Quantified Effect of Violent Crime on Housing Values

Despite the well-known symbiotic relationship between crime rates and the socio-economic wellbeing of a neighborhood attempts to measure the toll of crime on home values are scarce if nonexistent.

The Center for American Progress, a Washington-based nonpartisan research and educational institute dedicated to finding progressive solutions to major domestic and international problems, has ventured to calculate the impact of violent crime rates on the real estate values and the fiscal stability of eight major American cities.

“The Economic Benefits of Reducing Violent Crime,” conclusively shows that “measures aimed at reducing crime have significant economic benefits to homeowners,” said co-author of the study Kevin Hassett, who is director of economic policy studies and resident scholar at the American Enterprise Institute.

The estimated increases in the value of the housing stock for the eight cities and their immediate metropolitan areas, following a 10% reduction in homicides, range from $600 million in Jacksonville and the surrounding area to $800 million in the Milwaukee area, to $3.2 billion in Philadelphia and the surrounding suburbs and $4.4 billion in the Boston area.

The study is based on findings from a project that examined and analyzed the costs of violent crimes nationwide and in eight American cities using statistics recorded by the police departments of Boston, Chicago, Dallas, Houston, Jacksonville, Milwaukee, Philadelphia and Seattle during several years.

The first-of-its-kind case study simultaneously isolated “the financial impact of violent crime reductions” on residential property values and municipality expenditures.

In the United States, violent crimes such as murder, rape, assault and robbery cost Americans nearly $200 billion per year.

It includes $46 billion in direct costs for medical assistance provided to the victims, property losses, foregone earnings, the criminal justice system, and the foregone income of criminals in jails and prisons. Indirect costs amount to nearly $156 billion annually and include the pain and suffering of violent crime victims.

The study used the results of the investigation to calculate “the potential savings and other benefits” for property owners and city governments if violent crime rates are reduced and sustained at average low levels.

Findings estimate municipality budgetary savings for each of the eight cities that participated in the study if the violent crime rate declined by 10% or 25%.

While estimated annual savings vary depending on specific changes, said co-author Robert Shapiro, who is the chairman of the economic advisory firm Sonecon LLC and a former U.S. undersecretary of commerce for economic affairs, the common denominator is that ultimately savings in tax-payer money amount to millions of dollars.

For example, a 25% reduction in violent crime would bring an estimated $6 million in annual budget savings in Seattle, $12 million in Boston and Milwaukee, $42 million in Philadelphia and $59 million in Chicago.

These findings show the “very large positive effects on property values should also be weighed when considering the costs and benefits of expanded crime prevention," added Hassett.

According to these academics, a combination of increased public awareness and regulatory action can help improve the situation in the areas that suffer from chronically high violent crime rates.

One example is a first-of-its-kind class-action lawsuit filed by Marc Morial, president and CEO of the National Urban League and former mayor of New Orleans, during his 1994-2002 tenure against several gun companies and industry groups “to hold them financially responsible for the cost of handgun violence.”

During a press conference upon the launch of the report, Morial reiterated that since national data show 67% of homicides, 41% of robberies and 20% of aggravated assaults are committed with a firearm—measures that reduce access to firearms can help reduce violent crime.

The crime-cost co-dependence becomes even stronger and more challenging during an economic crisis, says Donna Cooper, senior fellow at the Center for American Progress, which is why “reductions in the rate of violent crime” represent budgetary saving options to municipalities and opportunity to boost residential housing values.