Foreclosure Externalities and Vacant Property Registration Ordinances

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 speci�cation to overcome policy endogeneity concerns, and we �nd that the enactment of VPROs in Florida more than halved the negative externality from foreclosure. This �nding is robust to a rich set of time-by-location �xed 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 falsi�cation 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.