Valuation of education and crime neighborhood characteristics through hedonic housing prices

This article studies households' valuation of neighborhood amenities through analysis of housing as a bundle of structural and neighborhood characteristics. Using statistical techniques, hedonic prices, or incremental values in the market, can be imputed to each element of the bundle. Twelve variables describe neighborhood crime; twenty-one variables describe neighborhood schools. Together with structural variables, they significantly and substantially explain house prices in the Baltimore metropolitan area. The technique is also shown to provide a market framework for approximating the benefits of localized neighborhood improvements.The authors wish to thank David Puryear, Ralph Taylor, and the two anonymous referees for their helpful comments on earlier drafts of this paper. We also thank Central Maryland Multiple Listing Service, the Baltimore City and Baltimore County Police Departments, and the Johns Hopkins Center for the Social Organization of Schools for house price, crime, and education data. None of the people or organizations listed is in any way responsible for the analyses or conclusions presented. Requests for reprints should be addressed to Dr. Allen C. Goodman, Center for Metropolitan Planning and Research, The Johns Hopkins University, Baltimore, MD 21218.