The preservation of historic districts—is it worth it?

I investigate the welfare effect of conservation areas that preserve historic districts by regulating development. Such regulation may improve the quality of life but does so by reducing housing productivity—that is, the efficiency with which inputs (land and non-land) are converted into housing services. Using a unique panel dataset for English cities and an instrumental variable approach, I find that conservation areas lead to higher house prices for given land values and building costs (lower housing productivity) and higher house prices for given wages (higher quality of life). The overall welfare impact is found to be negative.