If ever there were a third rail of residential real estate, it would have to be the topic of crime. The radioactive issue and its relationship to residential real estate has been a troubling topic for agents for decades. But how is it impacting the bottom line now?

It’s an issue that is so sensitive the federal Fair Housing Act establishes parameters for how brokers can discuss it with their clients. And while prospective home buyers have always asked questions about the safety of the area they’re considering moving to, the topic has become even more prevalent since the onset of the coronavirus pandemic that helped spawn a nationwide surge in crime.

Whether or not rising crime rates are impacting sales on a large scale is difficult to ascertain — some markets, such as luxury condos along the Magnificent Mile in Chicago, for example, have taken an undeniable hit — but brokers in markets across the country give mixed responses when asked whether it’s hurting their bottom line. The economic impact of crime on real estate is even more difficult to pinpoint in the current market, when many residential brokers are enjoying the best years of their careers.

Broaching a delicate subject

The aforementioned Fair Housing Act guidelines aim to prevent “steering,” a term used to describe agents who encourage buyers toward — or more importantly, away from — communities based on race, religion and a number of other protected classes.

But the issue is just as relevant now as it was when the federal law was passed in 1968. Case in point: The online brokerage Redfin, along with Realtor.com, announced in December the decision to remove neighborhood crime data from their websites. Trulia, a subsidiary of online broker Zillow, also pulled its crime data about a week later.

Redfin Chief Growth Officer Christian Taubman wrote in a Dec. 13 press release that the data available fails to paint an accurate picture for consumers and could result in discrimination, and that “given the long history of redlining and racist housing covenants in the United States there’s too great a risk of this inaccuracy reinforcing racial bias.” The change comes at a time when some municipalities have reduced funding to police departments in response to widespread protests opposing police brutality. Despite efforts to curb housing discrimination, neither the federal law nor the dwindling sources of information available online have reduced questions from home buyers.

Less than two months prior to announcing the decision, Redfin released a survey showing that crime is the No. 1 issue for home buyers. Half of survey respondents who moved between the beginning of the pandemic and mid-August 2021 said crime factored into their decision.

John Ford, broker/owner of Ford Realty in Boston, said he often receives questions about crime but, citing the Fair Housing Act rule, is careful not to characterize the level of safety, or lack thereof, in the neighborhoods where he works. Instead, he advises clients to search the internet for local crime stats on their own.

“I always advise Boston condo buyers to do their due diligence if they’re concerned about crime activity,” he wrote in a blog post on his company website. “Car theft/break-ins, muggings, assaults and burglaries are unfortunately incidents that happen in all Boston neighborhoods.”

He said in a telephone interview that while many considering buying in Boston aren’t deterred by the crime rate, he does see the effect local crime news coverage has on some home buyers, particularly empty nesters considering downsizing or buying a second home in the city.

“I think if they’re hearing negative news on crime, it does have an impact on the real estate values,” he said. “Empty nesters don’t want to move into a crime-ridden area.”

A city with a reputation

The topic of crime might be a little easier for brokers like Ford, who operates in a large municipality that regularly bucks national trends on crime. In the first half of 2021, homicide was down nearly 30% in Boston, and Part 1 crime, which, along with homicide, includes rape, robbery, burglary and other serious crimes, had dropped 17%, according to a report in The Boston Globe.

It’s a different story in cities like Chicago, where serious crimes have spiked in recent years. Matt Laricy, managing broker of The Matt Laricy Group, a division of Americorp Real Estate, works largely in the upscale River North area of downtown Chicago. He says the jump in crime has driven clients away from the area. “I hear all day long, ‘We’re moving because of crime,’” he said.

The luxury condos he specializes in took a big hit at the beginning of the pandemic, but Laricy said buyers are starting to return. It’s not just the rise in crimes like carjacking and homicide that have fueled buyer concerns, but also the public demonstrations that resulted in looting and millions of dollars in property damage in 2020, according to Laricy.

“If you push things too far, it can go to a certain point where it can’t be saved,” he said in August 2020 when the city was reeling from the destruction they were seeing in their communities. “If you have something happen like that again, I don’t think Chicago can come back.”

Laricy contends now that the industry should press elected officials to increase police presence throughout the city. “It’s a simple thing to fix, but it’s not popular to say that right now,” he said.

Marla Forbes, an @properties agent who works primarily in the affluent Gold Coast neighborhood of Chicago, said it’s not just crime, but also high taxes that are driving people away from Chicago, particularly those nearing retirement. “I think if they’d considered having a part-time place in Florida, Texas or Arizona, they decided on making that their full-time home and maintaining a second home in Chicago,” she said.

Crime might have sped up or influenced that decision, she added. Unlike Laricy, though, Forbes said she doesn’t often hear a lot about crime from clients. “People who want to live in the city are still looking in the city,” she said.

Forbes added that the flight to the suburbs of Chicago after the pandemic was driven in part by an oversupply of homes. “The city was and still is such a vibrant, interesting and exciting place to live, many were forgoing a move to suburbs and staying put and buying townhomes in the city, so there was an oversupply in many of the suburbs” she said. “Properties were just sitting in Highland Park and Lake Forest, in particular.”

Should I stay or should I go?

Crime rates have also spiked in Atlanta, prompting the city most recently to form a new police precinct in the high-end Buckhead community. It comes at a time when many in the affluent neighborhood are pushing to separate from the city of Atlanta and establish their own municipal government.

The newly elected mayor, Andre Dickens, announced the opening of the new precinct on Jan. 13, stating, “The most important issue for any mayor is to keep our cities safe and its residents safe. It is a paramount concern to me to stop this crime wave that we have in our city,” according to an article in the Atlanta Journal-Constitution.

Anthony Acosta, an associate broker with Harry Norman, REALTORS®, who specializes in luxury condos in and around Atlanta, attributes the rise in crime there to the pandemic-driven economic downturn.

“I grew up in New York, and I’ve lived in other big cities in other countries, and normally, in big cities, when you have issues with the economy, you tend to see crime rates go up,” he explained. “It’s just a factor of living in a big city.”

He said that home buyers should consider the larger perspective. “It’s a nationwide thing. People see in the news shootings and crime in Buckhead, and they take it as, ‘This is my neighborhood,’” he said. “But it’s not just in Buckhead — it’s everywhere.”

Acosta’s business has not slowed down as a result of increased crime in the area, but he said he has seen it hurt others in the industry. Questions about crime are more common these days than even a few years ago, he said.

But like Ford in Boston, Acosta said he won’t discuss the topic with home buyers. “I try to stay neutral, because I have to be careful what I say. I tell people that it’s part of living in a big city and direct them to go online to do their own research,” he said.

To the suburbs … and beyond

Matt Silver, a partner and broker with Corcoran Urban Real Estate in Chicago, said that crime has driven some buyers away from the city, but only about one out of every 10 of his clients voice a concern. It’s not just crime, though, according to Silver. He said the migration to the suburbs was fueled in part by low interest rates and the ability to work from home. Some clients moved a few years earlier than they’d planned, Silver said.

Forbes also said she saw an initial flight to safety at the beginning of the pandemic, but that the market has since stabilized. “I think that when the pandemic hit and the civil unrest hit, a lot of people panicked, and it drove sales in the suburbs and southwest Michigan was on fire,” she said.

But buyers weren’t just leaving for greener pastures a short drive away from the city. That exodus has involved many leaving the state entirely, according to Kim Offord, managing broker and district director of Fathom Realty.

Offord, who works in Chicago’s Chatham neighborhood on the South Side, said people are leaving in part because of the work-from-home trend and states like Texas giving homebuyers better deals. While violence nationwide is driven in part by a struggling economy, she believes that in Chicago it’s also because of a lack of investment in economically depressed communities.

Large retailers like Target and Walgreens closed up shop on parts of the South Side prior to the pandemic and public demonstrations condemning police brutality, but no businesses are coming in to take their place, she said.

“People are tired of not having anything in their communities; we shouldn’t have food deserts or have to go two miles just to go to a drug store,” she said. “We’re seeing the wrong kinds of businesses open up like liquor stores and pawn shops. That damages the walk score and brings down property values.”

 

A downward spiral?

The departure of residents due to crime can have a snowball effect when a reduction in property tax revenue makes it even more difficult for officials to protect a municipality, Redfin Chief Economist Daryl Fairweather said in late October in the survey that showed crime was the most important factor to homebuyers.

 

“Cities historically have been able to attract residents looking for high paying jobs, but now that remote work is ubiquitous, some may have to work on improving safety and other quality of life factors to retain and attract residents,” Fairweather wrote. “This might be an uphill battle, because as wealthy residents leave, they take tax dollars with them, leaving cities with less resources to address safety concerns for remaining residents.”

 

Laricy said he’s also concerned that crime and demonstrations that result in looting will hurt the city’s sales tax revenue, noting the large portion of the sales tax base the Mag Mile contributes to the city.