Location, Location, Location (and safety)
The impact of safety on Your Home Value.
Neighborhood safety is among the most relevant predictors of your home’s value. If you’re looking to buy a home or improve the value of the home you own already, safety is the key.
Research shows crime, especially violent crime, affect home valuation dramatically: “robbery and aggravated assault crimes (per acre) exert a meaningful influence upon neighborhood housing values.”¹ Economists have quantified that effect for violent crime, and have found one less homicide = +1.52% property value for the zip code. 10% lower violent crime = 0.8% higher valuation.² The Federal Reserve Bank of New York found a 10–25% decrease in homicide resulted in an increase of 5–10% for local home values in Rio de Janeiro.³ These are zip-code or wider level effects. Proximity to the issue increases the impact. In a levered asset like Real Estate, if you have 20%/$100k equity in your home, a 10% increase in value has turned your $100k into $150k. The effect is even more dramatic when safety increases on your block.
Bottom line: lower violent crime closer to your home/investment = massively significant increase in the value of your home/investment.
How do you identify homes in an area that is ripe for a safety improvement?
We addressed how to identify a home with safety in mind in a prior post. That covers how to identify the current safety situation where you’re looking, but also allows you to look at trending.
Trending safety data is your friend, but so is knowing what issues the area faces in order to address the issue via smart policing requests. Here, we’ll pick on the Ross Dress For Less on Market Street in San Francisco (so we don’t pick on a residential neighborhood). The area covered by each report is 1/4 mile square… a couple city blocks. The timeframe can be set by the user, and we’ve set it to one year, the default. You can see the overall Quantified Risk Index (QRI) score is a High 62. In details you can see the Neighborhood QRI (quality of life issues like drugs and loitering) is in Extreme territory, and the Violence QRI is a High 71.
The only area with significant research showing an impact on property value is violent crime, but I think we’d all be surprised if loitering drug addicts didn’t put some pressure on valuations as well. Either way, let’s stick to the research and focus on violent crime. The top four issues are Violent Offenses (assaults and the like), Theft & Robbery (in the violent section, this would be akin to a strong-arm robbery from a person, not a home break-in. Home burglary is covered in the Home QRI), Sexual Offenses, and Animal Offenses (dog attacks, etc.).
The percentages listed are relative to the time period covered. We’ve set it to a year for this screen. Violent Offenses are +21%. While not a good number, street violence is some of the most preventable crimes, as research sown increased police patrols can dampen open activity like assaults. You’ll not violent activity spikes at 11am, 1pm, and 4–5pm. Requesting patrols from SFPD for those times, letting them know there are spikes then, can decrease that activity significantly (SFPD non-emergency: 1–415–553–0123, or see their social here). Theft & Robbery has decreased 33% over the past year, which is great. Patrols requested for Violent Offenses should decrease on the same basis.
Sexual Offenses are tough. Many are hard to prevent with police patrols, and they often spike with high Neighborhood QRI issues, often drugs. They tend to be an horrific side effect of generalized degradation that will be a second-order effect of drugs and violence. Digging deeper into the issue, we see the type of Sexual Offenses in the sector are Sexual Assault, and Sex Offender Registration Violations. Sexual Assaults tend to decrease as the neighborhood becomes less violent and drug use decreases. Offender violations tend to be when a registered sex offender failed to notify the police or neighbors of his/her residence location, or they’ve located in a illegal location (near a school, etc.). Those offenses will drop off as the violation passes in time and aren’t something to try to mitigate.
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At this location, crime is high, and that is an opportunity in two ways:
- Higher crime can be reduced more rapidly that low-but-lingering crime. In the case of Theft & Robbery in this sector, it is already reducing rapidly.
- Lower crime is a benefit to you as an investor/homeowner, but is also a massive benefit to your neighbors both in terms of their investment, but also in their lives. A safer neighborhood for kids to be playing outside is a more valuable neighborhood, and a nicer place to live.
Start a neighborhood watch. Request additional patrols at specific time spikes for specific crime types. Police appreciate knowing you respect their work and know what you’re calling for… A request for a patrol at 4pm for a spike in street violence on your block is an easier pick up than complaining that things are generally bad, and asking SFPD to fix it.
In SF, if you’ve got a $1m house, a minor investment of time and attention can yield a 10% value increase in a matter of months. That’s a big deal.
The Quiet Part Out Loud.
Realtor.com, Redfin, and Trulia are eliminating crime data that is prized by customers from their sites. Data vendors sold them a combination of crime incident listings along with demographic data that makes it look like demographics predict crime. They don’t.
The history of real estate is marbled with racist practices and legislation. Redlining, restrictive covenants, and biased appraisal make real estate sites understandably nervous about endorsing data that could be perceived as racially charged.
AskScout data has NO demographic component: no race, income, or voting patterns of any kind. AskScout is purely crime incident data combined with natural features like topography and weather, and processed using ML with NO access to demographics.
The combination of these datasets and our patented classification schema give us the ability to predict future risk at a precise location with 70–90% accuracy.
AskScout discredits existing neighborhood prejudice by showing nuance and highlighting the good in all neighborhoods.
If you’d like AskScout for free:
AskScout is live in SF, coming to LA, Chicago, and NY soon. Active for iPhones and Apple Watches, coming to Android soon.
AskScout for iPhone: https://apps.apple.com/app/askscout/id1611040474
AskScout for Apple Watch: https://apps.apple.com/app/askscout-for-watchos/id1611145461
SOURCES
[1] https://www.sciencedirect.com/science/article/abs/pii/S0166046210000086
[2] http://www.housingwire.com/sites/default/files/editorial/violent_crime.pdf
