Casinos, Crime, and Real Estate Values: Do They Relate?

Abstract

This study analyzes the effect of a new large export-based industry on crime in its region, and in turn on property values. Urban economic models suggest that, ceteris paribus, land values diminish with distance from a central place which “produces” employment, income and other amenities. The new industry has the negative byproduct of crime, which is hypothesized to have a reversed, although systematic effect, on land values. Thus, theoretically, the net effect of (dis)amenities as a function of distance from the central city is ambiguous. Applying the model to casinos in Atlantic City shows that the frequency of violent crimes, burglaries, and robberies diminish with distance and appear to have a depressing effect on property values especially in localities accessible to the central city. The negative effect of crime diminishes with distance. The effect on property values appears to be significantly higher in the postcasino relative to the precasino era. However, the positive effects of the central city on real estate values diminish with distance. Thus development and crime affect property values inversely as a function of distance. The discounted value of the cost of crime resulting from casinos, as reflected in unrealized assessed real estate valuation, appears to be on average 24 million dollars per square mile in the 12 accessible localities, and 11.2 million dollars per square mile in the 52 less accessible localities.