VOCAL Neighbors

Top five problems with landmarking

Well, I can come up with more than five, and some are of more of a fundamental "this is America philosophical freedom personal liberty" type, but here are the ones that the landmarks people definitely will NOT tell you.

1) If you are landmarked, your homeowner's insurance costs will go up. Here's the situation. When you insure your home, the insurance company has mathematical tables that it relies on to estimate the likelihood of loss, and has estimates on what it would cost to repair/replace a house of equivalent dimensions using standard building materials. That standard insurance policy DOES NOT pay for repair/replacement to historic guidelines, which is what landmarking imposes. If you want that kind of coverage, you either need to get it via having a special policy rider written to cover historic preservation (which costs beaucoup bucks), or by overinsuring your home generally (i.e., if you have a $500K policy, you should at least double it to be a $1M policy).

State Farm, for example, has the following language in its homeowner's insurance policies:

"2. We will not pay for:...

(c) any increased cost to repair, rebuild or construct the building caused by enforcement of building, zoning or land use ordinance or law."

Guess what? Landmarking is a "land use ordinance" that increases the cost to repair, rebuild or construct a building.

To give an example of the difference between what a standard insurance policy would cover versus what you would need for historical coverage, try this. Assume you have a house with a front porch. During a storm, a tree limb falls off and crashes down, taking down part of your porch roof, railings, and maybe even takes out a part of the window. Standard insurance would cover ripping out what is damaged, and rebuilding with stock materials (i.e., what you get from Home Depot on the higher end). But if you are in a landmarked district, you can't get something "off the rack." Rather, you have to salvage and reuse as much of the original materials as possible; repair the original materials that are broken using historical methods; and if you MUST replace something, your replacement parts have to conform to historic specifications and materials, as set forth in the US Department of the Interior guidelines. What that means is that if your porch railings had a hand-turned post topper, you have to have a new version made by hand, and made to look identical to the original. Ditto for windows. STANDARD HOMEOWNER'S INSURANCE DOES NOT COVER THESE EXTRA COSTS. If your insurance company says that it would cost you $10 to fix a broken porch balustrade using stock wood you could pick up at Home Depot, but Landmarks commission says you have to have a new balustrade custom-milled using a hand lathe, at a cost of $200, YOU eat that $190 cost differential; you can't get your insurance company to pay for it under a standard policy, because they do not pay for increased costs associated with complying with local land use ordinances.

2) If you are landmarked, you are surrendering control of your home's exterior to the City's landmarks department and your local neighborhood association for design review. Oh, and the landmarks folks always say that they are interested in your facade. Well, there are two problems with that. First, people have very different interpretations of "facade." City landmarks tends to view facade as "any part of your house, porch, roof or garage that can be seen anywhere from the street, sidewalk, neighbor's yard, public alley, or any other public access route." It is not merely the side of your house that faces the street. Second, let's be realistic: we live in Chicago, city of scratch my back I'll scratch yours. The second you surrender control of your front, you effectively surrender control of the back, because once you need a permit for something to get done on the front, a city bureaucrat can "suggest" that if you make a change to your back, your permit will be approved tomorrow. If you disagree, well, maybe that permit application will sit on my desk for six months while he thinks about the facade impact. (Or forces you to go get a lawyer, or complain to your Alderman). If you are not landmarked at all, he has no power or control over you. Which would you choose?

This is why we should always be very, very careful of surrendering even a portion of our property rights to anyone else. Particularly people who we don't even elect.

Oh, and when you are landmarked, neighborhood associations get a say in the process too -- so not only do you have to convince Landmarks department, your alderman, and the buildings department that your home renovations should be done, but now your neighborhood association gets design review too. And for those talking about preserving the character of the neighborhood, think about what it does to neighborhood character when the members of the neighborhood committees having the power of design review are called the "neighborhood nazis," as in Old Town.

It may make you wonder, who is paying the mortgage and the taxes here? But I digress.

3) Landmarking has no impact on your property taxes. It is a persistent myth the pro-landmarks people use, but we'll debunk it again. Landmark designation will NOT freeze your property taxes. There is already in place a State of Illinois program where, if 25% of your home's value is put into historical renovations, in accordance with their guidelines and approval process, your property taxes can be frozen for a period of 8 years, with a successive steps back up to market levels for the final four years. You do NOT have to be landmarked under the City of Chicago to take advantage of this program AT ALL.

4) Landmarking under the City of Chicago ordinance takes away one of the few economic benefits to historic preservation -- a historic facade easement donation. This involves a slgihtly complicated tax issue, so if you want more information about this, DO NOT rely on this post alone, and please, please, please contact a qualified tax attorney who can give you the details, rules and requirements. The gist is this. The IRS allows owners of historic properties to donate a permanent easement on the facade of their home to a preservation council (i.e., Preservation Council of Illinois). The devaluation (or portion thereof) in the value of your home as a result of this easement can be used as a charitable deduction against your income taxes. In essence, the IRS lets you deduct the loss of your home value for the "charitable gift" of a part of your property (facade of your home) you made to the preservation society. Once you are subject to City landmark ordinance, which controls the facade of your home and obligates you to preserve it, you can't take that deduction anymore, because the landmarking ordinance already transferred from you to the City the property rights associated with control over the facade of your home.

5) Lagging property values over time. This is a biggie. In Lincoln Park, we had a study prepared in which we compared the relative appreciation rates over time of the Lincoln Park Sheffield neighborhood (the area that Vi Daley wanted to landmark) with the relative appreciation rates of the homes in the Mid-North district (same distance north as Lincoln Park Sheffield district, but closer over to the lake), which has been landmarked for the past 20 years. We found that the average appreciation rate in Mid-North was on the order of 15% per year. In Lincoln Park's Sheffield district, it was 20% per year. Now, granted, both areas appreciated in value over that 20 year period (I should hope so!). But when you consider that one area is oupacing the other by 5% each year, and start compounding that difference over home values each year, that is some serious lost appreciation opportunities. A 25% difference in value on homesites valued at over a million dollars ... you can do the math. Ask yourself how the benefits of landmarking (if there are any) can even come close to compensating you for that lost value.

posted by The Grants @ 9:34 AM