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This study reports a finding of a significant effect on the selling price of a single-family house given its proximity to a registered sex offender's residence. The effect is an increasing function of proximity that varies with offender classification and with the community notification system employed. For more dangerous offenders, the effect is significant for houses located up to 0.3 mile from an offender. Houses located within 0.1 mile of an offender sold for 17.4 % less, on average, than similar houses located farther away. For less dangerous offenders, the significant effect extends to 0.2 mile from the offender's residence, and the effect is smaller.
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Real estate literature is rich with papers reporting the results of studies conducted to determine the effect of externalities on housing value. (1) While the list of previously examined externalities is extensive, a notable exception is the proximity of the residence of a registered sex offender to the subject property. La Fond (2) has shown that the direct and indirect costs of enacting and implementing sexual predator laws are expensive for the public at large. Whether an additional monetary burden must be borne by property owners in close proximity to an offender's residence, however, has not been investigated. Relatively recent additions to the law facilitate an examination of this issue and enable us to begin filling this gap in the literature. In 1996, Congress passed "Megan's Law," (3) which required states to enact laws governing sex offender registration and community notification. Today, every state has complied with the federal requirement and has laws that require offenders to register with police (or a government agency) and specify how registration information is released to the public.
In this study, single-family house transactions that occurred during 2000 in Montgomery County, Ohio, are examined to determine the effect on selling price given the house's proximity to the residence of a registered sex offender. A significant effect was discovered. The effect is an increasing function of proximity that varies with the community notification system employed. Where limited disclosure was employed for more dangerous offenders, the negative effect extends to 0.3 mile from an offender's residence. Compared to comparable houses located farther away, houses located within 0.1 mile of an offender's residence sold, on average, for 17.4% less. Where passive notification was employed for relatively less dangerous offenders, the negative effect was significant for houses located up to 0.2 mile from the offender. Compared to comparable houses located farther away, the houses located within 0.1 mile of an offender's residence sold, on average, for 7.5% less. The results suggest that when appraising a single-family house, appraisers may want to place more reliance upon the cost approach and/or include an appropriate adjustment to a comparable's sale price when using the sales comparison approach.
This article first describes the systems for sex offender classification and public notification employed in Ohio during the study period. Next, the pricing implications of both the categories of sex offenders and the notification systems are described. Then the data and methodology are presented along with a brief explanation of the geocoding process used to determine the distance between each sales transaction and the nearest offender's residence. Finally, the results and their implications for appraisers are discussed.
Sex Offender Classification and Community Notification in Ohio
Courts in Ohio classify sex offenders into one of three categories: "sexual predator" "habitual sex offender," or "sexually oriented offender." The classification depends on the history of the offender and the court's opinion of the likelihood that the offender will commit another offense. All convicted sex offenders in Ohio are required to register with the sheriff's office in the county in which they reside. While members of any category may cause public concern, sexual predators are deemed to present the greatest risk to the community. In Ohio, a sexual predator is defined as a person who has been convicted of, or pleaded guilty to, a sexually oriented offense and who is considered likely in the future to commit additional sexually oriented offenses (4) A habitual sex offender is defined as a person who has been convicted of, or pleaded guilty to, committing a sexually oriented offense, and who has previously been convicted of or pleaded guilty to one or more sexually oriented offenses. (5) Finally, a sexually oriented offender is defined as a person who has been convicted of, or pleaded guilty to, a sexually oriented offense. (6)
Ohio law specifies that each county sheriff's office must follow a practice sometimes referred to as "limited disclosure," i.e., proactive notification that applies only to sexual predators and some habitual sex offenders. Under this system, the sheriff's office must notify a variety of parties within 72 hours after the sexual predator or habitual sex offender moves into a residence. Parties that are notified include owners of houses adjacent to the offender's residence and school officials (who in turn sometimes notify the parents of students). Interested parties may also learn about sexual predators and habitual sex offenders through two "passive notification" mechanisms. In some counties (including the sample county here), information about predators may be viewed over the Internet on the sheriff's office web site. In addition, interested parties may personally request information about sex offenders (in any category) from the sheriff's office. Passive notification is the disclosure system used for sexually oriented offenders and some habitual sex offenders. Under this system, interested parties must initiate contact with the sheriff's office to discover the location of an offender's residence.
Effectively, there are four categories of offenders in Ohio: (1) sexual predators where limited disclosure applies, (2) habitual sex offenders where limited disclosure applies, (3) habitual sex offenders where passive notification applies, and (4) sexually oriented offenders where passive notification applies. For the purpose of this study, however, sex offenders were divided into two groups based on the disclosure procedure: (1) sexual predators and habitual sex offenders where limited disclosure applies, and (2) sexually oriented offenders and habitual sex offenders where passive notification applies. Meaningful analysis based on offender classification is problematic in the present study because there are only six habitual sex offenders in the database.
Price Implications of Offender Classification and Notification Systems
Intuitively, it would appear that if a house is located in close proximity to a sex offender, selling price effects should be negative. Few people would elect to live next door to a felon of any type. Although convicted arsonists and murderers also may pose a risk to a community, current law makes it easier for market participants to identify the location of sex offenders and build that information into transaction prices. (7) Recidivism by sex offenders is well documented in the literature. (8) Analysis of data collected by the United States Department of Justice (DOJ) suggests that proximity to a sex offender's residence increases one's risk of becoming a victim. Approximately every five years, DOJ administers a comprehensive questionnaire to a nationally representative sample of prison inmates. Sex offenders accounted for 8.5% of state prisoners included in the most recent survey, the 1997 Survey of Inmates in State Correctional Facilities (9) The results indicate that while sex offenders commit their crimes over substantial geographic areas, they tend to perpetrate their crimes close to home. Sex offenders reported that 85.1% of their crimes were committed in the same city in which they resided at the time of arrest (compared to 80.2% for other offenders), and 64.9% of sex offenders reported committing their offense in their own neighborhoods (compared to 44.6% for other offenders), (10)
It is plausible that larger price discounts would be associated with the proximity of a house to a more dangerous offender compared to proximity to a less dangerous offender. It also is reasonable that larger discounts would be associated with a notification system where government authorities take an active role in the process compared to a system where they do not. No published studies, however, have documented that the public recognizes or fails to recognize the difference between offender classifications. Therefore, it is uncertain whether the public distinguishes between offender classifications, and whether any differences in selling price discovered here are due to the relative risk posed by the offender or due to the notification system employed. If the public does not distinguish between offender classifications, any selling price difference attributed to difference in offender classification should disappear when the same notification system is used for all offenders.
A selling price results from the negotiations between the seller and buyer. The presence of an offender may motivate owners to accept a low offer to consummate a sale, and the model employed here will capture that effect. However, in order to estimate the actual selling price effect of proximity to an offender, both price and marketing time should be investigated because, from the seller's perspective, extra time on the market lowers the present value of the selling price. Unfortunately, the transaction data set used in this study does not include reliable time on the market information. (11) Because marketing time is not included in the model used in this study, the selling price effect discovered may understate the effective selling price effect. In fact, if a sufficient number of owners wait for an undiscounted offer, failure to include time on the market would make it impossible to detect any selling price effect. While knowledgeable buyers may refuse to bid on a house located in close proximity to an offender's residence, or may lower their bid, the price offered by uninformed buyers will be unaffected. Therefore, without time on the market in the model, if almost all owners are willing to search until an uninformed buyer is located, no selling price effect should be detected.
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