Crime and Property Values: Evidence from the 1990’s Crime Drop

Does a dramatic drop in crime lead to an increase in property values? To date, the literature on how crime influences property values has focused solely within a single metropolitan area and has been limited primarily to cross-sectional analysis. In this study we exploit the dramatic, nationwide decrease in crime that occurred in the 1990s to examine the relationship between changes in crime rates and property values. To do this, we compile information on changes in property values and crime during the 1990s in nearly 3,000 urban zip codes throughout the U.S. Using a fixed-effects framework as well as an instrumental variables strategy, our analysis implies a large and statistically significant association between crime and property values. The estimated elasticities of property values with respect to crime range from -0.15 to -0.35. Furthermore, zip codes in the top decile in terms of crime reduction saw property value increases of 7-19% during the 1990s. Both the empirical analysis and a graphical analysis suggest that causality runs from decreasing crime to increasing property values. These results imply that the crime drop was a major contributor to the recent resurgence of cities.