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The Impact of Crime on House Prices

Crime affects not only the victims and their families but also the community. A pervading sense of fear, especially at night, leads to the gradual decline of the gathering of informal and formal groups. A crime-ridden community discourages businesses from opening in the area and people who are relocating prefer to look elsewhere. For the real estate industry, a high crime rate means bad business.

Many studies have been done to evaluate the impact of crime on house prices. But economics professors from Florida State University note that the link between diminishing values of houses and crime cannot be fully established because of numerous variables. In a 2010 study by Keith Ihlanfeldt and Tom Mayock of FSU, crimes of robbery and aggravated assault had a significant impact on a neighborhood’s housing prices. Another study on 2800 houses sold in Jacksonville, Fl. found that homes in high crime neighborhoods sold at huge discounts.3

Crime committed against persons and properties instills fear in the community where it happened. It affects the behavior of its residents. Children are discouraged from going out and extra security is placed on gates, doors and windows. Several studies in different parts of the United States have been done to determine the correlation between crime and housing values. The general consensus shows that violent crimes decrease the value of homes. The impact of crimes of property on house prices is not as apparent.

The FBI website describes violent crimes as murder, nonnegligent manslaughter, forcible rape, robbery and aggravated assault. These are wrongdoings against persons. Property crimes are burglary, larceny-theft and motor vehicle theft; these actions do not involve threats or force on the victims. Ratings of places in the USA list the level of crimes with data culled from various sources. San Diego has a 57 rate for violent crime, higher than the state level of 46 and the national level of 41.4. But it has declined from previous years and housing costs in the county is one of the highest in the country. A criminal defense lawyer cites the various non-government organizations that help in crime prevention as a deterrent to perpetrators.

Elderly people and females seeking a house to rent or buy are more likely to avoid areas with a high crime index because these are the people who are less able to protect themselves compared to men. Crime is also higher and housing costs lower in nonwhite neighborhoods. Detroit and Flint in Michigan are consistently listed as among the most dangerous places in the nation for their high rates of violent crimes. These are predominantly occupied by black residents and although presidential candidate Trump may have gotten flak for saying so, he was basing his statement on statistics.

Finder.com transposed a study in Sydney, Australia that showed house values decreasing if located near a murder scene to the US market and found the same results. Nationwide, around $2.3 billion is lost annually from declining house prices due to homicides. The psychological effect of a crime occurring in a locality is repugnance for that area from outsiders looking for a house to rent or buy. If the scene of the crime is the house itself, selling becomes almost impossible following the months after the deed. Aside from murder, rape and assault, areas where sex offenders live or where drug labs have been found depreciate in value.

If you are selling your property and it is in a neighborhood where a homicide or other violent transgression has just occurred, real estate appraisers advise waiting for year or so for the negative publicity to side down so you can sell it at a fair price. The stigma associated with crimes does not last forever.