Tuesday, July 13, 2021
Interesting look into marijuana reform and home values
I just came across this interesting new online report from the realtor website Clever Real Estate under the heading "2021 Study: How Legalizing Recreational Marijuana Impacts Home Values." Here are excerpts:
To learn how marijuana legalization may impact real estate, we used publicly available data from Zillow and the U.S. Census, among other sources, to explore the relationships between home values, marijuana legalization, dispensaries, and tax revenue. We used multiple regression analyses to model current trends and predict future patterns.
Overall, we found marijuana legalization leads to higher property values and millions of dollars in new tax revenue. In fact, states that legalize recreational marijuana and add new retail dispensaries see far greater property value and tax revenue gains than states that block dispensaries or limit marijuana to medicinal use.
From 2017 to 2019, home values increased $6,338 more in states where marijuana is legal in some form, compared to states that haven’t legalized marijuana.
As states tax marijuana sales for the first time, the increased revenue drives new investment in things such as public services and infrastructure — which in turn drives higher demand in real estate, higher property values, and greater revenue from property taxes.
On average, home values increase by $470 for every $1 million increase in tax revenue. In 2020, the eight states that reported a full year of marijuana tax revenue earned $2.3 billion — including $1 billion in California alone. The seven states (and Washington, D.C.) that have yet to collect a full year of marijuana taxes are predicted to collectively bring in $601 million in new annual tax revenue.
States that have legalized and allowed sales of recreational marijuana see the biggest increases in home values: Between April 2017 and April 2021, property values rose $17,113 more in states where recreational marijuana is legal, compared to states where marijuana is illegal or limited to medicinal use.
In the five states that have legalized recreational marijuana but have yet to begin sales, home values are predicted to increase by an average of $61,343 when sales go into effect. Among states that have legalized recreational marijuana, California has seen the biggest increase in home values — up by $128,341 since 2017, after we controlled for other variables.
We found that cities with more dispensaries are positively correlated with higher home values, suggesting legalization boosts jobs and economic growth. Home values increased $22,090 more in cities with recreational dispensaries, compared to home values in cities where recreational marijuana is legal but dispensaries are not available. With each new dispensary a city adds, property values increase by $519.