Will an Idyllic Community Be Stripped of Its Value?

Question: I live in a bedroom community of San Diego that is primarily a family-oriented, beachside community with lots of parks, churches, hiking areas and schools. Last week, a local bar turned into a strip bar. Dancers are not nude, but bikini-clad. How might this affect real-estate prices in this city, especially homes within 500 to 1,000 feet of this establishment?

Ed: As you probably guessed, the effect on values of nearby homes isn't likely to be positive. Few Realtors list "within walking distance of a strip joint" among the desirable features of a home. Sex may sell cars and toothpaste, but it has never done much for real estate.

But just how negative is the effect? I asked Eric Kelly, a vice president of Duncan Associates, an Austin, Texas-based firm that advises municipal governments on zoning laws. Dr. Kelly, who also is a professor of urban planning at Ball State University in Muncie, Ind., says the studies he's reviewed suggest there is "a significant effect" on values of homes within about 500 feet of what is politely known as an adult-entertainment center. A survey of appraisers in the Dallas-Fort Worth area found that they believed the effect could stretch as far as 2,500 to 3,000 feet.

Walter N. Carpenter Jr., an appraiser in Orlando, Fla., says an Oklahoma survey of appraisers reported that 74% of those surveyed found home values dropped within one block of a sexually oriented business and 50% found values dropped within three blocks.

It's very difficult to estimate how large the value effect is in percentage terms, Dr. Kelly says, because there are so many variables. He figures a worst-case scenario would be a drop of around 20%.

The effect is smaller, he says, if residents don't have to pass the strip club regularly on their way to work or school.

Typically, he says, city ordinances ban such clubs from locations within 500 to 1,200 feet of residential areas. Why not make that 2,500 or 3,000 feet? That, says Dr. Kelly, might effectively mean that no locations were available for this type of business, leaving the town open to a successful legal challenge.

Write to James R. Hagerty at bob.hagerty@wsj.com