For many, the legalization of recreational marijuana might as well have been trumpets loudly declaring the end of times. Arguments against it ranged aplenty, with some claiming it is a gateway drug while others claimed it would result in increased crime rates. But what many hadn’t considered was the effect it would have on real estate.
Economists from the University of Oklahoma ran a study to find out the effect marijuana legalization had on housing prices, and their results were quite interesting. They examined listings on Zillow, and after tracking them against legalization in Colorado and Washington State, found that legalization ‘has beneficial spillover effects at both the state and local levels.’
“Concern about the potential effect on crime rates and the difficulty in policing impaired driving have been cited as reasons to slow-walk the path to full recreational legalization. This research contributes to the discussion, providing evidence that recreational marijuana legalization (RML) has large spillover effects on the local housing market,” the study authors write.
According to the study, neighborhoods in Colorado and Washington saw a 7% price increase as marijuana retailers opened shop. “Considered together, this research suggests that there are second order benefits associated with marijuana legalization that policy makers and voters should be aware of when deciding the drug’s legal status,” the authors assert.
Apparently, marijuana dispensaries are seen as amenities, and they affect the value of the neighborhoods around them.
“Marijuana’s legalization provides a novel source of tax revenue which states have used to fund capital expenditures, especially in education and it acts as an amenity via the dispensaries that distribute it,” says the paper which was published online by the SSRN. It adds that the creation of a new legal market has direct implications for the local economy, as it establishes new dispensary jobs and reduces arrest rates. All these factors have well-established impacts in housing markets.
One of the more interesting discoveries was that while the prices of more expensive homes increased immediately following a successful ballot drive to legalize marijuana, homes in less expensive homes only saw a price increase after the stores started business. They say liquidity may be a factor as “the wealthiest households can more rapidly move to legal states if they believe there to be some positive spillover effects from legalization.”
However, they say that their research may not be able to determine whether their positive effect will persist. At the moment, though, it seems marijuana dispensaries offer a lot more than cannabis.
“This demonstrates that it is not simply the benefit of increased tax revenue, but also the existence of the dispensaries themselves that is driving the price increases. The dispensaries act as commercial amenities that the public puts a premium on being nearby.”
These study findings may come as welcome news to members of the cannabis industry, such as Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP), who have always believed that the full benefits of marijuana may take long to be fully enumerated.
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