Marijuana real estate: How recreational pot is impacting the neighborhood

Marijuana is going mainstream as more states greenlight recreational usage. Today, 68% of Americans support legalization and nearly 1 in 3 Americans now live in a state where all adults have legal access to it. For perspective, only 12% of Americans favored legalizing cannabis in 1969.

Recreational states have deemed marijuana shops essential businesses during COVID-19, and they’ve remained open despite lockdowns. Colorado, the first state to legalize marijuana for recreational use, now has more dispensaries than McDonald’s or Starbucks, and an economic stimulus to boot. Which brings us to the question of marijuana real estate — how has pot impacted the U.S. neighborhoods where it's budding?

We ran a study and survey using emerging research to take a closer look at marijuana’s impact on residential housing markets and how homeowners feel about dispensaries moving into the neighborhood.

Using data beginning in 2012, we found that:

• After legalizing recreational marijuana, home prices grew at rates above the national average in 60% of states: Colorado, Washington, Oregon, Michigan, Maine, Nevada.
• States that have had legalized recreational marijuana longest (Colorado and Washington) have experienced the most housing growth.
• Despite positive trends in key housing markets, a slight majority of Americans (54%) still wouldn’t buy a home within one mile of a legal dispensary.
• People who live in the Northeast and home buyers aged 55-64 are most likely to oppose marijuana dispensaries in their neighborhoods.

Due to differing state laws, competing reports and a small state sample size, marijuana’s long-term impacts on residential real estate remain unclear but we were able to draw some conclusions about its initial impacts.

Marijuana was a big winner in the 2020 election, when four more states voted to legalize recreational use — but this now budding movement has been a slow burn. Marijuana lost on a California ballot in 1972, and for the next 24 years, voters rejected all marijuana legalization attempts.

In 1996, California became the first state to legalize medical marijuana. Sixteen years later, in 2012, Colorado and Washington legalized recreational marijuana use. At the time, these Western states were outliers going against laws set by the federal government. Today, many states throughout the U.S. are following suit.

Here’s a look at where it’s legal to possess recreational marijuana in the U.S. today:

Housing costs soar in states where recreational marijuana is legal longest

Economic benefits are one of the major draws to marijuana legalization. Take Colorado, the nation’s first recreational marijuana experiment. They’ve made $1B in marijuana tax revenue since 2014, and these dollars are being used toward preventing youth consumption, protecting public health and safety and investing in public school construction.

Legalizing recreational marijuana may also bring more jobs and more investment opportunities to approving communities. Yet critics argue that recreational marijuana jobs tend to be low-wage and that dispensaries contribute to an uptick in neighborhood crime, which can negatively impact housing costs.

To understand where the housing market fits into marijuana’s impacts on the economy, we looked at housing trends in key states and compared growth to the national average. We discovered these correlations:

• Colorado and Washington both legalized weed in 2012; since then, property values in both states have doubled.
• After legalizing recreational marijuana, home prices grew at rates above the national average in 60% of states: Colorado, Washington, Oregon, Michigan, Maine, Nevada.

Despite growth, most Americans wouldn’t buy homes in a neighborhood with a legal marijuana dispensary

America may be warming up to marijuana legalization, but that doesn’t mean homeowners are rushing to invite Mary Jane into the neighborhood.

We ran a survey to prospective homeowners to see how they feel about recreational marijuana in their zip code. We found that 46% of Americans would buy a house within 1 mile of a legal marijuana dispensary. Men were more likely than women to be open to the idea.

Here’s a closer look at our findings:

Women, northeasterners and homeowners aged 55-64 were the least likely to buy close to a legal marijuana dispensary. Men, westerners and 24-44 year olds were most likely to consider buying in a neighborhood near a dispensary.

One concern is that crime has risen in neighborhoods with marijuana dispensaries — yet whether this uptick in crime is up across the board or due to marijuana specifically remains unclear. Our marijuana driving survey did reveal that 60% of legal users admit to driving under the influence, presenting another facet to the recreational marijuana debate.

Final thoughts

Competing data, varying state regulations and lack of sample size make drawing conclusions about recreational marijuana more complicated — for example, while some studies observed massive growth in home prices, others see negative impacts for houses near dispensaries.

As more states legalize marijuana (and possibly the federal government, too) its impacts on housing and community will become clearer. In the meantime, landlords, HOAs, and even home insurers are stepping in with their own rules about what it means to have marijuana in the neighborhood.

Sources:
SSRN | Zillow