Home Foreclosures and Community Crime: Causal or Spurious Association?

Abstract

More than 6.4 million U.S. properties entered foreclosure between 2007 and 2009. Among the dire consequences of foreclosure is a possible increase in crime. Foreclosures and the subsequent property vacancies and residential turnover may affect community crime rates by increasing opportunities for property crime and by undermining informal social control among community residents. Yet aggregate crime rates continue to decline despite the foreclosure crisis. This study examines the implications of rising foreclosure rates on community crime using crime and foreclosure data from the city of Chicago between 2002 and 2009. Dynamic panel-data models of crime reveal that the association between foreclosure and both property and violent crime is spurious. After accounting for simultaneity and time-variant and time-invariant community characteristics, the rise of recent home foreclosures has no independent effect on community crime rates. Rather, crime and foreclosures are explained by a common set of factors.