The Effects on Property Values Due to Restrictions on Design and Development from Protective Covenants

Annotated Bibliography (September 4, 2007)

Tom Hilton Second Vice President Carderock Springs Citizens Association Speyrer, J.F. (2004).

The effect of land-use restrictions on market values of single-family homes in Houston. The Journal of Real Estate Finance and Economics, Vol. 2(2), 117-130.

Analyzes the effects of zoning and restrictive covenants on single-family housing prices in and around Houston, Texas. The calculation of a hedonic price index reveals that higher prices are paid for homes in neighborhoods with either type of land-use control than for comparable houses in neighborhoods without these controls. The premiums paid for these restrictions are not statistically distinguishable, but institutional constraints on these controls may explain why both forms continue to exist and to command market premiums.

Coulson, E., & Lahr, M.L. (2005). Gracing the Land of Elvis and Beale Street: Historic Designation and Property Values in Memphis. Real Estate Economics, Vol. 33(3), 487-507.

Analyzes appreciation rates across comparable designated and undesignated neighborhoods in Memphis, Tennessee. After controlling for numerous housing characteristics, the authors find that properties in neighborhoods designated historical by the Memphis Landmarks Commission had appreciation rates above those in other similar neighborhoods. They also find that new properties benefit as much, perhaps even more, than older properties from being in a historic district.

McMahon, E.T. (2006). Sustainability and Property Rights. Urban Land Institute Report. June. Available on the Internet at http://www.uli.org/AM/Template.cfm?Section= Search& template=/CM/HTMLDisplay.cfm. Literature review on the effects of covenants and similar restrictions on property values. The author concludes that such restrictions “almost always result in increased property values.”

Lang, R.E. (2006). (2005). Valuing the Suburbs: Why Some “Improvements” Lower Home Prices. Opolis: An International Journal of Suburban and Metropolitan Studies Vol. 1(1) 5-12.

Review article concludes that “Homeowners’ associations, through their extensive and enforceable covenants, are an excellent means…” to protect house equity. The article explores research showing that many modifications such as pools, fences, and in-law cottages actually detract from resale value. The author concludes that urban and suburban markets are different and that changes that add value in one often detract from the other.