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2010 News Releases

Research by Longwood business professors examines sex offenders’ effect on home sales

August 6, 2010

Home with Price Reduced Sign

Living near a sex offender affects both the price for which one can sell a home and the time it takes to sell, say three faculty members in Longwood University's College of Business & Economics in a research paper that is attracting widespread attention.

The presence of a registered sex offender living within one-tenth of a mile reduces home values by about nine percent, and these same homes take as much as 10 percent longer to sell than homes not located near registered sex offenders, reports a study by Dr. Ray Brastow, associate professor of economics; Dr. Bennie Waller, associate professor of finance and real estate and chair of the Department of Accounting, Economics, Finance and Real Estate; and Dr. Scott Wentland, assistant professor of economics. "Sexual offenders have robust and economically large effects on nearby real estate," they concluded.

The paper, titled "Estimating the Effect of Crime Risk on Property Values and Time on Market: Evidence from Megan's Law in Virginia," examined more than 20,000 real estate listings in central Virginia between 1999 and 2009. The study analyzed effects for homes located within one-tenth of a mile from a person on the sex offender's list and also studied effects at longer distances - out to one mile.

"We found larger effects on price and the time it takes to sell than we expected, and we found significant differences out to greater distances," said Brastow, who often has collaborated with Waller on research on real estate outcomes. "As we moved out from one-tenth of a mile, we also found an effect, though it was less. We hypothesize that people in rural or suburban areas like central Virginia are likely to define their neighborhood over larger areas than people in urban settings."

Since the 1994 passage of the Sexual Offender Act, known as Megan's Law, persons convicted of sex crimes have been required to notify local law enforcement about their current domicile and any change of address. Information about sex offenders' current and prior residences is public information and in Virginia is available on a public web site, the Virginia Sex Offenders and Crimes Against Minors Registry, maintained by the State Police. The authors matched data from that web site with data from a central Virginia multiple listing service.

"The intent of this research is to examine the impact of Megan's Law on the marketing duration and sales price of residential real estate as observed in rural areas of central Virginia," the study says. "The empirical real estate literature has linked a host of housing, property, and surrounding area characteristics to sales price and marketing duration. However, relatively few have studied the effect of Megan's Law on sales price and none have studied the Law's effect on marketing duration. Additionally, previous studies have examined the effect of sex offenders in primarily urban settings."

Two previous studies cited by the researchers were in the greater Charlotte, N.C., area and Tampa, Fla. "This paper fills the gap in the literature by estimating the effect a nearby sex offender's residence has on its surrounding real estate market in relatively rural areas of central Virginia," the study says. "We find a substantial difference between our estimates of a sex offender's impact in rural areas compared to the estimates in studies of urban areas, suggesting a fundamental difference between rural and urban areas in values placed on crime risk imposed by nearby sex offenders."

"This study finds that central Virginia home sellers must absorb a relatively large risk premium when selling property near a registered sex offender. Alternatively, home buyers are willing to pay a premium to live in safer areas. The qualitative result is not surprising and is entirely consistent with previous findings in similar studies. However, the quantitative result reveals an economically large difference between the risk premium associated with sex offenders in a rural area like central Virginia versus urban areas like Charlotte and Tampa.

"Moreover, our analysis of marketing duration suggests that homes located near registered sex offenders take longer to sell, signifying a general reluctance to purchase properties exposed to such risks. Certainly, no one wants to live near a registered sex offender, but empirical results indicate that the more tightly knit communities of central Virginia are willing to pay more to avoid such a risk. This study's results are consistent with the notion that residents in rural areas consider larger areas when defining who constitutes a 'neighbor' and assessing subsequent risks."

Since being posted May 30 on the Social Science Research Network (SSRN) web site, the paper has been downloaded 50 times and viewed 188 times (as of Aug. 6). For three weeks in July and August, it has been listed on the SSRN's Top 10 download list for three categories. The paper was presented at the American Real Estate Society meetings in April 2010 in Naples, Fla., and it has been accepted to be presented at the American Real Estate and Urban Economics Association meetings in January 2011 in Denver. It also will be presented at an economics seminar at the Federal Reserve Bank of Richmond in September. Newspaper articles about the study have appeared in the Washington Examiner and the Richmond Times-Dispatch.

"We started this project to determine whether location near a sexual offender was another element of real estate values and whether it would have measurable effects on real estate outcomes," said Waller. "We are gratified that industry practitioners and academic researchers find our analysis to contain valuable insights."