Spatial spillover effects of crime on private investment at nearby micro-places

Abstract

Criminal activity may influence the decisions of existing property owners or prospective investors to invest in a property, given the potential elevated expenses and increased uncertainty that often accompany crime. This study investigates the relationship between crime and private investment at nearby micro-places using location-specific crime incident and building permit data from 2008 to 2018 in the cities of Chicago, Los Angeles, New York, Philadelphia, San Antonio and Seattle. Data were aggregated to the blockface-level to examine how changes in investment on a blockface are influenced by changes in crime on that blockface and adjacent blockfaces in the subsequent year. Results indicate that an increase in total crime on a blockface was associated with a significant decrease in building permit activity the following year in all six cities, but the relationship is less strong when aggregating crime from adjacent blockfaces. When looking at spillover effects, higher crime on adjacent blockfaces was significantly associated with lower levels of investment beyond the effect of the crime trend on that blockface in Los Angeles and San Antonio. Though the relationship between adjacent blockface crime and investment was negative across the other four cities, it was not statistically significant. Taken together, these findings suggest that effective targeted crime prevention policies may have the added benefit of spurring local economic investment and that the impact of crime is very localised.