The Law and Economics of Historic Preservation in St. Petersburg, Russia

St. Petersburg's architectural heritage makes it one of the most beautiful cities in Russia. However, as government subsidies continue to dwindle, the city is increasingly dependent upon private sources of financing to restore and preserve the many seriously deteriorated monuments and buildings. This article considers whether the economic and legal environment in St. Petersburg provides sufficient incentives for private investors to undertake historic rehabilitation projects. A pro forma model is used to analyze a developer's return on investment in new residential construction on the outskirts of the city versus rehabilitation of an historic residential building. The results show that the costs associated with historic preservation are significantly greater than for new construction and for a developer to make a reasonable rate of return on historic preservation the square meter price of residential space would be affordable by only a small segment of the population. Simultaneous changes to multiple legal and economic policies are recommended to encourage additional private investment in historic preservation.