This tech can be good if applied to a narrow range of people like you suggest (eg. only searching people who live in neighboring blocks) but nobody is actually doing that. We should pass laws requiring a rigorous analysis of these probabilities for such databases to be used, including a conversation about what rate of false positives we are willing to tolerate. Guardrails should be put in place to enforce those limits. If this is too hard, we don’t have a strong enough handle on this technology to be using it.
Here’s the scenario that scares me the most:
Police identify a suspect using facial recognition. Then puts that person in a lineup for a witness. Of course the witness is going to say “that’s the one!” because the suspect actually looks like the perpetrator. The witness will be sure, the cops will be sure, and a jury will convict. And this scenario is completely determined by the use of the facial recognition database. This will happen unless we pass laws to prevent it.