What is in a label? On neighborhood labeling, stigma and housing prices

Place-based policies that allocate resources to specific areas inadvertently also designate these areas as needing assistance, potentially leading to the development of neighborhood stigma. The common coupling of resource allocation and area designation makes it difficult to measure the stigma effect. However, the Swedish police’s listing of “vulnerable” neighborhoods, initially introduced in 2015, lacked accompanying resources, offering a unique opportunity to examine the isolated impact of place-based policies on stigma. We study the stigma associated with unfavorable area labels through an analysis of how police listings affect housing prices — a reliable measure of location value. Employing the synthetic control method, we find that the list resulted in an average price decrease of 3.6% within one year and 6.5% within six years in the designated neighborhoods. In line with ideas of racial stigma, we also find that areas with a higher proportion of minority residents prior to classification experienced more pronounced negative effects. • Since 2015, some neighborhoods in Sweden are labelled/classified as “vulnerable” by the Swedish law enforcement. • We study effects of being classified as vulnerable on housing prices in the designated areas. • Being listed as vulnerable caused average housing prices within the listed areas to drop by 3,7 % within 1 year and 6,5 % within 6 years. • The effect is relatively larger in neighborhoods with more local media attention and a larger share of foreign-born residents at the time of the listing.