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Academics put pricetag on 'distinctive design'

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Architects may finally be able to put a price on the economic worth of their work, thanks to a government-sponsored study by a leading London university

Researchers at the London School of Economics (LSE) claim to have come up with a means of totting up the ‘economic premium’ generated by ‘distinctively designed’ buildings.

In their paper, Distinctively different: a new approach to valuing architectural amenities, professor of urban economics and land development Gabriel Ahlfeldt and director of planning studies Nancy Holman estimate the economic value of good design to be ‘large’.

Their analysis of almost 8,000 property transactions and interviews with more than 500 residents in 47 conservation areas found a ‘capitalisation effect’ of £38,700 for every step up their five-point scale of distinctive design.

This ranges from ‘distinctive’ to ‘very distinctive’, according to a summary of the research, which was part sponsored by the Department for Business, Innovation & Skills.

One of the novel aspects of the researchers’ means of assessing the value of architecture is the way it isolates the financial benefits of design from other factors that could push up prices, such as improvements in nearby infrastructure or public services.

They label the added value of distinct design as an ‘architectural externality’ which by definition could not be generated by the ‘free market’.

Our research shows good architecture creates economic value

This fresh evidence of architectural value provides sound reasons for planning policy that “seek to preserve and enhance the architectural quality of the built environment’, they conclude.

‘Architectural beauty can be considered a local public good – no one can be excluded from the utility derived from looking at an appealing building, nor does the architecture deteriorate as more people enjoy the view,’ the report adds.

‘If there is a positive non-marketed architectural externality, investments into architectural quality will be suboptimal if left to free markets.’

Ahlfeldt said: ‘Our research shows that good architecture creates economic value.Importantly there is not only an effect of the architecture of a building on the value of the building itself, but also onto the value of nearby properties.

‘From a welfare economics perspective the problem is that when individual owners think about how much to invest into the architecture of their buildings they do not take into account the effects on others. Our results show that if owners or developers were able to coordinate their efforts to improve the quality of the architecture in an area, they would all benefit from positive spillovers.’

Comment:

Matt Bell, group head of external affairs at Berkeley Group
‘Good architecture does create economic value. The question is who the value accrues to. It may well increase property values in the surrounding neighbourhood but that doesn’t necessarily deliver a commercial dividend for the developer, except on long-term regeneration programmes where it can enhance the values you get on later phases. Ultimately, you do this because you believe it’s intrinsically important and because you have a business model based on the idea that you invest more to make more.’

Roger Zogolovitch of Solid Space
‘The premise is an interesting one the conservation areas by default reinforce the importance of the sense of place additionally privilege and therefore it builds a self-sustaining brand strength around largely the attractiveness of the Victorian and Georgian terrace housing in a preserved urban setting.

‘From the wider perspective of architecture it would be more interesting to engage the authors in debate on the subject of the benefit or dis-benefit  in value terms of the enhancement, modification and development within conservation areas of new development. Whilst their research reinforces the ambiance of the conservation area adding premium to the property values they treat each conservation area as a discreet ‘volume’.

‘The question for me is whether the quality of the architecture is what makes the overall character and that robust but qualitative architecture could enhance rather than detract. If that is their view from their organized research there would be a very interesting counter establishment view on the future of planning in these areas which I believe and support.

‘Their evidence reminds us all of the privilege that has settled around these places which should be shared, enhanced and expanded to be enjoyed by more rather than less. The growth of London population to 8.6miliion demands that all areas of the city should be expected to yield their contribution to housing elements of that population. Restriction, privilege, exclusion and de-population of the most beautiful parts of our city does not seem to be a policy that should be endorsed.’

 

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Readers' comments (1)

  • iain meek

    I must agree with Mr Zogolovitch, this study relates entirely to conservation areas and is essentially a town planning study. It gives no clue as to the benefits of 'very distinctive' new architecture within the townscape.
    It may simply encourage further conformity within existing conservation areas and the introduction of further conservation areas- with more input from planners who are relatively untrained in architecture.

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