The capitalization of crime in the city of real estate

This article explores how the relationship between crime and property values is reshaped by the transformation of houses into investible assets. Departing from neoclassical economics of crime, we introduce the notion of “capitalization of crime” to illustrate how crime is utilized to generate forward-looking financial expectations and shape housing markets in gentrifying neighborhoods. The study, based in Haifa, Israel, combines quantitative and qualitative data to demonstrate how investors and renters each play a role in constructing the value of crime by capitalizing crime in opposite directions. First, using a geographic information system to map crime alongside real-estate prices, we show that the effect of crime on property values is offset by prospects of future gentrification, thereby contributing to housing speculation. Second, using digital ethnography, we show how renters use “crime” to dampen investor expectations, reduce rents, and delay their displacement. Thus, our study adds to the established body of critical criminology, which examines the manipulation of crime for economic and political gains. It further contributes to emergent debates in urban criminology by explicating how the financialization of rental housing is remaking urban politics of crime and criminalization.