Effects of neighborhood crime on home prices

• In Event: WG-PLACE 2: Research on crime, place and time

Abstract

The living environment plays an important role in the value that people attach to a home. This is reflected in the price that buyers are willing to pay for living in attractive neighborhoods. It has been suggested that increasing local crime levels reduce the local sales prices of homes. The present research readdresses this question using rich datasets and rigorous econometric methods. We create a panel dataset that links crime, house prices and potentially confounding variables by combining three sources of information in the period 2012-2020 in The Netherlands: (1) transaction data including sales price, date and location of home sales throughout the Netherlands, (2) police recorded crime per month per neighborhood, broken down by crime type, and (3) annual demographic, socio-economic and geographical characteristics of all neighborhoods, including the proximity of various facilities. We use the hedonic price method to determine the economic value of neighborhood characteristics. This method assumes that home buyers are prepared to pay a higher price for homes in neighborhoods with positively valued characteristics such as natural quality, accessibility, cultural heritage and low crime levels of crime.

Authors

• Wim Bernasco, Netherlands Institute for the Study of Crime and Law Enforcement (NSCR)

• Jan Rouwendal, Vrije Universiteit Amsterdam, Department of Spatial Economics