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Cannabis Legalization Boosts Property Values, Study Says

September 26, 2017
(kickstand/iStock)
Cannabis legalization in Colorado has brought the state nearly $2 billion in cannabis sales, several hundred million dollars in tax revenue, and general scholarship funds for college-bound students. It has also apparently increased property values in the city of Denver—at least in the areas near the city’s retail cannabis shops.

Homes near retail cannabis stores in Colorado gained 8.4% more value than homes further away from the stores.

That’s the word from the Wisconsin School of Business at the University of Wisconsin-Madison, which earlier today released the results of a study done by Dr. Moussa Diop, an assistant professor of real estate & urban land economics, along with James Conklin of the University of Georgia and Herman Li of California State University. The researchers found that legal cannabis has not impacted housing or property prices negatively, and in fact increased values near retail stores.

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According to the study, single family residences within 0.1 miles of retail cannabis establishments saw an 8.4% increase in value, compared to residences located just a little further away—between 0.1 miles and 0.25 miles—from a store.

The relationship between cannabis legalization and housing prices is important to note, said Diop, particularly when looking at the effects of legalizing adult-use cannabis.

“The presence of retail marijuana establishments clearly had a short-term positive impact on nearby properties in Denver,” Diop said. “This suggests that in addition to the sales and business taxes generated from the retail marijuana industry, municipalities may experience an increase in property taxes. It’s an important piece of the puzzle as more and more voters and policy-makers look for evidence about the effects of legalizing recreational marijuana, as the issue is taken up by state legislatures across the country.”

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The study flies in the face of often-raised fears about cannabis stores lowering nearby property values. Just last week, the Sacramento Bee ran a story about California homeowners worried about the negative impact of cannabis on home prices. That story focused on the effect of cannabis growing, though, not selling.

The study did not seek to identify the reasons that property near cannabis retailers gained value faster than comparative samples. The authors did speculate about some potential explanations, though, including a surge in housing demand caused by cannabis-related employment growth.

In Leafly’s latest Cannabis Jobs Count, we found that legalization now supports 26,891 full-time jobs in Colorado, up from 23,407 one year ago.

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A study published last year by Realtor.com found similar price pressure in Colorado:

“Since the first shops opened their doors on Jan. 1, 2014, the median home sale price in the state has shot up from $248,000 in the first half of 2014 to $298,000 in the first half of 2016, according to the realtor.com analysis.”

Realtor.com noted that the price increases were partly due to the state’s population surge. From 2014 to 2015, Colorado was the second fastest-growing state in the nation. “There’s no direct evidence tying the legalization of the drug to the population boom,” wrote Realtor.com, “but real estate agents say more of their clients are relocating to the state because of it.”

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Not all cannabis businesses are equal, though. Realtor.com noted that homes near recreational shops were priced comparable to homes away from those stores, but appreciated in value 4.8% faster than the comps far from retail stores.  Homes near cannabis grow operations, by contrast, are priced 8.4% lower than comparable homes but appreciate in value 3.8% faster than homes far from grow sites.

Source: Realtor.com

Diop and the rest of the research team also mentioned the possibility of lower crime rates and additional amenities locating near those cannabis businesses. The researchers used residential property information from the City of Denver’s Open Data Catalog and a list of retail licenses granted by the Colorado Department of Revenue.

You can find the full report on the University of Wisconsin website here.

Gage Peake's Bio Image

Gage Peake

Gage Peake is a former staff writer for Leafly, where he specialized in data journalism, sports, and breaking news coverage. He's a graduate of the University of Nebraska-Lincoln's College of Journalism and Mass Communications.

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  • Silverado

    Until they won’t, especially in this real estate BUBBLE that many areas of the country are currently experiencing. Although IF this is indeed happening in Colorado, without knowing one further thing about their real estate market, and I can ASSURE you that the real estate BUBBLE is alive and well there too. This is ANECDOTAL at best and really means nothing.

    • FCN

      Do you live in Colorado? I moved to Colorado Springs in 2015.I am glad I moved when I did-the housing prices have risen astronomically-I could not afford a home here now.My built in equity rose by $60K from then to now.I was able to flip my mortgage and create a financial pillow as well as do about $12K in improvements to raise the value of the home even higher. And trust me I live in one of the less desirable parts of town.Everyone has picked up these older homes and flipped them.”The Ghetto” is now higher dollar real estate. As well as Colorado is an extremely beautiful state. I can see Pike’s Peak from my house. I see U-Hauls all the time. Houses don’t stay listed very long. I wouldn’t call this ANECDOTAL

    • Joseph Muhammad

      Yah.

  • primus108

    @Silverado: When I first became a Realtor, many years ago, there was a cartoon picture on the wall of the office of a very, very old man with a long beard, and the caption said, “Portrait of a young man waiting for Real Estate prices to come down.” Everyone who can’t afford to buy, thinks the prices are exorbitant and assume that signals a bubble and should lead to a crash, whereupon, (theoretically) people formerly priced out of the market will leap in and purchase homes at much lower prices. Of course, there are others who CAN afford to buy, and those who cannot simply keep landlords looking for additional rentals. Meanwhile, if there IS a correction, the sheep will bleat, “See, I told you prices were too high, now I will wait for them to go even lower.” Of course, prices rebound before the sheep can summon the courage to sign an offer to purchase, whereupon we rewind and replay.

  • Joseph Muhammad

    Nope. Cannabis shops are typically in retail districts. Even without cannabis shops the property values near retail areas would see an inflated inflation over the inflation of all property values and rents in Denver – including retail space rents – as the city has become over-populated primarily due to state legislature selling off the Rocky Mountains to frackers and other energy companies who are tearing down the mountains. Also banking, high-tech, aerospace contractors keep expanding here. Do study in Spokane and other areas and see what results you get!