Despite their widespread use, research on the effectiveness of halfway houses has been largely mixed, with many studies indicating that halfway houses may actually increase likelihood of recidivating rather than reducing it. This study aims to shed light on the relationship between halfway houses and recidivism by focusing on the role of parolee concentration as a mediating factor. Results based on the analysis of all first time parolees released from Pennsylvania State Prisons (n=8,515) indicate that the likelihood of recidivism for parolees transitioning through halfway houses is higher than that for those paroled directly to the street. Analyses on a smaller sample of parolees with geocodable address information (n=5,708) indicate that parolee concentration significantly affects the association between halfway houses and rearrests, but not for reincarceration. Additional evidence points towards significant direct associations between parolee concentration and all recidivism outcomes, with higher parolee concentration within neighborhoods being associated with higher likelihood of recidivism. Interestingly, halfway house capacity (examined only for individuals paroled to halfway houses, n=3,796) was not significantly associated with any recidivism outcome except rearrests within one year of release, and in this case a higher capacity was associated with a lower likelihood of rearrest.