The externality of a mortality incident within an apartment building: cases of homicide, suicide and fire deaths

Abstract

The presence of a stigmatized property due to undesirable mortality incidents, such as homicide and suicide, may affect people’s willingness to pay to live in that particular neighborhood. The Japanese property transactional law states that a stigmatizing incident that could affect a potential buyer’s/renter’s decision needs to be disclosed prior to the contract phase. However, such disclosure does not occur in most cases when the transactional property is not the property at which the incident occurred by tacit agreement that the stigma does not extend beyond the property. This paper applies a hedonic approach to examine the externality of stigmatized property using data from Tokyo, Japan. By carefully considering detailed regional fixed effects, the estimation results reveal that an incident of homicide occurring in an apartment unit lowers the rents of nearby units in the same building by approximately 10% immediately after the incident, but the impact is ameliorated gradually over time and disappears after approximately 7–8 years. We do not find any evidence of a negative externality in cases of suicide or death by fire. These results suggest that under the current legal system, a recent homicide occurring at a property in an apartment building should be disclosed to potential buyers/renters of different units in the building.