Urban regeneration economics: the case of Lisbon's old downtown/ Miestv atgaivinimo ekonomika: senojo Lisabonos komercinio rajono atvejis.

ABSTRACT. Buildings are one of the biggest assets of Lisbon's central downtown accumulated over a period of several centuries. The efficient use and optimization of the value of these assets are a challenge for both the owners of individual buildings and for society as a whole. Recently, a new regeneration initiative was announced for old urban Lisbon's downtown, covering three fields of intervention: the economic, social and physical fields. This paper presents a case study of the regeneration program for the Lisbon's old downtown including an analysis of the framework used to assess the costs and benefits.

KEYWORDS: Building; Cost-benefit analysis; Economic analysis; Urban renewal

SANTRAUKA

Pastatai--tai vienas pagrindiniq Lisabonos centrinio komercinio rajono turtq, sukauptq per keletot amziq. Efektyvus sio turto naudojimas it vertes optimizavimas--tai issukis ir atskiru pastatu savininkams, it visai visuomenei. Neseniai paskelbta nauja senojo Lisabonos komercinio rajono atgaivinimo iniciatyva, apimanti tris intervencijos sritis: ekonomine, socialine it fizine. Siame darbe pristatomas senojo Lisabonos komercinio rajono atgaivinimo programos atvejo tyrimas, pateikiama sanaudq bei naudingumo jvertinimo sistemos analize.

1. INTRODUCTION

The physical and social degradation of central urban areas is a widespread problem in major European Union (EU) cities, and the causes are related to the abandoning of old urban spaces and a reduction of investment in their main assets (Urbeviva, 2007). The progressive deterioration of the old urban centers has been worsening and creating new social and economic problems. Therefore, more and more European cities are pursuing urban redevelopment projects in different areas of public intervention aimed at attracting people back into the city (Bianchini, 1999; Law, 2000; Balsas, 2001, 2004). Major urban renewal projects in urban central areas are justified by the public interest in restoring deteriorated architectural heritage (Couch et al., 2002). It is assumed, furthermore, that renewed historical sites contain distinctive architectural elements that confer prestige and a touch of distinction on city's image (Orueta, 2007).

In response to the dramatic physical deterioration of building assets and the rapid decline in occupancy in the central areas of Portugal's major cities, in 2004 the Portuguese government published the legal framework that regulates the creation and operation of the urban rehabilitation societies (RSRU, 2004). The mission of these societies is to develop and promote urban regeneration initiatives aimed at revitalising and regenerating the rundown central areas of Portugal's major cities.

Lisbon is the capital of Portugal. The city's central downtown built heritage, which dates from the seventeenth century, was rebuilt immediately after the 1755 earthquake. Lisbon's central downtown area has experienced dramatic physical degradation of its major built heritage in the last thirty years (Videira, 2006). In recent decades, the economic and social profile of Lisbon's central downtown has changed; in particular, some economic activities have been given up and the urban functions have changed (CMLa, 2004). Therefore, pre-existing residential growth halted and occupancy fell dramatically as many individuals and families left the central downtown areas. One of such areas is the Sao Paulo community presented in this study.

More recently, the Lisbon's central downtown was declared a critical zone for public intervention by the local government authority (CMLb, 2004). Various initiatives have been used in the past in Lisbon, mostly concentrated on improving of the physical condition of residential buildings (Appleton, 2003). Recently, a new regeneration initiative for the old urban Lisbon's downtown was announced, covering three fields of intervention: the economic, social and physical fields (CBC, 2006).

The economic evaluation of regeneration and renewal interventions raises issues common to every cost efficiency analysis or cost benefit analysis of a major investment in building. In addition, the urban residential environment has good public characteristics in the sense that everyone could gain from joint action to improve an area since the benefits derived from housing renovation are substantially non-excludable (Balchin et al., 1992). Many households are likely to enjoy the external benefits of an improved environment and higher property values. Cost efficiency and cost benefit analyses have been widely recognized as a useful framework for assessing the positive and negative aspects of prospective actions and policies, and for making the alternatives economic implications an explicit part of the decision-making process (Arrow et al., 1996). However, studies and frameworks on the economic evaluation of the regeneration of old urban heritage are limited (Orueta, 2007). This paper presents a case study of the regeneration program for the Lisbon old downtown including an analysis of the framework used to assess the costs and benefits.

2. METHODOLOGY OVERVIEW

Encouraged by the shortage of economic studies on urban regeneration and renewal programs and the approaches for cost-benefit analysis, this paper sets out to give a detailed presentation of the approach used to evaluate a proposed multi-field intervention in Lisbon's old downtown.

The methodology proposed in this paper is aimed at helping in the practical application of economic evaluation methods in urban regeneration and renewal. It can also be viewed as an approach to the reliable preliminary screening of projects, which may subsequently be appraised in more detail.

The contents and conclusions of the research work were arrived at by means of. (i) a review of publications and State-Of-The-Art practices related to urban regeneration; (ii) a review of data and information on past public interventions; (iii) a survey conducted throughout the duration of the study; and (iv) a case study. The study estimated the costs benefits of the regeneration intervention planned for the Sao Paulo community. The framework used in this study is being extended to other run-down areas of Lisbon's old downtown.

3. PUBLIC INTERVENTION

Major urban regeneration interventions are justified by the public interest in recovering obsolete architectural heritage (Couch et al., 2002). One of the most significant events for the urban regeneration of Portuga's major cities was decree no. 104/200 of 7th May 2004 which provides the legal framework for creating public enterprises, known as Sociedades de Reabilitacao Urbana (SRUs) (Urban Regeneration Enterprises) (RSRU, 2004). Sociedades de Reabilitacao Urbana (SRUs) have been promoted by the government and established by municipalities, in order to achieve a focused, integrated regeneration strategy for major cities. They produce a coherent single enterprise for the future of their entire area and then co-ordinate its implementation as to deal with the urban regeneration operation in central urban areas. The main aim of these local SRUs is to promote urban rehabilitation of the built heritage operations within their intervention area. The agencies are separate public legal enterprises. They seek to achieve the harmonious physical regeneration of their areas by implementing their strategic plan in a way that would not be possible with individual ad hoc decisions.

The Lisbon municipality attempted to deal with the degradation of the old central areas by creating three public enterprises responsible for the physical rehabilitation of the historic district. They are: the SRUBP--Sociedade de Reabilitacao Urbana da Baixa Pombalina; the SRULO--Sociedade de Reabilitacao Urbana da Lisboa Ocidental; and the SRUO Sociedade de Reabilitacao Urbana da Lisboa Oriental. The public intervention in urban regeneration follows a 'top-down' planning approach supported by four nation wide programmes:

a) Recria: which looks at the rehabilitation of rented private housing. It provides a set of financial incentives for private owners to restore and renovate housing units building in a poor state of repair. Therefore, the programme aimed at providing financial support for renovation and rehabilitation works in two ways: grants and mortgage loans. Mortgage loans are used for fund the renovation work not covered by grants.

b) Rehabita: which extends the Recria programme by including financial incentives for regeneration initiatives in historic districts classified as critical zones for public intervention and which are bound by the planning directives. It also provides financial support to municipalities willing to rehabilitate the built heritage in historic districts.

c) Recriph: which is a special programme similar to the Recria which combines grants and mortgage loans to finance renovation works in old buildings developed under a horizontal property regime.

d) Solarh: which provides financial support in the form of mortgage loans at zero interest to owners with low income to allow them to carry out the renovation works needed to rehabilitate their homes. It also provides financial support to non-governmental social solidarity organizations.