Crime Prevention for Economic Development: Lessons from Chicago and Los Angeles

Crime imposes an immense burden on cities, taking its toll in higher policing costs, lower property values, fewer job opportunities, and reduced overall quality of life. High and rising rates of crime are often cited as reasons for businesses not to locate to areas of concentrated poverty. Meanwhile, municipal leaders dedicate significant community development resources to infrastructure improvements and tax incentives. New research by authors Johanna Lacoe, Raphael Bostic, and Arthur Acolin seeks to determine if crime prevention might bring more investment capital to these communities.

The authors examine how private investment in the cities of Chicago and Los Angeles changed as crime rates declined throughout the 2000s, using detailed city block-level data on crimes committed and subsequent building permit activity in the one to two years after crime rates had changed. Controlling for baseline crime rates and city-wide changes in crime and development, the authors seek to determine whether and how changes in crime at the block level affects private investment decisions. Significant variation in crime rate trajectories at the neighborhood level allows the authors to study the effects of both increasing and decreasing crime.

During the study period of 2006–2011, both cities saw broad declines in crime and pace of investment. However, these recession-era declines are not observed evenly across the cities, and many individual city blocks experienced opposing trends. Studying this variation, the authors find a significant relationship between crime at the city block-level and subsequent investment activity. Though the effects are somewhat larger in Los Angeles, the patterns in each city are remarkably similar, despite differences in demographics, underlying crime levels, and land use patterns. In both cities, one additional crime on a given block is associated with a 0.2 percent reduction in new construction permits, and a 1.8 percent reduction in renovation permits on that block. Though Los Angeles’ residential permit activity is more impacted by short-term crime trends, commercial permits in both cities were suppressed for up to two years after an increase in crime. Additionally, though property crime has a marginally larger impact than violent crime in Los Angeles’ subsequent investments, all forms of crime are associated with similar reductions in permit activity in Chicago.

The effects of changes in crime are similar between blocks that had differing baseline crime rates, suggesting that the trajectory of crime is more important to investors than a point-in-time measure. Interestingly, the effect of changes in crime on building permit activity is found primarily in neighborhoods with increasing crime rates. While worsening neighborhoods experience significantly decreased investment, improving neighborhoods do not see symmetrical investment increases. The implication is clear: crime prevention matters. Efforts to deter crime could have significant impacts on future neighborhood investment. Previous research has found similar asymmetric effects of crime: educated individuals and families with children tend to migrate out of higher crime neighborhoods when possible. While declining crime rates have been found to limit out-migration, they have not induced crime-sensitive individuals to return.

City governments, nonprofit agencies, and philanthropic partners invest considerable resources into equitable economic development. However, without consideration of the effects of localized crime, their efforts may not see the results that can lift up communities and help neighborhoods thrive. These results indicate that crime does pose a barrier to growth, and it is critical for policymakers to understand the impacts of crime, not only on quality of life, but on the future prospects for neighborhood development as well. Stronger investment in crime prevention might prove an effective tool for promoting more widespread economic opportunity.

Article source: Lacoe, Johanna, Raphael W. Bostic, and Arthur Acolin, “Crime and Private Investment in Urban Neighborhoods,” Journal of Urban Economics 108 (2018): 154-169.

Featured photo: cc/(MattGush, photo ID: 1138299265, from iStock by Getty Images)