Cannabis home prices




What you should know:Between April 2017 and April 2021, property values rose $17,113 more in states where recreational marijuana is legal, compared to states where marijuana is illegal or limited to medicinal use.

When marijuana legalization first appeared on a California ballot in 1972, voters rejected it. But the tides of public opinion have turned.

Today, 91% of American adults believe marijuana should be legal in some form — with the majority (60%) saying they support measures that would legalize recreational marijuana.

This widespread acceptance of marijuana is quickly reshaping state laws. As of July 2021, 36 states and Washington D.C., have legalized marijuana for recreational use, medicinal use, or both. The industry is projected to be worth $30 billion by 2025.

As legalization brings marijuana into the mainstream, it’s sparked questions for real estate professionals and individual citizens alike. Will legalization impact property values, for better or worse? Will communities begin to reap benefits of marijuana legalization — or suffer the consequences?

So far, the National Association of Realtors — the industry’s largest trade organization — has demurred, stating it “does not have a position on cannabis legalization.”

To learn how marijuana legalization may impact real estate, we used publicly available data from Zillow and the U.S. Census, among other sources, to explore the relationships between home values, marijuana legalization, dispensaries, and tax revenue. We used multiple regression analyses to model current trends and predict future patterns.

Overall, we found marijuana legalization leads to higher property values and millions of dollars in new tax revenue.

In fact, states that legalize recreational marijuana and add new retail dispensaries see far greater property value and tax revenue gains than states that block dispensaries or limit marijuana to medicinal use.

KEY TAKEAWAYS

From 2017 to 2019, home values increased $6,338 more in states where marijuana is legal in some form, compared to states that haven’t legalized marijuana.

As states tax marijuana sales for the first time, the increased revenue drives new investment in things such as public services and infrastructure — which in turn drives higher demand in real estate, higher property values, and greater revenue from property taxes.

On average, home values increase by $470 for every $1 million increase in tax revenue.

In 2020, the eight states that reported a full year of marijuana tax revenue earned $2.3 billion — including $1 billion in California alone.

The seven states (and Washington, D.C.) that have yet to collect a full year of marijuana taxes are predicted to collectively bring in $601 million in new annual tax revenue.

States that have legalized and allowed sales of recreational marijuana see the biggest increases in home values:

Between April 2017 and April 2021, property values rose $17,113 more in states where recreational marijuana is legal, compared to states where marijuana is illegal or limited to medicinal use.

In the five states that have legalized recreational marijuana but have yet to begin sales, home values are predicted to increase by an average of $61,343 when sales go into effect.

Among states that have legalized recreational marijuana, California has seen the biggest increase in home values — up by $128,341 since 2017, after we controlled for other variables.

We found that cities with more dispensaries are positively correlated with higher home values, suggesting legalization boosts jobs and economic growth.

Home values increased $22,090 more in cities with recreational dispensaries, compared to home values in cities where recreational marijuana is legal but dispensaries are not available.

With each new dispensary a city adds, property values increase by $519.

Home Values Increase by Thousands Where Marijuana Is Legal

Home values are higher in states where marijuana is legal — a trend that holds true whether marijuana is allowed for medicinal use, recreational use, or both.

Compared to states where marijuana is illegal, we found that home values in states where marijuana is legal in some form increased by $6,338 more between April 2017 and April 2021.

Though the relationship between legalization and home values seems simple, the reality is more complex.

Numerous factors determine home values, including the home’s features and condition, the area’s amenities, and local crime rates. Legalizing marijuana can impact each of these criterion in ways that are both predictable and surprising — particularly by creating fresh demand for housing, new businesses, and tourism.

For example, as the first state to legalize recreational marijuana in 2012, Colorado is often viewed as a model for how legalization’s ripple effects may shape states’ futures — and so far, the impact has been promising.

Colorado’s marijuana legalization brought a wave of new businesses, creating jobs and enhancing retail and other amenities. Crime rates also dropped, as law enforcement no longer pursued cases related to legal marijuana.

Additionally, in the first year after Colorado legalized marijuana, hotel revenue soared by $130 million, according to a study by Penn State.

Other benefits of legalization, like those in Colorado, may improve quality of life in wide-ranging ways that create real estate demand by encouraging people to relocate. Examples include greater access to medical treatments for conditions such as chronic pain, reduced rates of incarceration, fewer alcohol-related health problems, and more.

Marijuana Legalization and Higher Home Values Bring More Tax Dollars to States

States gain the rare opportunity to tax an entirely new — and lucrative — commodity when they legalize marijuana sales.

In 2020, eight states (Colorado, Washington, Alaska, California, Illinois, Massachusetts, Nevada, Oregon) reported a full year of state-level tax revenue totaling approximately $2.3 billion, not including local taxes.

Though this represented 1% or less of each state’s budget, the increases were substantial — particularly in California, where legal marijuana sales drove more than $1 billion in tax revenue.

Seven additional states (Arizona, Maine, Michigan, Montana, New Jersey, South Dakota, Vermont) and Washington, D.C., have legalized marijuana but have yet to establish the systems necessary for collecting taxes. Once retail and tax collection systems are in place, these states will collectively gain an estimated $601 million in new annual tax revenue.

These less-than-operational states (as well as those that have yet to legalize marijuana at all) are missing out on a substantial opportunity to bolster their budgets — and provide improved public education, infrastructure, and more to their residents.

According to a report by Urban Institute, education programs (including pre-K and community colleges) are the most likely to benefit from this new source of tax revenue.

For example, Oregon devotes 40% of its marijuana tax revenue to its state school fund — generating $180,252,103 between 2017 and 2021. Arizona, which recently legalized recreational marijuana, plans to follow suit by devoting 33% of its future marijuana tax revenue to community colleges.

Other states use marijuana tax revenue to fund equally important programs. For example, Washington devotes its marijuana tax revenue to its Basic Health Plan Trust Account, which provides basic healthcare services to those who lack coverage.

Ranked from most to least common, current or planned uses for marijuana tax revenue include:

In addition to taxes from retail, rising home values result in higher property taxes.

We found that in 2021, average home values increase by $470 for every $1 million increase in overall tax revenue from marijuana.

Home Values Increase the Most Where Recreational Marijuana Is Legal

Though all types of marijuana legalization are associated with higher home values, recreational marijuana has the greatest potential impact.

When we controlled for other factors, we found that home values in areas that have legalized recreational marijuana leapt by $17,113 more than places where marijuana is illegal or only allowed for medicinal use.

Even when we limited the comparison to recreational versus medicinal legalization, this disparity persisted. Places that legalize recreational marijuana saw home values increase by $15,129 more than those that only legalized medicinal use.

Unlike our previous analysis (published on our sister website, Clever, in 2019), there was a statistically significant difference in home value changes in states where marijuana is medicinally legal and those where it’s fully illegal. Medicinal legalization drove home values up by $1,543 more than in states where marijuana is illegal.

Home Values Predicted to Increase by More Than $60,000 in Newly Legalized States

States that recently legalized marijuana can expect to see home values rise once the law is fully implemented — especially in places that allow recreational marijuana.

Once sales go into effect, our model predicts home values will increase by more than $60,000 on average.

To find this data, we analyzed the relationship between home values and recreational marijuana sales. We looked at home value changes between April 2017 and April 2021 in cities where legal sales of recreational marijuana have started versus states with no recreational marijuana sales. (To account for location differences, we controlled for population and initial home values in April 2017.)

Using the regression, we ran a prediction analysis to estimate how much home values would have increased had sales already started in the five states where recreational marijuana sales are legal but have yet to be implemented.

According to our analysis, these five states (Montana, New Mexico, New York, Virginia, Vermont) would have seen home values increase by an average of $61,343 had they legalized recreational marijuana in 2017.

This is $7,302 more than the actual average increase in home values of $54,041.

Impact of Marijuana Legalization by State

In the course of our analysis, we gathered publicly available data on states’ marijuana laws, dispensaries, tax revenue, and home value increases to date.

We found that:

California collected the most tax revenue (more than $1 billion) and saw the greatest increases in home values ($128,341).

Colorado has the most dispensaries overall (742 total).

22 states have legalized marijuana in some form but have yet to begin sales, including 19 that have only legalized medicinal marijuana and three that have legalized all uses.

You can use the following table to sort by category, or scroll to find your state listed in alphabetical order.

Dispensaries Contribute to Higher Home Values

Both recreational and medicinal marijuana dispensaries have contributed to soaring home values in states where marijuana is legal.

Between April 2014 and April 2021, each new dispensary in a city where marijuana was legal drove home values up by $519 on average — regardless of whether the dispensary sold recreational or medicinal marijuana.

When we looked specifically at recreational dispensaries, we found that the effect was even greater.

Among states that have legalized recreational marijuana, recreational dispensaries have the potential to drive home values up by $22,090 more than cities that have legalized recreational marijuana but do not have any recreational dispensaries.

Not only do retail sales of marijuana drive tax revenue and spending in local economies — but they also create jobs.

Today, the cannabis industry supports 321,000 full-time jobs across the U.S., according to an annual report by Leafly, which tracks publicly available federal and state data.

Additionally, 2020 was a banner year for hiring as new states legalized marijuana. Despite the pandemic causing unemployment rates to soar, the cannabis industry added 77,300 new full-time jobs to the economy for an impressive 32% year-over-year increase.

Final Thoughts

As more states legalize marijuana, there is strong evidence that legalization drives higher property values — particularly in areas that allow recreational marijuana and welcome retail dispensaries.

As states collect taxes from retail sales of marijuana, they plan to invest millions in public education, substance abuse treatment programs, criminal justice reform, and more. Many states also plan to spread the wealth by redistributing tax revenue to local governments.

These investments can improve quality of life in communities across the nation while attracting tourism and new residents who drive real estate demand.

States that have yet to legalize marijuana, or have only legalized medicinal use, are missing out on millions in tax revenue — and the opportunity to see property values rise.

Methodology

All analyses used average home values in cities across the United States. We relied on publicly available data from Zillow and population estimates from the Census to assess the relationship between marijuana legalization and home values.

Additional data sources are specified in the descriptions of our regression analyses below.

Home Values and Marijuana Legalization

We assessed the relationship between home values and marijuana legalization using various multiple regression models.

We compared home value changes between April 2017 and April 2021 in cities where recreational marijuana is illegal versus legal (and sales have started). We controlled for population and initial 2017 home values.

We used this model to predict home value increases in the five states where recreational marijuana has been legalized but not yet implemented.

A similar regression model analyzed home value changes in areas where medicinal/recreational marijuana sales are legal and have started versus areas where marijuana remains completely illegal.

Home Values and Dispensaries

We also explored the relationship between home values and dispensaries in states that have legalized recreational marijuana sales. We referenced data collected by PotGuide, which has a comprehensive list of dispensaries across the United States and whether each is licensed to sell recreational and/or medicinal marijuana.

From there, our analyses only included areas where recreational marijuana is legal and sales have started.

We assessed the correlation between the number of dispensaries and increases in home values between April 2014 and April 2021, using a multiple regression analysis controlling for initial 2014 home values and population.

We compared home value increases between April 2017 and April 2021 in areas that have at least one recreational marijuana dispensary versus those that have none using a multiple regression analysis controlling for initial 2017 home values and population.

Marijuana Tax and Home Values

Using state tax collection data from the Tax Foundation and the Bureau of Labor Statistics, we evaluated the relationship between April 2021 home values and tax dollars from 2020 recreational marijuana sales using a multiple linear regression, controlling for total state taxes collected in 2020 and population. We limited this analysis to areas where recreational marijuana sales were legal.

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