Ms Stephen, who had a partner Mark Ryder, 35, and eight-year-old son, grew up in Liverpool but was living in Skelmersdale when she went missing.
The body parts were found just yards away from the West Everton and Breckfield Children's Nursery and Liderton Court Residential Home for the Elderly.
People living near to the scene said they had been fearing such a tragedy for some time.
Mum-of-two Michelle Mahoney, 32, said: "In the last couple of years there have been more and more prostitutes around here.
"It is not very nice to live here with so many of them about and you would think the police would have moved them away from where people live.
"Every morning when I take the kids to school I see them walking along and it is not nice to have to explain what they are doing to your kids.
"You read about prostitutes getting murdered and with so many of them around here we have just been waiting for something like this to happen and now it looks like it has done. My heart goes out to her Mum."
Bricklayer Michael Flaherty, 28, added: "I just hope something is done about this problem now because no one wants this on their doorstop.
"Everyone is worried about prostitutes but now we have a murderer to worry about as well."
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