Smoking cigarettes indoors has been shown to reduce a home’s resale value by up to 29%, says Realtor.com. When it comes to buying a cannabis enthusiast’s home, the resale value research is less clear, though 30% of realtors say they have struggled to sell a house where cannabis was grown. A recent study conducted by the National Association of Realtors said 50% of leasing professionals found it wasn’t hard to re-lease a property after tenants smoked cannabis indoors, and the organization “does not have a position on cannabis legalization.”
Legal cannabis raises home value
There’s been a lot of chatter surrounding cannabis and the real estate market. But, what kind of impact do cannabis operations have on property value by simply just existing in the same town or city as your house? According to research by real estate data company, Clever, property values rose by $17,113 more in states where recreational cannabis is legal, compared to states where it’s illegal or just legal at the medicinal level. Not to mention, millions of dollars in tax revenue created. In 2021, average home values increase by $470 for every $1 million increase in overall tax revenue from cannabis.
Clever combined data from Zillow, the U.S. Census, and other resources to produce their report.
New businesses, tourism, and jobs all contribute to the increase
When it comes to answering the “why”, that’s a little more complex. According to Clever, there’s a variety of reasons why property values are increasing as cannabis legalization takes place. “Numerous factors determine home values, including the home’s features and condition, the area’s amenities, and local crime rates. Legalizing marijuana can impact each of these criteria in ways that are both predictable and surprising — particularly by creating fresh demand for housing, new businesses, and tourism,” says the report.
We often look to Colorado as a model representing cannabis’ potential in different states. Legalization brought Colorado a wave of new business, and the crime rate also dropped. Also, hotel revenue rose by $130 million in the first year after Colorado legalized, according to a study conducted by Penn State.
- Home values increased by $6,338 from 2017 to 2019 in states where cannabis is legal in some form, compared to states that haven’t legalized at all
- On average, home values increase by $470 for every $1 million increase in tax revenue
- Eight states reported a full year of tax revenue generated from cannabis sales in 2020, totaling $2.3. $1 billion of that being California sales alone.
- The seven states (plus D.C.) who haven’t yet sold a year’s worth of legal cannabis are predicted to collect $601 million in new annual tax revenue.
- Home values are predicted to increase by an average of $61,343 in states that have legalized recreational cannabis, but sales aren’t yet taking place.
- California has seen the biggest increase in home values, up by $128,341 since 2017, among states that have legalized at the recreational level
- Cities with more dispensaries are positively correlated with higher home values, suggesting legalization boosts jobs and economic growth.
- In cities with recreational dispensaries, home values increased by $22,090, compared to states where recreational cannabis is legal but not yet being sold in retail locations
- Property values increase by $519 with each new dispensary a city adds
According to Clever’s future predictions, home values will increase by more than $60,000 on average.
Looking at tax revenue
When it comes to tax revenue, where does it all go? Different states allocate their tax revenue towards different things, but according to a report by Urban Institute, education programs (including community colleges and pre-K schools) are the most likely to benefit.
Oregon, for example, donates 40% of its tax revenue to the state’s school fund, accumulating $180,252,103 between 2017 and 2021. Arizona recently legalized cannabis for recreational consumption, and they plan to follow suit by donating 33% of their tax revenue to the state’s community colleges.
Other states use their tax revenue for different things, like Washington, where the tax revenue goes towards a healthcare trust account to provide basic healthcare services to people without insurance. Ranked from most to least common, here’s how different states use their cannabis tax revenue:
- Education programs
- Substance abuse education and treatment programs
- Reparations for those negatively affected by the War on Drugs/criminal justice reform
- General funds
- Transfers to local governments
- Administrative costs of initiating new laws
- Public health and safety programs
- Law enforcement, crime reduction, and fire departments
- Transportation and infrastructure
- Programs for conservation
- Programs for veterans
Cannabis’ impact on local communities
This is just another piece of evidence supporting cannabis’ positive impact on local and state economies. According to Leafly, the legal cannabis industry supports 321,000 full-time jobs across the United States, adding 77,300 of those last year. Not to mention the tax revenue generated from legal cannabis sales. Criminal justice reform, education, substance abuse treatment, and local governments all benefit from the new source of revenue.
As the cannabis industry continues to grow, we see it positively affects more than just consumers.