Study: cannabis legalization boosts property prices

A recent study suggests that American states legalizing cannabis are actually seeing an increase in housing prices, with a more pronounced effect once nearby cannabis outlets open their doors.

Economists at the University of Oklahoma have attempted to verify this. the impact of cannabis legalization for adults by reviewing and monitoring ads on Zillow.com since legalization in Colorado and Washington State. Their findings suggest that legalization «has beneficial spin-offs at both state and local levels».

«Concerns about the potential effect on crime rates and the difficulty of controlling impaired driving have been cited as reasons for slowing the path toward full recreational legalization,» write the authors of the study. «This research contributes to the discussion, providing evidence that the legalization of recreational cannabis has significant positive ripple effects on the local real estate market.»

Rising real estate prices with recreational cannabis

Specifically, real estate prices in Colorado and Washington increased by 7% around the time cannabis stores opened, according to the study. «This research suggests that there are second-order benefits associated with cannabis legalization that policymakers and voters should be aware of when deciding on the legal status of this drug.»

However, legalization tends to have a different impact on the value of more expensive homes compared to less expensive ones, even though all have seen an increase. Prices of the most expensive homes rose immediately after the legalization vote, while less expensive areas saw an increase from the time regulation was introduced.

«The greatest impact occurs once it is legal to sell cannabis,» they write. The announcement of legalization resulted in «positive effects of more than 10% in the upper half of the price distribution,» according to the study, «and from 5 to 15% after the state enacted the law and the first legal sales.»

Why this unbalanced effect? Economists argue that a number of mechanisms could be at work, an important one being access to liquidity among wealthier populations: «Wealthier households may migrate more quickly to (legal) states if they believe legalization has positive spillover effects.»

They also took particular note of the’effective opening of cannabis stores.

«If the main mechanism of our interstate models is the effect on economic development,» says the study, «it is possible that the impact will only be felt once the first dispensaries are open and a significant volume of cannabis sales takes place, generating tax revenues.»