46th Congress of the European Regional Science Association: "Enlargement, Southern Europe and the Mediterranean", August 30th - September 3rd, 2006, Volos, Greece
The State of California enacted the Mills Act in 1976. This act allowed local municipalities the option of setting up a historical designation program. The main feature of the program was to allow the owners of historical buildings a reduction in their property taxes in return for an agreement to not alter the exterior facade of the designated building. The extent of the property tax deduction runs anywhere from 40 – 80 percent. This means that for a $1,000,000 house, the tax benefits may run to $8,000 per year. Theory suggests that the value of this tax benefit should be fully capitalized into the price of the home. The degree to which it is not may suggest the cost to the homeowner for agreeing not to alter the building. This paper uses hedonic regression analysis to estimate the value of historical designation to single family residences in the City of San Diego.