Bring heritage onto the balance sheet

Dr Eric Crampton
20 July, 2021

Governments and councils have two basic levers for achieving policy objectives. They can spend money on programmes aimed at providing the desired outcome. They can also implement regulations compelling private individuals and companies to act in ways that move toward the outcome.

Which lever is best depends on the policy objective. Poverty alleviation is better handled through redistributive spending than by some regulatory alternative. But road safety regulations requiring car warrants of fitness make more sense than trying to achieve the same outcome through a spending programme.

But governments will often lean toward regulation-based solutions, even in cases when spending makes more sense.

When it comes to preserving heritage buildings, using regulation rather than spending comes at substantial cost to urban development and functionality, to earthquake strengthening, and to heritage preservation itself.

Wellington’s railway station is a Category 1 heritage-listed building that also tries to be a working public transport facility. 

Last week, Kāpiti Coast District Councillor Gwynn Compton received 128 pages of correspondence between Heritage New Zealand, Greater Wellington Regional Council, and KiwiRail about the potential placement of six temporary electronic turnstiles for the trial of an electronic ticketing system at the station. Bold colours that might be visible to commuters were considered as detracting from the building’s heritage features.

Heritage New Zealand also opposed a proposed wheelchair ramp for the Station’s main entrance.

Heritage protection goes well beyond buildings listed by Heritage New Zealand. Councils designate individual buildings or areas as having heritage value. These regulatory designations aim to preserve heritage amenities by restricting changes to the buildings, or at least by requiring heritage consultation on resource consents.

But is regulation the right instrument?

Government and council spending faces a budget constraint. Ministers and ministries compete to have their preferred projects funded; a dollar spent on one project is a dollar that might otherwise have been spent on a rival Ministry’s project.

Regulation does not face the same kind of budget constraint. Regulations still impose a cost, but that cost is borne by the individuals and firms who deal directly with the regulations, and by others affected by them. Those indirectly affected will often not even be able to point to the cause.

Governments can then prefer to use regulatory tools rather than spending, even when spending makes more sense. Spending measures affect the government’s balance sheet; regulatory measures affect other peoples’ balance sheets.

And that has consequences when it comes to heritage preservation.

The incentives inherent in preserving heritage amenities through regulation rather than through spending lean toward listing too many buildings. While some funding is available from central government, from councils, and through private philanthropy coordinated through Heritage New Zealand to help preserve and maintain historic buildings, that funding winds up being spread thinly.

Heritage protection through regulation also easily proves too rigid in the face of changing circumstances.

After the Boxing Day 2010 Christchurch earthquake, the owner of 605-613 Colombo Street wished to tear it down. Its unreinforced masonry façade was risky and could not be made safe at any reasonable cost. Despite the building having had only a Category 4 listing, the owners were advised a notified consent process would still be required for demolition. The February 22 earthquake demolished the building instead, at considerable cost. The building should have been strengthened well ahead of the earthquakes but strengthening processes can be more costly and difficult when buildings are listed.

And neighbourhood-level character designations that imposed little cost when first established can impose substantial cost when population grows. Designations then prevent turning older wooden villas into townhouses and apartments and contribute to a growing housing shortage.

All of it pits heritage advocates against those who see the costs of the regulatory measures used to protect heritage amenities – as seen during the debates over Wellington’s draft spatial plan.

Shifting heritage preservation away from regulatory mandates and toward government and council on-budget expenditure could ease those disputes. And it could help improve the real public amenity provided by those heritage buildings.

Heritage amenities are real. We should all be paying for them, through the tax and ratings systems, and with a sharp eye on the bottom line.

Suppose that government and councils shifted to providing an annual subsidy to the owners of important heritage buildings for the value they provide, while lifting restrictions on changing or strengthening those buildings.

Owners would be free to modify or demolish their building – but could lose some or all of the heritage payment.

Immediately, government and council would be forced to prioritise. While crowdfunding and philanthropy would certainly also help, budgets would still be limited. Under limited budgets, how much would governments really be willing to spend to stop Wellington’s Gordon Wilson Flats from being demolished? Would it be enough to make Victoria University happy to preserve them? If not, the University would be free to demolish them.

If Wellington wanted to trial an electronic ticketing option at the railway station, or to install a wheelchair ramp at the main entrance, Heritage New Zealand could simply notify the effects of the different options on the heritage subsidy that might be provided. And the train station could take the offer, or leave it.

Wellington Council this week again went to court to force the strengthening of the earthquake-prone heritage-listed Adelaide hotel. Heritage considerations can substantially increase the costs of necessary earthquake strengthening. And the building’s owners have insisted that the costs of mandated strengthening works are higher than the strengthened building would be worth.

If the owners instead were paid an annual subsidy for building’s heritage amenities, while being free to demolish or redevelop it while losing some or all of the subsidy, they could make a commercial decision that appropriately weighed the building’s heritage value against strengthening costs.

And the owners of older villas in places under development pressure could decide for themselves whether to keep the villa and the heritage payment, or to allow the redevelopment that is necessary to end the housing crisis.

Protecting heritage amenities through regulatory measures helps keep government and council costs down. Those costs instead wind up being borne by the owners of heritage buildings and by those suffering from the effects of heavy restrictions on getting new housing built. Too many buildings wind up designated, with too few resources available to maintain them.

Shifting heritage protection to on-budget expenditure for government and council would help to focus preservation efforts on the places where they are most warranted.

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