Crime, house prices, and inequality: the effect of UPPs in Rio

Frischtak, Claudio; Mandel, Benjamin R.

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Crime, house prices, and inequality: the effect of UPPs in Rio

Abstract: We use a recent policy experiment in Rio de Janeiro, the installation of permanent police stations in low-income communities (or favelas), to quantify the relationship between a reduction in crime and the change in the prices of nearby residential real estate. Using a novel data set of detailed property prices from an online classifieds website, we find that the new police stations (called UPPs) had a substantial effect on the trajectory of property values and certain crime statistics since the beginning of the program in late 2008. We also find that the extent of inequality among residential prices decreased as a result of the policy. Both of these empirical observations are consistent with a dynamic model of property value in which historical crime rates have persistent effects on the price of real estate.

Keywords: amenity value; real estate; wealth distribution;

JEL Classification: K42; O15; R30; O18;