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"Estimates of the Impact of Crime Risk on Property Values from Megan's Laws"
American Economic Review,
Publication type: Journal article
Research Archive Topic: Real Estate
We combine data from the housing market with data from the North Carolina Sex Offender Registry to estimate how individuals value living in close proximity to a convicted criminal. We use the exact location of sex offenders to exploit variation in the threat of crime within small homogeneous groupings of homes, and we use the timing of sex offenders' arrivals to control for baseline property values in the area. We find statistically and economically significant negative effects of sex offenders' locations that are extremely localized. Houses within a one-tenth mile area around the home of a sex offender fall by 4 percent on average (about $5,500). We also find evidence that the effect varies with distance within this range—houses next to an offender sell for about 12 percent less while those a tenth of a mile away or more show no decline. We combine our willingness-to-pay estimates with data on sexual crimes against neighbors to estimate the costs to victims of sexual offenses. We estimate costs of over $1 million per victim—far in excess of estimates taken from the criminal justice literature. However, we cannot reject the alternative hypotheses that individuals overestimate the risk posed by offenders or view living near an offender as having costs exclusive of crime risk.
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