[Richard C. Collins] notes that protection at the local level is the real hedge against internal alteration of a neighborhood, but in the case of St. Michaels, without a local historic designation, the issue is whether the historic district can maintain its current atmosphere if the proposed adjacent development increases the population by nearly half. "No one is suggesting altering the town. . . . It's a concern that the new construction would hurt the economic vitality of the historic town," he said.

Historic designation tends to be especially popular in large jurisdictions where the local government is more pro-development than the communities, said William A. Fischel, a professor of economics at Dartmouth College. Local neighborhoods might apply for historic designation simply to protect their brownstones from city hall, he said. In general, he noted, the economic evidence of what historic preservation does to property value is mixed depending on the size of the district or the buildings.

Beware the law of diminishing returns if too many neighborhoods in an area are deemed historic, said Edward Coulson, an associate professor of economics at Penn State. Coulson and his colleagues are conducting a study to determine whether neighborhoods change demographically as a result of historic designation. They are interested in finding out whether neighbors are trying to keep their neighborhood's status quo, or upgrade as new owners, seeking the status of living in a historic area, move in. They expect the results to be published sometime in the fall.