The Impact of Crime on Residential Real Estate Prices in Hamburg, Germany
The economic impact of crime has been the subject of many studies during the past decades. Generally, the motivation to investigate this topic is due to the fundamental responsibility of governments to provide security to its citizens. Intuitively, public
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The Impact of Crime on Residential Real Estate Prices in Hamburg, Germany Introduction
The economic impact of crime has been the subject of many studies during the past decades. Generally, the motivation to investigate this topic is due to the fundamental responsibility of governments to provide security to its citizens. Intuitively, public safety is the basis for modern societies to prosper and to ensure economic activity. A company, for example, will only be able to produce something if its property is not robbed and its employees are safe on their way to work. Most societies delegate this responsibility for safety to public authorities. The authorities’ legitimacy strongly depends on the ability to ensure public safety. If governments fail to provide safety, individuals must provide for their own safety through other means; consequently, they may not accept the government collecting taxes. As resources are scarce, policy makers have a strong interest in spending money to ensure public safety in the most efficient way; it is, therefore, studied thoroughly in most countries. However, the nature of public safety poses several difficulties to policymakers and to researchers analysing its impact on economic activity. Safety is measured through the absence of crime, which is a public service provided by the government in deterring crime by police work, for example. A common strategy is to measure the impact of crime implicitly by estimating housing prices. Hedonic modelling allows one to include crime measures as variables in regressions. Many studies have been conducted in this way and have raised several issues regarding the validity of these models. One major concern when estimating the economic impact of crime is the endogenous nature of crime measures as comprehensively pointed out by Ihlanfeldt and Mayok (2010). In this paper, we exploit a six-year panel data set reaching from 2012 to 2017 containing prices for apartments and single-family homes and crime data on Hamburg’s city quarter level investigating the relationship between crime and housing prices. We use the fixed-effect panel data methodology to analyse the impact of different crime measures. Due to the absence of exogeneous instrumental variables, we further implement a dynamic panel data approach to deal with the endogeneity of crime. The results indicate a weak relationship between © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 J. de Graaff, Essays on the Impact of Urban (Dis-)Amenities on the German Real Estate Market, Essays in Real Estate Research 18, https://doi.org/10.1007/978-3-658-31623-5_4
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4 The Impact of Crime on Residential Real Estate Prices in Hamburg, Germany
violent crime and apartment prices. In more general terms, the results further underscore the difficulties to analyse the impact of crime given that it is endogenous. The paper is structured as follows. First, a brief summary is provided of (a) the relevant literature and (b)
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