On the House: What crime can cost cities, and housing markets

Posted: July 23, 2012

When I was a kid, one of my favorite Soupy Sales quips was, "Crime doesn't pay. I know because I tried it for two weeks and couldn't make ends meet."

But the line isn't really that funny, is it? Even real estate markets can be hurt by the impact of a single crime. More about that later.

When I lived in Philadelphia and was called for jury duty, one of the voir dire questions was, "Have you or someone you know been a victim of a crime?" Every hand in the courtroom went up in response, including mine.

Crime does more than cause its victims physical pain and mental anguish. It cuts deeply into their wallets, and those of everyone else, too.

How much does crime bite into our bottom line?

Violent incidents, such as murder, rape, assault, and robbery, cost Americans nearly $200 billion a year, including $46 billion in direct costs for victims' out-of-pocket medical expenses, property losses, and forgone earnings, according to the Center for American Progress.

Then there are the costs to the justice system resulting from those violent crimes, and the forgone income of criminals in jails and prisons.

On top of the direct costs, violent crime carries nearly $156 billion in annual indirect, intangible costs, including the pain and suffering of its victims.

Philadelphia was among the eight cities providing data to the Washington-based center for its recent study, which was conducted by Kevin Hassett of the American Enterprise Institute and Robert Shapiro, a former undersecretary of commerce.

The report states that for Philadelphia, the direct annual cost of violent crime exceeds $700 million. The total cost for the city, including the indirect and intangible costs, is $3.7 billion a year.

Based on their analysis, Hassett and Shapiro also estimated the budgetary savings each of the eight cities should expect to achieve if their rates of violent crime declined by either 10 percent or 25 percent.

Those savings include lower expenditures on law enforcement and the justice system, as well as the additional revenues each city could expect to collect from applying local taxes to the income earned by those who otherwise would have been victims or perpetrators of those crimes.

For Philadelphia, the estimated savings for municipal budgets from a 25 percent reduction in violent crime would be $42 million, the authors of the report said.

But the largest economic benefits arise from the impact of lower rates of violent crime on the housing values in the cities sampled, study authors Hassett and Shapiro said.

Analysis of the data found that a reduced incidence of murders in a particular zip code was followed by a predictable and significant increase in housing values in the same zip code in the following year, they said.

On average, a reduction in a given year of one homicide in a zip code caused a 1.5 percent increase in housing values in that same zip code in the following year, according to Hassett and Shapiro.

"We applied these findings to available data on the value of the housing stock in the metropolitan areas of all eight cities," they said.

"The estimated increases in the value of the housing stock for the eight cities and their immediate metropolitan areas, following a 10 percent reduction in homicides, range from $600 million in Jacksonville and the surrounding area, to $800 million in the Milwaukee area, to $3.2 billion in Philadelphia and the surrounding suburbs," Hassett and Shapiro said.

Crime might not pay. But the absence of it appears to.

"On the House" appears Sundays. Contact Alan J. Heavens at 215-854-2472, aheavens@phillynews.com or @alheavens at Twitter.

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