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The economic value of heritage districts: How assessment growth in heritage conservation districts compares with non-designated areas in Hamilton

MacNab-Charles heritage conservation district

By

Paul Shaker

Economics of heritage, Buildings and architecture, Community, Adaptive reuse

Published Date: Oct 01, 2019

Photo: MacNab-Charles heritage conservation district

There are competing views about the value of heritage properties. On the one hand, there is a growing consensus on the esthetic and economic development value of heritage buildings in an urban landscape. On the other hand, a perception persists that designating buildings or districts under the Ontario Heritage Act decreases the value of properties.

Our team of planners and data geeks at Civicplan sought to analyze the validity of the latter perception by looking at a case study of Hamilton, Ontario. The analysis tracked property assessment values for buildings in Hamilton’s seven heritage conservation districts (HCDs) over two time periods. The two datasets were then compared to each other to determine the change of assessment within and outside HCDs in Hamilton over time.

What is assessment value?

Assessment value is different from market value. Where market value is based on the agreed price between a willing buyer and seller, assessment value is determined by a provincial organization, the Municipal Property Assessment Corporation (MPAC). Assessment property value informs the amount of property tax paid on residential properties to municipalities in Ontario. MPAC defines assessed value as follows.

To establish your property’s assessed value, MPAC analyzes sales of comparable properties in your area. This method, called Current Value Assessment (CVA), is used by most assessment jurisdictions in North America. In addition, we look at all of the key features that affect market value. When assessing residential properties, 200 different factors are considered.

Five major factors account for approximately 85 per cent of the value:

Location
Lot dimensions
Living area
Age of the property, adjusted for any major renovations or additions
Quality of construction

Other features that may affect value include: number of bathrooms, fireplaces, garages, pools, whether properties have water frontage, and so on (Municipal Property Assessment Corporation. “Understanding Your Assessed Value.”).

The analysis

The Hamilton analysis focused on assessed housing values within HCDs in Hamilton as compared to the average assessment value of residential properties in the municipal ward in which the HCDs are located. (For property assessments, see: On-Line Property Inquiry, City of Hamilton. City of Hamilton, Average Residential Tax Assessments by Ward, 2010 and 2016. For ward and city average property values, see: City of Hamilton. “Appendix “B” to Report FCS16032.” In Mathew van Dongen, “Hamilton tax hikes by ward: See what you’ll pay.” The Hamilton Spectator April 20, 2016.) Before looking at the numbers, certain research notes should be considered when reviewing the analysis:

Assessed value is different from market value and there is often a significant variation between the two.
For the purpose of this analysis, assessment value is used as a means to measure gaps in value and to compare the levels of change between those gaps rather than focus on the absolute values themselves. Additionally, assessment value provides a common approach by which to compare all districts.
The analysis compares two time periods, 2010 and 2016, to illustrate levels of change.

All properties within each of the seven HCDs were analyzed. The HCDs are geographically spread around Hamilton.

Table 1: Average HCD property value assessment in 2010 and 2016

The results

Between 2010 and 2016, the average assessed property value in Hamilton’s seven HCDs increased significantly. The average increase across all districts was 33 per cent, with the highest increase in the Durand-Markland HCD (43 per cent) and the lowest in the Cross-Melville HCD (25 per cent). (see Table 1)

Table 2: Average 2016 assessed value of HCDs compared to average ward assessed values

To put these values into context, reviewing the assessed value of properties in HCDs and the average assessed values in their wards provides a useful comparison (see Table 2). Six of the seven HCDs have higher assessed values than the average assessment of the ward in which they are located. On average, HCD properties were valued at 87 per cent more than their ward’s average. The only HCD with a lower average value than its surrounding ward is the Mill Street District in Waterdown. On average, properties in the Mill Street District were valued at just under 14 per cent less than the ward average.

Table 3: Change in average value difference between HCDs and their ward, 2010-16

Between 2010 and 2016, all but one of the HCDs had greater average increases in assessed value than the average assessed values in their wards (see Table 3). In 2010, the average assessed value of Hamilton’s HCDs was 78 per cent greater than their respective ward averages. By 2016, this difference had grown to 87 per cent.

MacNab-Charles heritage conservation district (Photo courtesy of Paul Shaker)

Conclusions

This analysis illustrates that Hamilton HCDs tend to be clusters of residential properties that are assessed at a higher value than their counterparts in the rest of the ward. Further, this value increases at a faster rate than the surrounding areas in the ward. Thus, it appears that heritage designation in the form of a conservation district does not negatively impact the value of properties. Rather, it may enhance value over time.

While the focus of this analysis was on assessed value of heritage conservation districts, it is important to acknowledge the local context of HCDs, as that may have additional influence on value. For example, the HCDs in this analysis tend to be located in areas with a stable stock of residential properties surrounding them. Further, they tend to be in more affluent neighbourhoods within their respective wards.

Finally, while it is well understood that heritage designation contributes to the preservation of our past, it is also important to understand better how designation might assist with the retention of property value, thus helping to build a community’s economic future.

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