Crime as primary barrier to private investment? Perhaps not.

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Michael Lemanski

Michael Lemanski is Director of the Development Finance Initiative (DFI).

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Oak Tree Street #6675The perception of crime may be a barrier to attracting private investment into a distressed neighborhood, but it doesn’t compare to the impact of “ubiquitous litter.” This is the finding from a student survey of community leaders and real estate professionals in one eastern North Carolina town. The ratio of home ownership to rental property normally dictates how “well maintained” a neighborhood feels.  But what are the barriers that prevent  owners from investing in their properties?

Based on results from the student survey (*), it might not be what you expect. Community leaders in town believed that the perception of crime was creating the largest barrier to private investment in a particular neighborhood. This led them to believe that if they could change that perception, they could “fix” this neighborhood.

A group of planning students set out to test these assumptions. The results of a qualitative survey of local residents and a series of interviews with local real estate agents were remarkably consistent and surprising.

The residents were quick to point out that most of the neighborhood residents don’t own their homes and there is no economic incentive for a tenant to repair or improve a house they don’t own. This lack of incentive creates a downward spiral not just on the housing quality but also the look and feel of the neighborhood.

Widespread litter, overgrown lots and vacant properties send a strong signal to potential investors that property values are decreasing along with the desirability/demand to live in the neighborhood. As the concentration of poorly maintained properties increase, it becomes harder and harder for residents or investors to get a positive return on investment for repairs. Property improvements don’t lead to higher rents or sales prices.

In the survey and subsequent interviews, very few respondents or real estate professionals mentioned crime as being a factor in deterring upkeep or investment in the neighborhood.  When pushed, respondents replied that the most important barriers to investing were visible deterrents such as litter and deteriorating properties, which make a first impression and establish the “feel” of the neighborhood.

There are many other factors that can lead to decreasing property values in a neighborhood such as lack of access to amenities (i.e., grocery/drug stores), poor public school options, incidents of crime, decreasing urban population, and deteriorating public infrastructure.  But according to local residents and real estate agents in this town, the largest barrier to property investment is the strong signal sent by the “ubiquitous litter” strewn about the neighborhood.  There is not enough “ownership” in this neighborhood to justify making investments.

*Survey conducted by Christy Raulli, Master’s in City and Regional Planning candidate at UNC Chapel Hill in the fall of 2009.

Michael Lemanski (7 Posts)

Michael Lemanski is Director of the Development Finance Initiative (DFI).


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