Sustainability in architectural heritage: review of policies and practices

It should be pointed out that the intention of the author is not to promote another EE or sustainable development principle, but to research possibilities to promote complete refurbishment measures, which include repair of building, strengthening and sustainable refurbishment for older Croatian building stock. As the governmental initiatives tend to be promoted usually in similar ways, a number of best practices, on both heritage upkeep measures and EE incentives, are reviewed concentrating on incentives/stimulative measures and the way these measures are enabled. The research was conducted aiming to find out which financial measures are best used for which purpose and, additionally, what is the best way to plan and start the sustainable refurbishment or adaptive reuse process.

This study explores the possibilities of encouraging complete refurbishment (including EE and structural safety) of historical buildings by exploring incentives used in Europe, the USA, Canada and New Zealand. As a conclusion, recommendations to increase the positive investment flow of private capital into architectural heritage buildings are presented, thus ensuring both preservation of heritage and sustainable development goals. The recommendations are based on the knowledge gained on best practices presented in this article and during the research conducted as part of the author's PhD thesis research. The findings also help the user of the initiatives on gaining insight into the intervention processes that need to be executed when the decision is made to invest into one's real estate. These findings can be used by local and regional governments interested in boosting adaptive reuse and complete refurbishment of existing buildings in Croatia, but these can also be applied to any country.

Generally, EE measures can be categorized as measure-oriented projects, whereas interventions on historical buildings usually demand the whole-house-oriented project, as sustainable refurbishment in historical buildings requires a whole set of other investments besides EE. If refurbishment is a building operation that occurs when a range of building activities need to be undertaken together, often due to a combination of obsolescence and deterioration (Ashworth 1996), then an existing building should be observed as a several-staged project, in which ensuring the stability and safety of the building is the first stage. Following the structural strengthening, sustainable refurbishment and adaptive reuse can be considered.

Thus, buildings that are to be refurbished present an opportunity to add value and reduce the carbon cost of buildings through improved energy-efficient design. As complete financial incentives covering structural strengthening, upkeep and EE works for heritage buildings do not exist, except partially in the USA, best stimulative practices on EE, structural safety and refurbishment (partial incentives) are going to be reviewed further on.

Generally, a number of different financial initiatives exist as governments are constantly trying to improve the efficiency of their sustainable development initiatives. As typical initiative types, tax deductions, tax rebates, exemptions or tax credits are used. These measures reimburse the investment through different tax corrections, evading the need for governmental financing. Grants and subsidies, however, are the most common form of government funding. Subsidies are usually financed directly to the user of finances (merchant, contractor, etc.) whereby just a part of the whole cost is covered, whereas grants are used for investment “risk” transferral, where the whole cost for a particular product is covered (e. g. solar water heater). Loans are provided in the form of low-interest or no-interest loans directly by the government for a specific purpose only. Third-party financing in EE upgrades is usually used in cases where the investor transfers his/her rights and investment to the third party, which then executes the whole upgrade and finances the investment from the governmental supports and the difference in the monthly bills until the whole investment is covered. In the case of architectural heritage buildings, these investments are usually achieved through transfer of development rights (TDRs) or donations, which are allowed in every country examined. The types of financial incentives available in Europe and the USA are shown in Table 1.

Firstly, regardless of the location of the heritage buildings, built or architectural heritage is of special interest to the country and the society it represents, and as such, these are to be treated with respect. Therefore, before any works can be undertaken, their scientific, architectural and historic value has to be studied and intervention guidelines requested. Finally, construction works are not to be started or conducted without prior approval of the ministry in charge.

As regulated by the Croatian, Belgian and Greek laws that regulate the protection of heritage buildings, the owner of the building is the sole responsible person for the upkeep of the architectural heritage buildings, but governmental support and partial subsidies can be received for the works needed. These supports and subsidies, in most cases, partially or fully cover just the cost difference of the regular maintenance (in case of a non-heritage building) and the maintenance of the heritage building. These principles apply also in Belgium (Haumont 1992), Greece (Tassios and Chronopoulos 1992), the UK (Sodagar 2013), France and the Netherlands (Pickerall 2009). However, in most cases, aid grant mechanisms are strict and restrictive due to their time limitations and grant application administrative procedures.

Government actions to encourage voluntary repair and maintenance of architectural heritage buildings by owners include regulation. In order to increase the success rate and to ensure private capital flow towards heritage protection, grant aid, low interest loans, tax incentives, easement donations and TDRs can be identified. Various regulatory and funding mechanisms can usually be combined into a more acceptable policy. Most countries combine regulation with the grant aid tool, in addition to some form of additional fiscal incentive.

While similarities exist in the choice of legal framework and funding by governments, variations of subsidy evolvement are found in different countries. As a rule, financial support is provided mainly based upon an agreed plan of works for conservation repair or maintenance works. However, funding for building improvement is never included in these funding types (designated for upkeep of architectural heritage buildings). Generally, the aim seems to be to blend regulatory and funding instruments to create a variety of tools to support private investments in architectural heritage building conservation.

Countries such as Croatia, with low levels of state subsidies for heritage conservation activities, must rely heavily on direct regulation to conserve heritage assets. This strategy is neither popular nor efficient as owners of protected heritage structures must bear the burden of repair and maintenance costs, with little or no compensation from the government. Sanctions, however, for non-compliance with regulatory policies, in most cases, are limited to the use of the architectural heritage buildings, and in reality, authorities are reluctant to use force against private owners without economic compensation and only take action in the most severe cases. In the worst cases, the owner may be expropriated and the building is assigned to a caretaker. Where deliberate neglect of a protected structure (listed building) can be proved in the UK, legislative provision exists for minimum compensation. Following expropriation, buildings may be sold to a Building Preservation Trust for repair.

Depending on the political intention and the willingness to invest in heritage preservation and sustainability, different approaches are chosen in different countries.

In the USA, the major problem of cities is that old city cores are depopulating. In order to repopulate and make the city cores socially more interesting, the government of the USA is using TDRs and tax incentives (Cunningham 2008). Thus, the government is avoiding large-scale investments in cultural heritage, but on the other hand, the government cannot achieve the targeted investment areas. This is controlled by sporadic investment incentives, whereby governmental properties are sold at symbolic prices with the contractual obligation of the investor to invest in the renovation and/or upkeep of the whole building. Principles such as tax deductions and TDRs are usually appealing just to the large-capital stakeholders, whereas they cannot be appealing to low-income or average-income inhabitants, whereby the regular upkeep of the already inhabited heritage building is set aside.

In Denmark, on the other hand, the proactive policy finances the heritage upkeep by private owners to forestall decay, instead of investing into sporadic repair costs. The policy encompasses income tax relief and is designed to encourage systematic maintenance of architectural heritage buildings. This policy enables the continuous care for the built heritage by the owners themselves, irrelevant of their income. However, in order for this policy to function, the government must be prepared for continuously investing in its heritage.

Research suggests that nationally financed heritage funding initiatives, with clear application and administrative procedures for recipients and the provision of multi-year funding, act as a catalyst to encourage the flow of private sector finance into architectural heritage building conservation projects (Pickerall 2009). In broad terms, in Europe, the emphasis is mainly on statutory regulatory policies. These can usually be allied with direct state provision of grant aid for conservation activities. A number of countries allow additional indirect tax relief and loan guarantees on the portion of non-subsidized costs. In the USA and Canada, however, the historic preservation ordinances are sporadic and mainly formulated as tax incentives to encourage conservation activities.

However, it seems that the majority of governments still have not perceived that preservation of architectural heritage buildings and achieving sustainable development can be, and in a majority of cases are, on the same course to the future stable fiscal and social development of their countries. Therefore, almost no incentives that incorporate structural safety upgrade provisions, as well as sustainable refurbishment or adaptive reuse provisions, can be found.

Although, generally, works on EE and heritage upkeep are stimulated separately, in Europe, the mostly used financial incentive is a financial subsidy or grant. These are generally administered after a complicated administrative procedure with fixed cost and investment plans. As previously mentioned, these are considered to be restrictive by subsidy or grant users. As a better alternative, governmental low-interest, or even no-interest, loans can be provided, as in France. If these are administered through a governmentally owned bank, an additional positive effect is achieved: fiscal stability of the particular governmentally owned bank is increased, and the government itself is publically perceived as proactive and stable (Pickerall 2009).

Additionally, based on the Danish example, for governmentally owned buildings, it is recommended to plan continuous financial support for architectural heritage building upkeep. This can, in most cases, lessen or even avoid the need for large-scale investments for the building repair.

The process of any intervention approval in Croatia and several other EU countries before any such work can be undertaken, as identified during the research conducted as part of the Ph.D. thesis of Sigmund (Sigmund 2014), is shown in Fig. 1.

Fig. 1

Normally, the process of renovation, strengthening and refurbishing should be similar to that in new building construction approval; so, when planning the intervention on a historical building, more emphasis should be laid on the preliminary investigation, planning and design.

The preliminary screenings, scope definitions and designs are important phases of the renovation process, as in many countries of the EU, the local government entitled for intervention consent allocation can request architectural and historical study results provided by the consent issuer prior to the intervention guidelines definition. The preliminary architectural and historical study provides a wide scope of information such as surveys of the building and its environment (the local context, general impressions, technical status and maintenance status), documentation of user requirements, documentation of property data, contracts that concern the building, history (building year, previous renovations/alterations, users and previous color schemes), as well as drawings and pictures (construction drawings, historical drawings, sketches and photographs). This step cannot be avoided according to the Croatian law. Depending on the intervention plan and the scope of the intended intervention, for each building (existing or non-existing), special requests from the ministry regulating interventions in the physical environment should be issued. Thus, the allowed interventions and scope of works on a building are defined.

The building owner's decision-making process for undertaking renovation differs a lot depending on the reason that gave rise to starting the process. In many cases, it is a question of immediate maintenance, for which the decisions are taken based on the appraisal of options under time constraints, whereas in cases of nonurgent maintenance, cost–benefit analyses are performed. These mainly depend on the defined intervention scope. However, for each planned intervention, a number of intervention possibilities can be listed, which, according to Sigmund (Sigmund et al. 2016), can simply be chosen by an iterative procedure of intervention technique selection and basic cost estimation process (as shown in Fig. 1).

Issuing the guidelines for allowable interventions on architectural heritage buildings can be a time-consuming procedure as these are created for each building separately. The major downside of this procedure is that the guidelines and the protective measures issued can vary from case to case, as they are usually dependent on the professional opinion of the person in charge (Sigmund 2014).

After the designing is done in accordance with special requests from the authority, the intervention design has to be approved by the ministry in charge (by both the ministry regulating interventions in the environment and, if it is a cultural heritage building, the ministry regulating cultural heritage protection).

Finally, the financing options should be chosen based on the intervention scope, investors’ willingness to invest in the maintenance and renewal of the property, as well as the property owner.

In cases where the government is the owner of a property, it is not rare that there is a lack of interest in investing for the property upkeep and/or upgrade. If this is the case, the most advisable way to proceed would be to either transfer the development rights or engage in private–public partnership (PPP). However, the selection of the right financing possibility in such cases is up for the owner to select.

If the investment willingness exists, there is no need for TDR and the project development can proceed normally, in accordance with Fig. 1. Generally, the financing can be chosen depending on the existing possibilities. These can be either financial support through grants, subsidies or complete financing through low- or no-interest (or guaranteed) loans. In some cases, the incentives can be combined. However, if the intention is to completely or partially renovate, upgrade or strengthen the built heritage through donations or sponsorship, the fundraising process can begin before the building consent is acquired.

The herein-presented procedure (Fig. 1) can discourage potential investors, especially because in restoration, refurbishment and other works on architectural heritage buildings, policy and political insecurity have proven to be major project risks (Sigmund and Radujković 2016).

If the government seeks to initiate private investments in built heritage or sustainability, financial incentives are not the only measures needed. In addition to financial incentives, a series of non-financial measures are recommended to be used, which can at least ensure a healthy investment environment. It is advised to have clarity in national heritage and development policy. If investments in heritage preservation are expected, simplification of planning procedures and a guaranteed, or at least supported, minimum standard of infrastructure within historic environments are needed. In order to achieve this, governments should have planning procedures and allowed intervention measures defined within the regulatory basics (Sigmund 2014), such as that used in Austria (Bundesdenkmalamt 2011). Thus, the request for intervention guidelines for heritage buildings can be avoided and the guidelines would be common for all cases.

Strong regulatory mechanisms, as in Croatia and Europe in general, on the other hand, are less likely to attract private investment in conservation of the architectural heritage buildings, unless substantial state subsidies are available to alleviate investor's perceived risk.

Finally, the main criticism of the herein-presented financial and non-financial incentives is that none of them stimulate safety-increasing measures when investing in repair, refurbishment or EE. In most cases, heritage buildings are not built to withstand contemporary safety or seismic provisions. As documented, seismic strengthening or safety-increasing measures can, in most cases, cost up to 3%–5% of the general maintenance cost (Sigmund 2014), which is best accomplished when other major interventions such as refurbishment or EE interventions are undertaken.