Nowhere in the idyllic world of the American Dream is the quintessential family’s fully-furnished ranch style surrounded by a white picket fence and also listed as “conveniently located next to a strip club.”
But in real life, agents handling client objections to properties near “sexually-oriented businesses” might actually be in luck.
A new study has concluded that strip clubs don’t put any downward pressure on home values. The conclusion undercuts legal doctrine that municipal governments have used to justify placing zoning restrictions on strip clubs and other sexually oriented businesses.
Seattle: an ideal research opportunity
The study conducted by three economists at West Virginia University and the University of Wisconsin-Lacrosse analyzed more than 300,000 home sales in Seattle between 2000 and 2014.
An 18-year moratorium on new strip clubs (starting in 1988, and lifted in 2006) presented a unique opportunity in the city to measure how these establishments’ arrival in or departure from neighborhoods impacted property values.
The basis for the study was as follows: “The relationship between the City of Seattle and local strip clubs is tumultuous, at best. For more than 20 years, the city limited the number of strip clubs in operation using various forms of bans, ordinances and zoning regulations.
“One reason the City of Seattle took these actions was to prevent a decline in property values due to possible negative externalities, or ‘secondary effects’ generated by the presence of strip clubs in local neighborhoods.”
It also noted that the circumstance in Seattle — attempts by municipal bodies to regulate strip clubs — “mirrors conditions in the rest of the country,” and that the negative “secondary effects” of strip clubs on neighborhood quality have been cited in four United States Supreme Court rulings, based partly on the testimony of real estate agents.
The research set out to either confirm or debunk this sentiment. But why focus on property values specifically?
The authors noted it that this choice was strategic: “Property values represent an improved approach for generating evidence about the importance of ‘secondary effects’ of SOBs compared to crime data, since real estate transactions prices reflect market valuations of residences, and not the many factors that can affect crime rates,” they said.
Findings: no basis for property value loss
The study found no empirical evidence that strip clubs drive down home prices, as property values in Seattle neighborhoods near the opening or closing of an establishment did not change in value per the study’s findings.
Specifically, “despite claims based on anecdotal evidence … the systematic evidence generated here does not support the idea that strip clubs in Seattle generated any ‘secondary effects’ in terms of negative impacts on nearby residential property values,” the authors wrote.
This new information could be a useful point of reference for agents whose clients may have reservations about a home due to their proximity to these businesses. And it also underscores the possibility that some assumptions about the impact of certain neighborhood attributes on home values may be flawed.
“The results imply that sexually oriented businesses are not a local disamenity in real estate markets, which runs contrary to ‘popular wisdom,'” said Brad Humphreys, one of the authors, in an email to Inman. “Prospective buyers are not likely to be turned off if they drive by a strip club on the way to see a property.”
“And a seller does not need to discount [his or] her asking price when putting a property on the market because a strip club is located nearby. The presence of these businesses in the area does not have any effect on the sale price of nearby homes.”
But, the study concluded, “while regulators may decide to limit SOBs [sexually oriented businesses] on moral grounds, this research contributes evidence disputing claims that negative economic impacts justify regulation or elimination of SOBs in urban areas.”
Along the same line, a client’s moral objections or concerns about loud music would perhaps fail to be swayed with the citation of a study about property values. But for those with money on their mind simply thinking long-term about appreciation, it could be useful to know.
The study adds to existing research that’s established links between certain neighborhood attributes and home values, including the positive impact of access to top-performing schools and the negative impact of proximity to sex offenders.
Editor’s note: This story has been updated to expand on the basis of the study and its conclusions.
