The 20% federal tax credit for historic preservation is said to have been the special pet of Senator Lugar of Indiana. Much of the recent transformation of Philadelphia's downtown is attributed to this incentive.
Philadelphia's Fourth Century: Revival or Relapse?
Novelists, sociologists, playwrights, financiers, historians, poets -- and others -- have described and explained the rise and fall of Philadelphia. Each of them is a little bit right, and a little wrong. Philadelphia is hidden, but it isn't hiding.
Slums are occasionally created deliberately. The great difficulty in assembling a large parcel of land in the center of a city, to build a skyscraper, let's say, creates a financial incentive to make the existing occupants of an area believe they want to move. The general technique is to buy a property in the targeted area, then let it deteriorate in such a disgusting way that the neighbors can't wait to get out. That makes the price of neighboring properties go down, so you can buy them and repeat the process. You can even further the project of parcel-assembly by renting the property to stores that sell pornographic movies, or display girls, girls, girls, or play boom boom music. Neighbors complain vociferously about that, so it is necessary to bribe a few officials to get away with it. When you see a sex shop, look around for an official who has taken a bribe to look the other way. And behind that, you'll generally find a real estate developer who wants to put up a skyscraper; he isn't necessarily to be commended for clearing the eyesores with his new building, because maybe he encouraged the eyesores. It might perhaps be possible to describe this behavior as a cyclic part of creative destruction; garbage collection is a necessary function, and you could look at the buildings headed for demolition as merely architectural garbage that needs to be picked up by someone willing to do it. You could say that, but it is good advice to such scavengers that it might be wise to have your own home and central office located in some other city. In Charleston, South Carolina, they have an ingenious law which imposes severe penalties for the crime of demolishing a building by intentional neglect. And they probably have some tar and feathers left over from earlier reconstruction eras.
Somewhat disgusting behavior does have a justification when the intended purpose of the land -- a highway, a bridge, a skyscraper -- is greater than the value of the existing property, as a houses, a drugstore, or a historic landmark. If there is really no other place for the new structure to go, it's a tough decision, because there is a net increase in value after the process is completed. More often, however, there are a number of other places where new development could go, and the race is on to make one particular direction more attractive to a developer by making it far less attractive to everyone else. When the race to the bottom is won by somebody's slum, several other competing slums have been created. If you include them in the calculation, the net change in value may actually be negative.
City government often abets slum creation in two ways. By petty corruption of zoning, policing of vice-like activities, and slack enforcement of maintenance rules. And secondly, by failing to lower taxes when properties get less valuable. This phenomenon is paradoxically more likely to affect the splendid mansions than the little worker's houses because it is politically difficult to lower the assessment on a millionaire's mansion, just because the neighborhood turned less fashionable. The millionaire himself might pay those punitive taxes for his showplace, but the absent heirs -- just dump the place.