Spillover effects of accessory dwelling unit development

Idil Tanrisever

Regional Science and Urban Economics, 2025, vol. 114, issue C

Abstract: Promoting accessory dwelling units (ADUs), small residential backyard units, is one way that state and local governments have attempted to boost housing supply amid rising housing costs. However, homeowners worry about the impact on property values due to increased population and density. This paper studies the effect of ADU development on neighboring property values using an instrumental variable approach. I find that a 0.5 percentage point increase (the mean ADU concentration over the sample period of 2013–2021) in ADU density leads to a 3% decrease in nearby property prices. The negative spillover effects remain consistent within a 300-meter radius, after which they become statistically insignificant. The results are robust across alternative specifications and samples and the adverse effects of ADUs are more pronounced for properties with smaller lot sizes and those in low- and middle-rent neighborhoods. I provide evidence that ADU growth contributes to neighborhood externalities, including increased parking citations, domestic violence reports, illegal dumping, and neighborhood service requests, while showing no significant effects on overall or property crime.

Keywords: Accessory dwelling unit (ADU); Housing supply; Land use policy; Spillover effects (search for similar items in EconPapers)
JEL-codes: D62 R21 R31 R52 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:114:y:2025:i:c:s0166046225000535

DOI: 10.1016/j.regsciurbeco.2025.104136

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