Foreclosure Externalities and Vacant Property Registration Ordinances

41 Pages Posted: 4 Dec 2019

See all articles by Arnab Biswas

Arnab Biswas

National Institute of Technology Karnataka (NITK), Surathkal

Chris Cunningham

Federal Reserve Bank of Atlanta

Kristopher Gerardi

Federal Reserve Bank of Atlanta

Daniel Sexton

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Date Written: 2019-12-01

Abstract

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.

Keywords: mortgage default, foreclosure, externality, policy, vacancy

JEL Classification: H23, K25, R28, R52

Suggested Citation

Biswas, Arnab and Cunningham, Chris and Gerardi, Kristopher S. and Sexton, Daniel, Foreclosure Externalities and Vacant Property Registration Ordinances (2019-12-01). FRB Atlanta Working Paper No. 2019-20. Available at SSRN: https://ssrn.com/abstract=3498054 or http://dx.doi.org/10.29338/wp2019-20

Arnab Biswas (Contact Author)

National Institute of Technology Karnataka (NITK), Surathkal ( email )

NITK Surathkal, P.O. Srinivasnagar
Dakshina Kannada District
Mangalore, Karnataka 575025
India

Chris Cunningham

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Kristopher S. Gerardi

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States
404-498-8561 (Phone)

HOME PAGE: http://sites.google.com/site/kristophergerardishomepage/

Daniel Sexton

Federal Reserve Banks - Federal Reserve Bank of Atlanta

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