In the recent election, New Jersey, Arizona, Montana, South Dakota and Mississippi all passed cannabis legalization, leaving only a handful of states who have not passed some form of cannabis. When it comes to legalizing marijuana, particularly for adult-use, people are concerned about rising crime rates, unsightly grow facilities and a decline in property values as a result. However, in reality, the opposite is true. Statistics show that crime decreased in legal cannabis states. Likewise, the numbers show property values go up instead of down.
Crime and Property Values
Cannabis businesses are no stranger to the chants of “not in my back yard.” While it may be intuitive that low-crime areas have higher property values and high-crime areas lower values, a study at Florida State concluded that robberies specifically can exert a demonstrable impact on housing prices. Due to the valuable products and large amount of cash on hand at cannabis businesses, cannabis businesses in commercial- and industrial-zoned areas could make desirable targets for robberies. Of course, robberies can be mitigated, and crime is just one of several factors influencing property values.
Cannabis Dispensaries Increase Property Values
States where cannabis is legal have higher home values. A recent study investigated the impacts, both medical and adult-use, legalization have on housing markets compared to states where cannabis remains illegal. By collecting data from Zillow and the 2018 US Census population estimates, their findings showed cannabis legalization significantly increased property values.
The study focused primarily on Colorado and Washington, as these states have been legal since 2012 and have the most data. They found retail dispensaries increased home values by $22,888 between 2014 and 2019 compared to where marijuana remains illegal.
More evidence shows homes within one mile to dispensaries increased by 8.4% compared to homes further away, bringing their value higher than the national average. With its 180 dispensaries, Denver saw a 67.86% home increase compared to the national average of 30%. Washington has also seen a rise in the last five years at 57%. Both states have medical and adult-use programs; However, the two programs do create different results.
Recreational vs. Medicinal Markets
Unsurprisingly, medicinal dispensaries have less of an impact on residential property values. Medically legal states saw increasing home values at a rate comparable to prohibitionist states, so researchers cannot credit cannabis as a deciding factor. Since people must qualify for a medical card, the market does not grow as quickly.
In turn, recreational markets create much more economic activity. They attract more entrepreneurs, job seekers, and homebuyers to the area, thus driving up the housing market. Even smaller economies like Redding, California, saw their home values increase between the time legislation passed and after they made their first sales.
Property Value Trends
It generally takes several months to a few years for dispensaries to gain the proper permits and start selling after legislation passes. Interestingly, data shows that recreational states see an immediate rise in home values following legalization. Take Redding, CA for example. They saw an initial increase after legalization by 3.75% from November of 2015 to 2016, and then another 7.35% increase after the first sales took place between 2016 and 2017.
In 2018, researchers at Colorado State University found that legalization impacts more-expensive homes compared to less-expensive homes differently.
More expensive homes see an increase right after legalization, while it takes the lower valued homes until the first sales are made to respond. They suggested this could be due to liquidity among the wealthy, as they can more easily move to newly legalized states if they think they can benefit from the inevitably growing economy.
With Increased Property Values Comes Higher Taxes
Of course, not everyone wants higher property values since that also means higher taxes. While numerous factors and variables determine property taxes, homeowners in states with legal cannabis do see increasing rates, depending on where they live in town. Rising taxes hit residents in Denver particularly hard.
The latest property tax increase in Denver ranged from 10% to 30%. These staggering amounts led to protests in Denver, where displeased residents gathered evidence to argue their value is not as high or as low as appraised. Seattle and Portland, Oregon, have also seen consistent home price increases since their state passed legislation.
Cannabis is often considered a ‘cash cow,’ due to the taxes the state can collect on sales. Since Colorado’s first dispensary opened in 2014, medical and recreational sales have generated $948,000,000 in tax revenue. However, a Leafly study found that though recreational cannabis created 23,407 full-time jobs in 2017, Denver’s population also grew by 50,000 between 2013 and 2016. Therefore, legalizing does not necessarily mean current residents will absorb all the benefits.
That’s not to say it can’t be done. How residents will benefit from taxes on marijuana sales depends on a state-by-state basis. Furthermore, for residents to understand how taxation will affect them, the state needs to be clear on their priorities. Those interested in learning more about this can read how different priorities create different policies.
How Commercial Grow Houses Affect Property Values
Generally, commercial cannabis cultivation has less impact on housing values than retail dispensaries. In Sacramento, California, strict guidelines for security, safety, proximity to schools, and even odor control exist. Grows are primarily located on industrial properties, where the closest neighborhoods have lower values.
When states first began legalizing cannabis, cultivation laws like those in Oregon had loose ends that enabled people to grow unregulated, which created disputes among residents. In the future, governments can learn from the mistakes made by the pioneers. The cannabis industry as a whole is significantly more regulated, with greater security concerns than other industry’s marijuana is often compared to, like liquor.
To truly understand how cannabis affects property values and taxation on a more detailed level, we’ll need to wait until more data is quantified. Until then, it is clear cannabis has a profound effect on economies, but just how beneficial that impact depends on the policies and regulations in place.