Do Foreclosures Increase Crime?

55 Pages Posted: 5 Sep 2010

See all articles by Ryan Goodstein

Ryan Goodstein

FDIC Division of Depositor and Consumer Protection

Yan Y. Lee

Government of the United States of America - Federal Deposit Insurance Corporation (FDIC)

Date Written: May 2010

Abstract

Among the policy concerns associated with increased foreclosures is an increase in neighborhood crime. We propose that foreclosures increase crime by decreasing informal policing by residents, an aspect of crime deterrence little explored in the empirical economics literature. We investigate the effect of foreclosures on crime using a national county-level panel dataset covering the period 2002 to 2007. Employing an instrumental variables strategy to correct for measurement error in foreclosure rates, we find robust evidence that foreclosures increase burglary. A one percentage point increase in foreclosure rates is estimated to increase burglary rates by 10.1 percent. Sensitive to sample period, we also find positive effects on larceny and on aggravated assault. Our estimates indicate that the recent spike in foreclosure activity will result in associated community-wide burglary costs of at least $4.6 billion, and of at least $17.4 billion when considering the impact on all types of crime.

Keywords: Crime, Foreclosures, Instrumental Variables

JEL Classification: K42

Suggested Citation

Goodstein, Ryan and Lee, Yan Y., Do Foreclosures Increase Crime? (May 2010). Available at SSRN: https://ssrn.com/abstract=1670842 or http://dx.doi.org/10.2139/ssrn.1670842

Ryan Goodstein (Contact Author)

FDIC Division of Depositor and Consumer Protection ( email )

550 17th Street, NW
Washington, DC 20429
United States

Yan Y. Lee

Government of the United States of America - Federal Deposit Insurance Corporation (FDIC) ( email )

550 17th Street NW
Washington, DC 20429
United States

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