All over Europe, the real estate market in the historical inner-cities’ residential areas can in some ways be compared to a transition market, in which it becomes increasingly important. As a matter of fact, the five objectives stated by the European Commission (2013) in its” Construction 2020 Action Plan” are:
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1.
Stimulating investment conditions for renovation.
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2.
Improving human capital.
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3.
Improving resource efficiency.
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4.
Strengthening the internal market for construction.
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5.
Fostering the global competitive position of European construction enterprises.
In this context, the share of renovation in the total market is particularly important. The analysis of the construction sector in Italy, for example, shows that (2015 data) only 31.4% of housing investment is represented by new constructions. The remaining 68.6% of investment consists of activities aimed at the reappraisal and renovation of existent residential buildings (without consider the ordinary maintenance) (ANCI 2015).
At the root of the simple quantitative data, there exist complex factors of diverse natures, such as the flat demographic trend, the aging of the Italian building stock, the prevailing requirement to conform to European regulations in plant-engineering sectors, and the ever increasing interest in the real-estate market for older, existent property. This last, but very important factor is, in turn, the result of very different causes, as is the establishment of new cultural models and the scarcity of new high quality building land. The first aspect could otherwise be defined as a widespread growing desire to conserve and improve the building heritage stock to the highest standard possible, rather than to “replace” it. The second aspect regards the strong line taken by public authorities on the preservation of the remaining unbuilt areas in both the historical centres and semi-central districts as well as in suburbs (Piano et al. 1980).
Considering the overall structure of the real estate, we note that, very often, the historical inner cities’ residential areas are characterized by:
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The sharing of public and private property, with the public quota usually quantitatively small, even if often characterized by very important single buildings.
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A very small to medium size of single (private) properties within the whole neighbourhood.
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A not fully defined real-estate value and vital market.
In such a situation, the degrading phenomena can be very strong, once that they start: a few owners (of the smaller, more deteriorated and less valued apartments) leave them empty and without maintenance; the near remaining apartments suffer the propinquity with such an abandonment context, and become in turn less valuable: consequently, they are rented (or sold), to poorer families and obtain less cures, and so on, with a feedback (snowball effect) that can be very strong. The same feedback phenomena in the reverse trend is, unfortunately, unlikely. Indeed, as we know, the cost of upgrading projects can be considered approximately proportional to the single project dimension, in a wide range of building dimensions. On the other side, the profits of the upgrading projects (the real-estate value of the restored buildings) vary with both the dimension of the single project and the broader extent of the whole upgraded neighbourhood (the “propinquity effect” works both in the degrading and in the upgrading phenomena).
So the market price of a restored apartment (or building, or group of buildings) is:
$$P \, = \, p \, \times \, s$$
where p is the unit price (price for square meter), and s is the surface of the apartment (or building, or group of buildings) involved in the upgrading project. According to the propinquity effect, p depends not only on the quality of the single restored real estate, bur also on the quality (and value) of the whole neighbourhood where the apartment (or the building) is located. So if the upgrading project is bigger (and a whole neighbourhood, with a lot of adjacent buildings is involved), p grows: we can assume (as a first approximation) that is
$$p \, = \, k \, \times \, s^{y}$$
where y > 0 (indeed, in some local survey in once very degraded areas, we found that it can be 1 < y < 2 or also 3). So, for the whole restoration project:
$$P \, = \, k \, \times \, s^{(1 + y)}$$
Thus the single project revenue varies (very approximately) in a more than proportional way with the surface (dimension) of the general upgrading project (Fig. 1). Obviously, the propinquity effects work also when there is not a unique restoration project, but more independent projects achieved in the same neighboured by different owner and/or developer.
As we can see, there is a minimal economic dimension of the upgrading project that, in very degraded context, can be relatively high (because the initial real-estate value is very low). Where the medium size of the single (private) properties within the whole neighbourhood is smaller (as in Italian historical inner cities), it can be very difficult that a single owner or developer achieves a project size sufficient to overcome the minimal economic dimension (Costantino 2002).
So, to overcame this dimension and, together, to assure a “correct” (by a cultural, technological, social and economic point of view) development of the process it is necessary:
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(a)
To promote the renovation of some important (for dimension and/or historical value) building or “cluster” of buildings.
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(b)
To support the single owners of the small, fragmented properties in the implementation of their individual projects.
When, as often happens, the deterioration of the neighbourhood and the fragmentation of the properties are so high to discourage purely private initiative, the upgrading process needs to be facilitated and supported by the Public Administration, not necessary via direct public funding. To achieve the a) objective (to promote the renovation of some important building or “cluster” of buildings) the Public Private Partnership can be a very useful tool, while to pursue the b) one (to support the single owners of the small, fragmented properties in the implementation of their individual projects) it’s possible to implement the Neighbourhood laboratory. Both tools require the oversight by the local Public Administrations, but not their direct financial involvement.