2021 has been a big year for the push to legalize marijuana. Earlier this year, many states legalized the recreational use of cannabis. These states include New Mexico, Arizona, Virginia, and even New York. What many have not yet considered is how legalizing cannabis affect other aspects of our lives. For example, in New Mexico, there is a current issue for those who wish to start a cannabis business. With little consideration to the state’s environment, there’s an ongoing issue regarding cannabis and water rights. Now, it seems that cannabis may be affecting something else across the U.S.: real estate. Recreational marijuana impacts real estate, but not in the way some anti-marijuana people may believe. In fact, it actually increases the value of a property.
Recreational Marijuana Impacts Real Estate
One of the main arguments of those who say, “Not in my backyard!”, is that it will negatively affect their communities. According to this economic analysis by the online realtor website Clever Real Estate, they couldn’t be more wrong. This study compared the growth of home property values from states where recreational marijuana was legal to states where it wasn’t. The observed time period was between April 2017 to April 2021.
The data analyst, along with the research group, reviewed information from Zillow, the U.S. Census, and other relevant and reliable sources. They analyzed the information to explore the relationships between home values, marijuana legalization, dispensaries, and tax revenue. Additionally, they used the observed patterns and multiple regression analyses to predict future trends.
Here’s what they found.
Home Property Value Increase
Between April 2017 and April 2021, property values rose $17,113 more in states where recreational marijuana is legal. As for home property value, they “increased $6,338 more in states where marijuana is legal in some form, compared to states that haven’t legalized marijuana.” Similarly, they found that cities with more dispensaries are correlated with higher home values.
As states continue to legalize the use of recreational marijuana, we can expect to see higher home values. Specifically, this impact will be the most seen in areas with retail dispensaries.
Importantly, when it comes to home values, there are much more complex factors that are considered than just cannabis legalization. However, there’s evidence that suggests that legalization has an overall positive effect in terms of growth.
Economic Benefits from Tax Revenue
For those of us who consistently purchase cannabis products, we’re well aware of the fact that it’s a taxed product. Both cities and states can benefit greatly from the amount of tax revenue earned from legalizing marijuana and its sale. For example, since 2014, states that have legalized cannabis have earned nearly $8 billion in tax revenue. These numbers are only expected to grow with the legalization of marijuana in more states. California alone earned $1 billion in 2020 thanks to the retail sale of recreational marijuana.
Large sums of tax revenue can be extremely beneficial to states, cities, and their residents. Money generated from taxes can be invested back into bettering the communities. For instance, Oregon is using revenues to fund educational programs, ranging from pre-K to community college. Many states are following their lead. Others are funding healthcare initiatives, drug treatment, or transportation and infrastructure. The proper handling of tax revenues generated from cannabis sales can greatly benefit the overall conditions of a community.
Why Does Recreational Marijuana Impact Real Estate?
Why exactly is there an increase in property value due to the legalization of marijuana? It all comes down to the money and business generated by the legal sale of recreational marijuana. When cities allow dispensaries to sell recreational marijuana, not only do they generate profit and tax revenue, they also create jobs and economic growth.
Similarly, investing in recreational marijuana and retail dispensaries can improve the quality of life in communities across the nation while attracting tourism and new residents who drive real estate demand. With better conditions funded by cannabis tax revenues and economic growth, why wouldn’t you want to move into a city that allows the sale and consumption of cannabis?
How Does This Affect You?
As a homeowner, this affects the value of your home. If you currently reside in a location where recreational cannabis is legal, you may want to look into the statistics of cannabis businesses in your area. This may give you some insight into how much your property value can increase in the following years.
If you are living somewhere where recreational marijuana is not legal, or only allowed for medical purposes, you may want to look out for policy changes. Marijuana legalization on a federal level is gaining traction as more and more states decide to legalize it. Keep an eye out for policymakers in your area that are in support of legalization.
If you’re a real estate agent, read up on cannabis, state, and city laws. These will keep you informed and on top of what’s going on with the way recreational marijuana impacts real estate.