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Crime and Residential Choice: A Neighborhood Level Analysis of the Impact of Crime on Housing Prices

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Abstract

Crime serves as an important catalyst for change in the socio-economic composition of communities. While such change occurs over a long period of time, crime is capitalized into local housing markets quickly and thus provides an early indicator of neighborhood transition. Using hedonic regression, we quantify this “intangible cost” of crime and extend the crime-housing price literature in several important ways. First, we disaggregate crime to the census tract level. Second, using longitudinal data, we examine changes in crime in addition to the neighborhood levels of crime. Third, we differentiate between the effects of property crime and violent crime. Fourth, we also disaggregate our sample into groups based on per capita income of the census tract. Finally, we show that it is vital to account for the measurement error that is endemic in reported crime statistics. We address this with an instrumental variable approach. Our results indicate that the average impacts of crime rates on house prices are misleading. We find that crime is capitalized at different rates for poor, middle class and wealthy neighborhoods and that violent crime imparts the greatest cost.

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Notes

  1. Three notable exceptions are Rizzo (1979), Naroff et al. (1980), and Dubin and Goodman (1982).

  2. We also estimated (not reported) models that measure the change between years t − 2 and t − 1. Measuring change in this way has the advantage that all of the measured change will have occurred by the time the house sale has completed. However, there are two major drawbacks to this more distant lag. One is that it doesn’t incorporate changes that are more contemporaneous, and perhaps more relevant, with the sale. The second drawback is that this requires one additional year of data, and such an estimation results in the loss of approximately one-third of the observations in our study.

  3. Indeed, alternatively categorizing types of neighborhoods based upon an index of concentrated disadvantage (based upon percentages of unemployment, poverty, female headed households, and black residents) did not change the findings.

  4. Formerly known as Amerestate, Inc.

  5. We also estimated all models using both tract fixed effects and by robust cluster procedures that adjust for possible correlation among observations within census tracts. The basic findings were robust across the three methods, although there was slight difference in the sizes of the standard errors on the coefficients. These results are available from the authors.

  6. [( − 4.66* − 0.011)*$71,853] + [( − 4.66* − 0.036)*$71,853]

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Acknowledgments

The authors gratefully acknowledge funding support from the National Consortium on Violence Research (NCOVR is supported under Grant SBR 9513040 from the National Science Foundation) and the Department of Housing and Urban Development. They also thank the Criminal Justice Research Center and the Center for Urban and Regional Analysis at Ohio State University for sharing crime and housing data. They greatly appreciate feedback on earlier drafts from Marlon Boarnet, Richard Green, Georgette Poindexter, three anonymous referees, and the editor of JQC. All errors and omissions are the sole responsibility of the authors.

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Authors and Affiliations

  1. UC Irvine Criminology, Law and Society, 2307 SE II, Irvine, CA, 92697-7080, USA

    George E. Tita

  2. John Glenn School of Public Affairs, The Ohio State University, 1810 College Rd, Columbus, OH, 43210-1336, USA

    Tricia L. Petras & Robert T. Greenbaum

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  1. George E. Tita
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  2. Tricia L. Petras
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Correspondence to George E. Tita.

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Tita, G.E., Petras, T.L. & Greenbaum, R.T. Crime and Residential Choice: A Neighborhood Level Analysis of the Impact of Crime on Housing Prices. J Quant Criminol 22, 299–317 (2006). https://doi.org/10.1007/s10940-006-9013-z

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