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Robert J. Shapiro

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Cutting Crime Pays

Posted: 10/05/2012 12:00 pm

The mass shooting in Aurora, Colo., in July was a terrible tragedy with a devastating human toll. But it will have other costs as well. In a new analysis I conducted with Kevin Hassett of the American Enterprise Institute, we calculated for the first time the extraordinary economic costs that violent crime imposes on communities.

In our new study issued by the Center for American Progress, we calculated that the four major types of violent crime -- murders, rapes, assaults and robberies -- cost Americans about $200 billion per year. That estimate covers first the costs of police, courts and prisons associated with those crimes. It also includes victims' property losses, out-of-pocket medical expenses, and their pain and suffering. Finally, we also include the foregone income of the victims of violent crime, as well as the lost income of the perpetrators themselves once they are caught and incarcerated. Reduce violent crime by 10 percent -- one-fifth of the reduction already achieved over the last 20 years -- and the nationwide savings and benefits would total $20 billion per year.

We also have calculated another benefit: When violent crime falls, property values increase. We collected years of data on violent crimes by specific location and date in a number of major cities across the country, and then we analyzed the relationship between changes in the rates of those crimes and changes in home prices in the same areas. On average, a 10 percent decline in homicides in a neighborhood or zip code produced a 0.83 percent increase in home values in the same area the following year. A 25 percent drop in homicide rates should produce a 2.1 percent increase in property values the next year.

Our results covered Boston, Chicago, Dallas, Houston, Jacksonville, Milwaukee, Philadelphia and Seattle. They show that falling rates of violent crime, especially homicides, translate into billions of dollars in gains by homeowners and tens of millions of dollars in new property tax revenues for city governments. For example, a 10 percent drop in homicides should increase the value of residential real estate, over just one year, by $4.4 billion across the Boston metropolitan area, by $3.2 billion in the Philadelphia area, by $2.9 billion in and around Seattle, and by $2.4 billion in metropolitan Dallas. Similarly, those gains in the first year would amount to $2.2 billion in the Chicago area, $800 million in and around Milwaukee, and $600 million in metropolitan Jacksonville.

Such progress against violent crime would means not only significant increases in property taxes, but also significant savings for city budgets. A 10 percent reduction in the four major violent crimes would reduce direct municipal costs by $5 million per year in Boston, $24 million in Chicago, $7 million in Dallas, and $17 million in Houston. Similarly, these annual budget savings would come to $4 million in Jacksonville, $5 million in Milwaukee, $17 million in Philadelphia and $2 million in Seattle.

Researchers have also identified a number of strategies that have proven to be quite effective in reducing violent crime -- and which, we now know, may directly lead to higher property values and large municipal savings. For example, additional police patrols have reduced the incidence of serious offenses in high-crime hotspots, and intervening in networks of underground gun brokers may help reduce illegal access to guns. Family therapy, parent training, and vocational training programs have all worked well for certain high-risk populations. These and other crime-reducing efforts entail budgetary costs as well, but most of us would be willing to incur those additional costs, given the large and broad economic benefits which they should produce.

We know that violent crime is costly for victims, cities and all of us. Now, we also can say with confidence that cities make a very costly mistake when they ignore the large, potential gains for their residents, home owners and taxpayers and budgets from making additional efforts to reduce violent crime.

 
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