Foreclosure Externalities and Vacant Property Registration Ordinances
41 Pages Posted: 4 Dec 2019 Last revised: 29 Apr 2020
Date Written: 2019-12-01
This paper tests the eï¬€ectiveness 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-diï¬€erence speciï¬�cation to overcome policy endogeneity concerns, and we ï¬�nd that the enactment of VPROs in Florida more than halved the negative externality from foreclosure. This ï¬�nding is robust to a rich set of time-by-location ï¬�xed eï¬€ects, limiting the sample to properties within 0.1 miles of a VPRO/non-VPRO border and to a number of other sample restrictions and falsiï¬�cation exercises. The results suggest that an important driver of the negative price eï¬€ect of nearby foreclosures is a non-pecuniary externality where the failure to maintain or secure a property aï¬€ects one's neighbors.
Keywords: mortgage default, foreclosure, externality, policy, vacancy
JEL Classification: H23, K25, R28, R52
Suggested Citation: Suggested Citation