The Impact of Capital on Crime: Does Access to Home and Small Business Lending Reduce Crime Rates in Disadvantaged Neighborhoods?

Charis Kubrin, George Washington University
Gregory D. Squires, George Washington University

ABSTRACT
Lending to disadvantaged neighborhoods has increased while crime has gone down in recent years. Community reinvestment advocates as well as law enforcement authorities have long contended that access to financial services, home ownership, and thriving businesses are critical to neighborhood stability which, in turn, is asserted to be associated with lower levels of violent and property crime. But no systematic research has explored the relationship between lending and crime. This study utilizes national data on home and small business lending with 2000 census and Uniform Crime Report data to measure the extent to which home and small business loans are associated with violent and property crime rates, particularly in minority and low-income neighborhoods, controlling for a number of socio-economic and demographic factors in major metropolitan areas. We also explore the effects of the Federal Community Reinvestment Act on neighborhood crime rates by examining loans made by institutions covered by this Act compared to lenders not uner its jurisdiction. In addition, we determine whether the presence of community reinvestment agreements negotiated by neighborhood organizations and financial instituions reduceds crime rates. This research advances our understanding of the linkages between financial services, neighborhood social organization, and crime. And it offers policy recommendations for community reinvestment and law enforcement initiatives.

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Updated 05/20/2006