The lasting effects of crime: The relationship of discovered methamphetamine laboratories and home values

This study estimates a household's willingness to pay to avoid the stigma of crime while minimizing concerns of omitted variable bias. By assuming methamphetamine producers locate approximately at random within a narrowly defined neighborhood, this study is able to use hedonic estimation methods to estimate the impact of the discovery of a methamphetamine laboratory on the home values near that location. Specifically, the analysis designates those closest to the site as the treated, while those slightly farther away act as the comparison group. The discovery of a methamphetamine laboratory has a significant effect on the property values of those homes close to the location that peaks from 6 to 12 months after each lab's discovery. The estimates found in this study range from a decrease in sale prices of 10% to 19% in the year following a laboratory's discovery compared to the prices for homes that are farther away but still in the same neighborhood.

► The study examines the impact of a meth laboratory's discovery on local home values.
► Homes in narrowly defined areas are used to minimize omitted variable bias concerns.
► The discovery of a meth lab has a significantly negative effect on the home prices.
► The decrease in price ranges from 10% to 19% in the year following a discovery.