Harm reduction or amplification? The adverse impact of a supervised injection room on housing prices

A medically supervised injecting room (MSIR) —a facility for the safe injection of illicit drugs—is an example of a harm reduction approach against opioid epidemics. An economic theory of moral hazard suggests that such a facility can intensify drug use by reducing the risk of lethal overdose, mediating an increase in crime, death, and nuisance behavior, thus, depressing local urban development. Beyond that, negative media coverage can generate similar adverse outcomes even without any factual drug intensification. Accordingly, using non-parametric methods and spatial double and triple difference design on the data from Victoria, Australia, we show that the MSIR's opening causes around 5%–7% reduction in housing value. We conclude that the harm reduction approach can have nontrivial indirect costs outside health domains.