“Not in My Backyard”: The Effect of Substance Abuse Treatment Centers on Property Values

Abstract

Residential treatment centers offer the most intense form of treatment for substance abuse and are often embedded in residential neighborhoods. As a result of the Patient Protection and Affordable Care Act, the number of treatment centers has been forecasted to burgeon. We examine the external effect of residential rehab centers on nearby real estate. As addiction treatment centers are planned, a common response of nearby property owners is ‘‘not in my backyard’’ (NIMBY). Using a large MLS dataset from central Virginia, we estimate the impact of substance abuse treatment centers on nearby home prices and liquidity (as measured by time on market). We find that a neighboring treatment center is associated with an 8% reduction in nearby home prices, and that this discount is magnified for treatment centers that specifically treat opiate addiction (as much as 17%).