Now that most localities have registered sex offender lists due to the body of legislation that has come to be Megan’s Law, some research from the NBER points out that if such an offender moves into your neighborhood, the price of your house will take a hit.
The authors estimate that a single offender depresses property values in the immediate vicinity by $4,500 to $5,500 per home. Altogether, the presence of sex offenders has shrunk property values in the County [Mecklenburg] by about $58 million.
Assuming that individuals are reacting to the increased probability of being victimized by a neighboring sex offender, the authors estimate that the victimization costs of sex offenses total more than $1 million per case. That is far in excess of estimates by economists cited in the criminal justice literature. The authors note that this large figure could be driven partially by individuals overestimating the probability of victimization, or by other costs associated with living near a sex offender (such not allowing children to play outside). Either way, Linden and Rockoff conclude there is a great willingness in the public to pay for policies that would shield residents from sexual offenders.
I can believe the “overestimation of probabilities of victimization” as most people are pretty bad at estimating probabilities.
