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.