What's in a Label? On Neighbourhood Labelling, Stigma and Housing Prices

In an attempt to identify local areas at risk, the Swedish police classifies a selected set of marginalised neighbourhoods as ``vulnerable''. The classification, first used in 2015, spurs a lot of public debate, and have been hypothesised to shape the perception of localities, potentially stigmatising neighbourhoods. We study the short to long term effect on housing prices (up to six years) of the initial classification. Implicitly, we thereby study the effect of assigning negative labels to neighbourhoods, something that we believe is often an inherent part of area-based policies. Using the synthetic control method, we find that being labelled as vulnerable caused average housing prices in the designated neighbourhoods to drop with around 3.7% in the short run and about 6.5% in the long run. In line with ideas of racial stigma, we also find that areas with a larger share of minorities (pre-classification) where more negatively affected.