Long Island, New York is best known for its beaches and lavish real estate. Anyone who visits the island can see the clear inspiration for stories like The Great Gatsby and Jaws. One lesser-known attraction is the McDonald’s in the village of New Hyde Park. Last year Architectural Digest listed the New Hyde Park McDonald’s as one of “The 13 Most Beautiful McDonald’s in the World.”
Known locally as the McMansion, this McDonald’s is a two-story historical landmark dating back to 1795. This Georgian-style mansion is certainly fit for a Gatsby party. But the way this McDonald’s came about – regulation – offers a lesson in how to do architectural preservation, and how not to do it.
When McDonald’s purchased the property, in 1985, the building had fallen into serious disrepair. The current owner and operator, Jack Bert, noted, “Prior to 1991, it was a dilapidated house in a very much vacant lot.”
McDonald’s tried to develop the property, but locals pushed back against it. After a three-year legal battle, the property was granted a historic designation. McDonald’s then reached an agreement with the village to renovate the building such that it could function as a McDonald’s franchise while maintaining a historic appearance. The result is the McMansion that is still operating today.
While this story seems to have had a happy ending, historical landmarking can have wider negative consequences in other cases. And even in this one, the three-year legal battle looks like a regrettable waste of resources in light of a better alternative: purchasing landmark status voluntarily from owners.
In most states, historic districts are created by zoning ordinances and have the power to regulate development and renovations. Some states even allow local governments to landmark an individual property against the will of the owner.
In many cases, locals who oppose new housing use historic landmarking strategically to block redevelopment. In Denver, Colorado, activists blocked the construction of an eight-story apartment building downtown by landmarking a 1960s-era diner. In Seattle, they nearly stopped the redevelopment of a derelict Denny’s by landmarking it. Phoenix, Arizona has blocked the redevelopment of an old industrial laundry even though the owners say it would cost $10 million just to bring it up to code.
Historic preservation isn’t a bad goal, but when preservationists landmark properties over the strenuous objections of property owners, it’s almost always a bad idea.
Owners already have strong reasons to preserve historic structures. The federal government provides generous tax incentives for the preservation and rehabilitation of historic buildings. In addition, New York offers both tax credits and direct grants to owners of historic properties. For example, a historic property can qualify for a 20 percent NYS homeowner historic tax credit or 20 percent NYS historic tax credit for income producing property, plus the 20 percent federal rehabilitation tax credit for income producing properties. In addition, the property can apply for a Preserve New York grant to cover up to 80 percent of restoration project costs. In FY 2024, the Office of Parks, Recreation and Historic preservation was allocated $200 million in capital funding to “restore and repair historic sites and parks.”
Ultimately, though, these tax incentives are paid for with tax dollars. The owners of historic properties get to enjoy the benefits of tax credits while taxpayers, many of whom live nowhere near the historic property, must bear the cost in the form of higher taxes to fund these programs.
Beyond the tax incentives, historic designation can raise property values. National Historic Landmarks enjoy a premium when they go on sale. A study of Baton Rouge homes that have received local historic designations finds that they are worth more too. Notably, these designations raised property values in part because they come with no development restrictions.
Studies of historic regulations that do restrict redevelopment typically show mixed effects on property values. For instance, an influential study of New York City found that historic district designations only raised property values where residential density restrictions were not binding. In other words, when you force a property owner to keep a historic building even when it would be much more profitable to build homes there, you destroy property value.
The biggest problem with historic landmark regulations is a knowledge problem. We don’t know how much the owner of a property values alternative uses of that property. If a local government instead negotiated with the owner, we could properly evaluate whether the benefits of historic status outweigh the costs that must be paid to purchase the right. Without that price signal, we risk destroying lots of value. In some cases, the benefits of redeveloping a historic site might be huge.
We should be especially reluctant to ban new housing in places that are suffering from a shortage of it. While New Yorkers in general are fleeing the state, much of New York City and Long Island remains a high-demand area. It’s no surprise that Governor Kathy Hochul and the legislature have been considering state measures to promote private-sector home-building. Removing government from the process by changing dated zoning regulations is the best path forward to solving the housing shortage. A small piece of the puzzle should be historic landmarks and district reform.
Instead of letting local governments ban redevelopment of allegedly historic structures more or less at will, the state could require them to negotiate for the development rights. An even better system might be to leave the entire issue up to buyers and sellers in the free market, especially since, as we’ve seen, property owners can enjoy a boost to property value from preserving a certified historic site. In addition, adjust the tax code so that properties with a “historic” designation are not favored over others. The first step would be to stop putting all of the burden of historic preservation on property owners, who have every right to try to make an honest living on their land.
