26 Nov Federal Reserve Bank of Atlanta: Foreclosure Externalities and Vacant Property Registration Ordinances
November 19, 2019
Source: Federal Reserve Bank of Atlanta
Foreclosure Externalities and Vacant Property Registration Ordinances (full white paper)
This paper tests the eﬀectiveness of vacant property registration ordinances (VPROs) in reducing negative externalities from foreclosures. VPROs were widely adopted by local governments across the United States during the foreclosure crisis and facilitated the monitoring and enforcement of existing property maintenance laws. We implement a border discontinuity design combined with a triple-diﬀerence speciﬁcation to overcome policy endogeneity concerns, and we ﬁnd that the enactment of VPROs in Florida more than halved the negative externality from foreclosure. This ﬁnding is robust to a rich set of time-by-location ﬁxed eﬀects, limiting the sample to properties within 0.1 miles of a VPRO/non-VPRO border and to a number of other sample restrictions and falsiﬁcation exercises. The results suggest that an important driver of the negative price eﬀect of nearby foreclosures is a non-pecuniary externality where the failure to maintain or secure a property aﬀects one’s neighbors.