Synopsis: Do Pot Shops Actually Increase Housing Values?
This week’s Hot Article, Do Pot Shops Actually Increase Housing Values? written by Randy Robinson and published by www.merryjane.com, is about how some homeowners and law enforcement have opined that legalizing cannabis would lead to lower property values, but a new study appears to contradict this position.
The new study, recently published in Contemporary Economic Policy, looked at property values in the Denver area from 2008 to 2017. It found that dispensaries increased home values within a half-mile radius by 7.7%. This study further validates two previous studies finding that home values rose 6-8% near dispensaries.
According to Jesse Burkhardt, a professor of economics at Colorado State University and primary author of the Economic Policy paper, “There are going to be costs and benefits to them (dispensaries) coming into the neighborhood.” One such cost could arise in the form of increased crime rates near dispensaries. “Some research showed that property crimes go up near a dispensary, but violent crime rates appear to be unaffected.”
“Whatever benefits dispensaries bring outweigh whatever costs come with a dispensary,” Burkhardt noted. “People are willing to pay an additional premium to live near one.”
While generally all dispensary openings appear to positively affect home values in their vicinity, existing dispensaries converting from medical-only to adult-use status also appears to trigger a rise in home values in the area, though such value boosts have been questioned and debated by multiple experts in the housing market, even to the extent of being argued in court. A property owner in Pueblo, CO argued in federal court under the RICO statute that smells wafting from an adjacent cannabis facility significantly lowered his property value:
“In 2014, the Colorado Association of Realtors worried that legal weed could compromise the real estate business, going so far as to cite concerns that people wouldn’t want to move to the Centennial State because pot smokers will be everywhere.
The jury in this suit ultimately sided with the cannabis company.
Jason Thomas, owner of the Denver-based Avalon Realty which specializes in properties for cannabis businesses, said, “The (home) values have gone up significantly, both on the for-sale and for-lease side, primarily because of the demand and lack of available properties. But Thomas further indicated that cannabis grow operations could jeopardize home values if they were handled and managed haphazardly.
The question remains whether these trends will continue to create a housing market that is unaffordable to the majority of Denver residents (the cost of an average single-family home in Denver currently exceeds $500,000). It should be noted that property and affordability issues are not unique to Colorado with evictions on the rise in California and widespread gentrification in Oregon. As the cannabis relates to or contributes to these issues, it is a commonly shared opinion among industry participants that federal legalization of cannabis could help to resolve many of these issues by making more space available for future cannabis industry expansion.
While market forces remain numerous, often unforeseeable, and somewhat whimsical, dispensaries, for now, seem to be positively influencing the value of property around them. Still, as this week’s Hot Article seems to question, could this be too good to be true and merely coincidence, or will this value boon granted by the cannabis industry stick as bonafide real estate value booster? Only time will tell, but for the time being, the cannabis industry appears to be positively benefiting property owners.