It’s high time the real estate industry started to talk about marijuana. A new study from Clever Real Estate reveals the true impact legalizing marijuana has on local housing markets.
Opponents of legalizing marijuana argue that legalization leads to elevated crime rates. In the real estate world, higher crime rates lead to lower property values and poor investments, so we needed to get to the bottom of this debate.
Does legalization lead to budding industry or stoned cold housing markets?
Here are the takeaways you need to know.
Key insights:
● Between 2014 and 2019, cities that allowed retail dispensaries saw home values increase $22,888 more than those where marijuana remains illegal
● CATO research supports these findings, suggesting homes close in proximity to marijuana retail dispensaries tend to increase in value
● For cities where only medicinal marijuana is legal, home values increased at a comparable rate to cities where marijuana is illegal; a statistically significant increase in home values could not be attributed to medicinal marijuana legalization
● States that legalize recreational cannabis usage, however, see an immediate bump in home values following legalization – even before retail dispensaries begin to pop up
● From 2017 to 2019, cities that legalized recreational marijuana usage saw home values increase $6,337 more than those where marijuana is illegal
Our findings show that in cities where recreational marijuana has been legalized, home values increase at higher rates than in those where marijuana is illegal or only legal medicinally.
Additionally, between 2014 and 2019, cities that allowed retail dispensaries saw home values increase $22,888 more than those where marijuana remains illegal. These insights are consistent with findings from the CATO Institute; homes closer to retail dispensaries are approximately 8.4 percent more valuable than those further away.
Our study also found that from 2017 to 2019, cities that legalized recreational marijuana saw home values increase $6,337 more than those where it remains illegal. This suggests that housing markets respond immediately to pro-market marijuana legislation.
It's not simply legalizing marijuana that leads to higher home values, but the cannabis businesses that are created from legalization. Our theory is that more businesses are created, resulting in more job seekers flocking to these areas, which leads to an increase in demand for housing.
If there’s a shortage in supply, the home prices jump. This can definitely be seen in states like Colorado and Washington where recreational marijuana has been around the longest.
In the end, recreational marijuana legalization is a huge advantage for homeowners living in progressive states.
Luke Babich is Co-Founder and CSO of Clever Real Estate. Luke is also an active real estate investor with 22 units in St. Louis, and a licensed Real Estate Agent in the state of Missouri.