Police report on “vulnerable areas” affect housing prices

Since 2015, the Swedish law enforcement label some neighborhoods as “vulnerable areas”. These police reports have received significant attention in both political debate and the media. When a residential area is listed as “vulnerable” by the police, it affects how the area is perceived, which in turn leads to a negative impact on housing prices, according to a new study published in Regional Science and Urban Economics.

“Many commentators have long argued that the lists can stigmatise and negatively affect the areas. Until now, this has primarily been a hypothesis. Our empirical study shows that this claim is also supported by the data. In the long run, this can also potentially have consequences for the individuals living in these areas. For example, previous studies from the US show that people living in areas with a bad reputation have more difficulty entering financial agreements. Such effects are, of course, also possible in a Swedish context,” says Henrik Andersson, Researcher in Economics at IBF and one of the co-authors of the article.

The police have published reports listing around sixty areas as “vulnerable”, “risk areas”, or “particularly vulnerable”. A neighbourhood is classified as vulnerable when it has a low socioeconomic status and when criminal activity exerts a negative influence on the community and local public institutions. If the area also meets additional criteria—such as widespread reluctance among residents to cooperate with the police or the presence of parallel societal structures—it may be designated as an especially vulnerable area. Many municipalities actively work to improve vulnerable areas with the goal of removing them from the list. This shows that the police list has a significant impact on how different residential areas are perceived.

One way to study how an area’s reputation is affected by being on the police list is to examine the average sale prices of homes. The study finds a negative effect on prices both in the short and long term. In the first year after an area was added to the list, prices fell by an average of 3.7 per cent compared with expected levels. After six years, flat prices had dropped by an average of 6.5 per cent. The decline varies between areas, with some remaining unchanged and others experiencing substantial drops.

“We interpret the decrease in housing prices as the listing reducing demand for homes in these areas on average. The exact reason why the effect varies between areas is not clear. One factor that seems to have mattered is the extent to which local media reported on the listing,” says Henrik Andersson.