New economic research reveals that more crime in a London neighbourhood means lower house prices. Surprisingly, though, it is relatively minor 'anti social' crimes like graffiti and vandalism that have the largest negative effects on house prices. In contrast, a higher incidence of burglary does nothing to depress house prices.
The study by Dr Steve Gibbons of the London School of Economics and Political Science (LSE) analyses Metropolitan police force data to show that home buyers in London pay more for a house in a low-crime neighbourhood than they would for an equivalent property located elsewhere. His report, published in the latest Economic Journal, shows that:
A 10 per cent reduction in recorded crime adds around 1.7 per cent to the selling price when compared with the average home in the average neighbourhood.
The crimes that have the strongest effect on prices are crimes in the 'criminal damage' category, including graffiti, vandalism and arson.
The incidence of these crimes is higher near public houses and other places of alcohol consumption - and this tends to depress local property values.
These house price effects indicate that neighbourhood crime imposes real costs on local residents, and suggest a role for further government expenditure on tackling the problem of neighbourhood social disorder.
People in London seem prepared to pay large sums of money to buy in to what they see as safer communities - around £200 per year on average in 2002/3, for a 10 per cent reduction in incidents of criminal damage.
In comparison, government spending dedicated to local crime reduction initiatives in the London region in 2002/03 was worth about £14 per household, with £1.40 per household allocated to the Safer Communities Initiative targeted at crime hotspots.
Simple economic reasoning predicts a difference in price between a house in a high-crime neighbourhood and an identical house in a low-crime neighbourhood. This price difference should just offset the monetary and psychological costs of life in a high-crime environment.
But up until now, there has been no evidence for Britain to show that this link between crime and house prices exists. This research fills this gap using geographically detailed Metropolitan Police Force data, matched to information on over 8,000 individual property sales in the London area in 2001.
An interesting aspect of the findings is that a higher incidence of burglary - what might be considered a high cost crime to the victim - does nothing to depress house prices. But crimes classed as criminal damage have very large effects, with costs comparable to previous estimates for serious violent offences.
A possible explanation is that graffiti, vandalism and similar anti-social offences impose high costs on neighbourhoods because they are easily visible, and are seen as signals of deeper problems of neighbourhood social disorder. These crimes, though not strongly linked to violent offences, can escalate the fear of crime in the community, induce people to leave and discourage potential home-buyers.
An implication of the results is that policy to discourage these 'soft' crimes may have large social welfare benefits, even if there is no knock-on effect to the reduction of more serious offences.
Read the report
For further information, contact:
The Costs of Urban Property Crime by Steve Gibbons is published in the November issue of the Economic Journal.
The author is based in the Department of Geography and Environment, LSE.
Graffiti worst drag on house prices (13 Dec)
Graffiti and vandalism have a stronger effect on house prices in some areas of London than more serious crimes such as burglaries, research has shown. Steve Gibbons, LSE, found that burglaries, which usually did entail higher costs for the victim, did nothing to depress house prices.
BBC News Online
House prices boosted by low crime (13 Dec)
13 December 2004