The Impact of the 2020 Riots on American Property Issues

December 13, 2020
Antonio Flores

Due to certain events in recent history, there has been a wave of crime and riots hitting American cities. This wave has been one of the most sudden in American history and likely has much to do with the combination of the post-coronavirus lockdowns and the events following the death of a black man in police custody in Minneapolis, Minnesota. These riots have caused over a billion dollars in property damage, and the sea change in the cities’ environment has forced businesses to adapt. If someone’s property has burned down, the owner will be understandably reluctant to continue paying the mortgage. Because of this, it is crucial for the American mortgage market to understand the impact of the June 2020 riots upon the American business environment.

In thirty-six out of the largest 50 cities in the USA, the homicide rate has increased by double digits since the end of May. This increase in crime makes keeping businesses open far less safe, which leads to shorter hours open, as businesses don’t want to be the last open. In addition, businesses in neighborhoods with higher crime are forced to incur additional expenses, as they must take additional security precautions to repel criminal activity such as adding bars to windows and security systems.

Another problem with widespread rioting is the insurance-related effects. This wave of riots was the first multi-state wave of rioting on record for many insurance companies. Previous riots such as the ones in 1992 and 2012 were regionally confined; the George Floyd riots started in Minneapolis and spread across the country. Because of this, riot insurance premiums will permanently increase across the nation, because insurers never know if there will be another multi-state wave of riots, but they know now from experience that it is possible. The riots of 2020 have increased insurance premiums for businesses across the nation.

To conclude, the 2020 riots have caused many changes in the landscape in which businesses operate. The rise in crime rates, the frequent inability of insurance to pay, and the riots have caused urban areas to become more inhospitable to businesses across America. As such, businesses in these areas tend to close at higher rates, and fewer new businesses will emerge. Mortgage lenders will need to take this information into account when assessing the US mortgage market, as migration, in this case caused by the riots, affects the geographic distribution of the commercial and residential real estate being sold.

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