September 14, 2007

Paying It Safe: What We'll Spend to Keep Crime Risk at Bay

New research using Megan’s Laws data confirms that property values decline when sex offenders move into a neighborhood — and points to how much it's worth spending on policies that prevent violent crime.


In the 1990s, new laws aimed at protecting communities from sex offenders began to crop up around the country. The earliest versions of these laws were dubbed Megan’s Laws, named for a seven-year-old girl who was sexually assaulted and murdered by a neighbor who, unbeknownst to the community, had a previous record of assaulting children. These state and federal notification laws require that the public be informed of the location and description of convicted sex offenders.

The laws have not been without controversy, having faced challenges on grounds that they violate due process and subject sex offenders to retroactive punishment, but they remain intact. The reasoning behind the laws is simple: neighbors can use the knowledge that a convicted criminal lives nearby to reduce the risk of becoming a victim.

While the instinct to avoid crime risk is clearly high, its demand and impact can’t be easily measured, so it can be difficult for policymakers to determine how best to direct resources to cultivate safety and reduce risk. In a world of scarce resources, both public and private, what is the cost of crime? Or more precisely, what are individuals willing to pay to reduce their exposure to the risk of crime? 

Data made public as a result of Megan’s Laws may help answer such questions by allowing economists to more accurately assess how much people value limiting their proximity to crime risk. Professor Jonah Rockoff and his coresearcher, Leigh Linden of Columbia University’s Department of Economics and School of International and Public Affairs, learned of a case in which a property owner claimed his home had declined in value as a result of a known sex offender’s move to his neighborhood. The homeowner sued to have his property taxes lowered. The researchers were interested in learning what a clear link between the arrival of sex offenders and declines in property values could reveal about how much people are willing to pay to lower their exposure to crime risk.

The researchers’ first step was to learn if Megan’s Laws really do cause property values to fall. To do this, the researchers mined a variety of real estate and tax information. Although Megan’s Laws are widespread, North Carolina is one of only a handful of states that include exact move-in dates of sex offenders in their registries — information that previous similar studies didn’t have and that would help the team make more precise calculations.

A colleague of Rockoff’s provided home-sales figures and exact geographic data for Mecklenburg County in North Carolina. The researchers also pulled records from the county tax assessor’s office. With the assistance of the School’s Paul Milstein Center for Real Estate, Rockoff and Linden painstakingly mapped property parcels and the residences of all sex offenders in Mecklenburg County, using the geographic data to measure distances between sex offenders and property locations, and compared sales and tax-assessor records before and after the dates the sex offenders moved in.

With all this data, Rockoff and Linden were able to take a far more precise look at the relationship between property values and crime risk than previous studies. “We weren’t just looking at what happened to property values generally in one section of town, at the aggregate level, and saying that property values overall drop when crime risk increases,” says Rockoff. “We were measuring the distance in feet, from house to house — what your distance is from crime risk.”        

Here’s what that precision yielded. Property values did indeed drop by about 4 percent after a sex offender moved into the neighborhood, which was about $5,500 of the median home price in Mecklenburg County. If there’s any good news in this, it’s that the decreases occurred in a very limited area — within about one-tenth of a mile, or two city blocks, of the sex offender. The closer another home was to a sex offender’s home, the greater the decrease: a home next door to a sex offender’s residence could see a drop in property value by as much as 12 percent, whereas a house four or five doors away might see a drop of only 5 percent. The researchers found no evidence of a decrease outside of that tenth-of-a-mile radius.

A previous study that examined property-value decreases and sex-offender locations, conducted by a team in Ohio, wasn’t able to account for other reasons that property values in a neighborhood might have fallen.

“The problem is that if sex offenders are moving to particular kinds of neighborhoods, particularly where property values are low — which is often the case —  you can confound the arrival of the sex offender with other things that might be making the neighborhood less desirable to live in, like a neighbor who paints his home bright pink or stops caring for his lawn,” Rockoff points out. Because they had the specific date of each offender’s arrival, Rockoff and Linden were able to reasonably eliminate other possible causes of declines in property values unrelated to crime risk that happened after those dates.

“The motivation for most economists to look at the relationship between property value and crime risk is to think about what people are willing to pay to reduce crime or their exposure to the risk of becoming a crime victim,” Rockoff explains. “For example, if property values near the residence of a sex offender in Mecklenburg County drop by an average of $5,500, you can estimate that an average person would be willing to pay a premium of $5,500 not to live in close proximity to a sex offender.”

Determining that figure allowed the researchers to make a rough estimate of the costs borne by victims of sexual offenses. Using additional data on criminal behavior, their rough estimate suggests that current Department of Justice figures of slightly more than $100,000 for the cost of victimization for rape and sexual assault should be much higher — as high as $1 million or more.

It may be discomfiting to quantify the experience of being a crime victim in economic terms, but there’s a compelling reason to do so. “If we know the cost to victims, then we know what it’s worth if we have a policy that might reduce the incidence of crime,” Rockoff explains. The researchers’ calculations imply that spending large amounts of funds for preventing sexual assault would be justified. 

As for Megan’s Laws, because people view information as a tool that can reduce their risk, they may want to be armed with the uncomfortable knowledge that a sex offender has moved in around the corner. But it’s not clear such laws achieve their intended purpose, and Rockoff is now looking at whether they actually prevent further crimes. “It’s important to understand whether these laws are doing something positive for public safety,” he says. “If they’re not doing that, it may be that all we’re doing is scaring people and reducing property values.”

Jonah E. Rockoff is assistant professor of finance and economics at Columbia Business School.

Read the Research

Jonah Rockoff, Leigh Linden

"Estimates of the Impact of Crime Risk on Property Values from Megan's Laws"

View abstract/citation  View Research  

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