April 19, 2019
Mention the words “pot” and “housing,” and what might come to mind are older teens and young adults, sitting in their parents’ living room (without the parents’ knowledge), and toking on joints or off bongs. However, research from Clever Real Estate, entitled “Marijuana Legalization’s Impact on Home Value,” examines states that legalized pot for medicinal and recreation uses, and how that legalization is impacting home values.
The perception, at this point, is that legalization of recreational marijuana leads to higher crime rates. Higher crime rates, in turn, depress property values. However, Clever Real Estate’s research demonstrated just the opposite. Namely, in states in which recreational marijuana is legal, cities with retail dispensaries saw home values increase $22,888 more than cities in which marijuana is illegal.
In another study, Libertarian think tank Cato Institute pointed out that in Denver, houses in close proximity to retail marijuana dispensaries increased in value by approximately 8.4%, relative to houses located slightly further away. While the Cato study didn’t research why this might be the case, it did note that potential explanations could range from lower crime rates (though Denver’s crime rate has increased, as noted below), housing demand spurred by marijuana-related employment and additional amenities connected with what the study’s authors called “retail conversion.”
Clever Real Estate analysts went on to say that, Colorado’s first retail dispensaries opened in January 2014; since that time, medical and recreational sales have generated more than $948 million in tax revenue. “Denver has 180 dispensaries . . . and its housing market has seen unprecedented growth since recreational legalization in 2012,” the analysts added.
The takeaway here is that, Colorado and Washington, the first states to legalize pot for recreational use, have seen home values increase by 58% and 57%, respectively, in the five years since legal commercial sales began. Another interesting takeaway is that there is not a “statistically significant increase” in home prices in cities in which only medicinal marijuana is legal.
What about violent crime in connection with cannabis legalization? The study pointed out that both Colorado and Washington have experienced an uptick in crime; violent crimes in Colorado, in fact, increased 25% since 2013. However, Clever Real Estate researchers point out that the numbers need to be taken into a national context. Basically, the crime rate increases in Colorado and Washington are consistent with the national violent crime rate trends, since 2014. Colorado and Washington remain below the national rates, even with the bump. Furthermore, there was little correlation between rising crime rates and home values.
Certainly, there are other drivers of housing values, in addition to retail marijuana dispensaries. Both Denver and Seattle have been job-creation juggernauts, which led to an increase in housing demand, and home values. However, the interesting aspect of this study is that home values don’t seem to be depressed because of proximity to cannabis dispensaries. In fact, Clever Real Estate research seems to show the opposite is true.
For comments, questions or concerns, please contact Amy Sorter