DP16272 Opioid Crisis and Real Estate Prices

Author(s): Cláudia Custódio, Dragana Cvijanovic, Moritz Wiedemann
Publication Date: June 2021
Keyword(s): opioid, Prescription Opioids, Real estate prices
JEL(s):
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16272

This paper estimates the impact of opioid abuse on real estate prices. We exploit the variation in opioid prescriptions induced by the staggered passage of state laws intending to limit the abuse of opioids. We document a long-term negative relationship between opioid prescriptions and residential real estate prices. For a one standard deviation change in prescriptions we find a 1.36 percentage points change in home values over the following 5 years. We also estimate a positive increase in home prices of 0.54 and 0.91 percentage points respectively in the first and second years following the passage of these laws. One im- portant factor driving this relationship are changes in mortgage delinquency rates. Overall, our results are consistent with opioid abuse having significant long lasting negative economic effects that are mitigated if opioid supply is limited.