PSI - Issue 64

Benedetto Manganelli et al. / Procedia Structural Integrity 64 (2024) 1720–1726 B.Manganelli, P. De Paola, F.P. Del Giudice/ Structural Integrity Procedia 00 (20) 000 – 000

1725

6

(5) ∆ > +

– (6) Assuming the replacement cost minus the depreciation equals the depreciated reconstruction cost (DCB) , we obtain: ∆ > + (7) At the end of the service life, when the value of the building is zeroed out due to depreciation, the feasibility of demolition occurs when the surplus urban rental income generated by urban regeneration exceeds the costs associated with demolition. 4. Conclusions The importance of real estate depreciation in urban, social, and fiscal policy choices justifies the continued research interest in this topic. Many studies that have addressed the issue have analyzed and attempted to interpret real estate value dynamics over time, without ever distinguishing, even when aware, the implicit contribution of the two value components, land and buildings. Often, the reasons for the considerable variability in the results obtained from the surveys conducted can be attributed not only to differences in the models used but also to differences in the periods analyzed and thus the real estate markets investigated. If we focus on the second reason, the observed differences are precisely attributable to differences in the dynamics of the values of the two components and the factors determining these dynamics. While physical and technical factors primarily affect building depreciation, and sometimes social and economic factors also play a significant role, the dynamics of urban rent (positive or negative) are determined solely by social and economic factors, which are different from those potentially influential on building depreciation. In this work, following the analysis of the literature, the market value function over time of an urban property was constructed as the sum of the two value components, land rent and building depreciation. This approach allowed for a correct interpretation of the phenomenon. In particular, it was possible to assess when it is convenient to replace/rebuild the property if it reaches the end or near the end of its service life, as well as to justify why, even when the building has reached the end, replacement is not proceeded with. The future research could focus on determining the threshold for demolition when public funding comes into play, that is, how the demolition threshold varies with the presence of public contributions.

Note: The current study has been developed within the current research P.R.I.N. Project 2022: “INSPIRE Improving Nature- Smart Policies through Innovative Resilient Evaluations”, Grant number: 2022J7RWNF.

References

S. Malpezzi L. Ozanne and T. Thibodeau: Microeconomic Estimates of Housing Depreciation. Land Economics (1987), n. 63. Bailey, M. J., R. F. Muth, and H. O. Nourse. (1963). “BA Regression Model for Real Estate Price Index Construction,’’ Journal of the American Statistical Association 58, 933Y942. Case, K. E., and R. J. Shiller. (1987). BPrices of Single- Family Homes Since 1970: New Indexes For Four Cities,’’ New England Economic Review Sept/Oct, 45Y56.