-economic concerns such as condo laws, but real forces that can be accounted for along with the speculative qualities of land and the depreciating nature of many houses.

I still believe these effects are smaller than the broader ones Matthew describes, but the fact is they do exist. A NIMBY's fear is that these considerations are not being taken into account at all, and more economically minded people would rather bulldoze a neighborhood into sterile oblivion in the name of progress.