The Impact of Single-family Mortgage Foreclosures on Neighborhood Crime

Abstract

Foreclosures of single-family mortgages have increased dramatically in many parts of the US in recent years. Much of this has been tied to the rise of higher-risk subprime mortgage lending. Debates concerning mortgage regulation, as well as around other residential finance policies and practices, hinge critically on the social as well as personal costs of loan default and foreclosure. This paper examines the impact of foreclosures of single-family mortgages on levels of violent and property crime at the neighborhood level. Using data on foreclosures, neighborhood characteristics, and crime, the study found that higher foreclosure levels do contribute to higher levels of violent crime. The results for property crime are not statistically significant. A standard deviation increase in the foreclosure rate (about 2.8 foreclosures for every 100 owner-occupied properties in one year) corresponds to an increase in neighborhood violent crime of approximately 6.7 per cent. The policy implications of these findings are discussed.

Keywords:

• Foreclosures
• subprime loans
• mortgages
• crime

Notes

¹ Owner-occupiable units are calculated by taking the percentage of occupied units that are owner occupied and multiplying it by the total number of housing units in the tract, including vacant units.

² Kubrin & Squires (2004) do not include percentage of Hispanic in their study of Seattle neighborhoods. However, in Chicago well over 20 per cent of the population is Hispanic and Hispanic segregation is significant.