Marijuana Legalization Increases Property Values, Study Finds

The legalization of recreational marijuana has a positive impact on the value of properties in the vicinity of retail cannabis stores.

New research from the Wisconsin School of Business at the University of Wisconsin-Madison suggests that adult use marijuana legalization stimulates a boost in property values.

Moussa Diop, Wisconsin School of Business assistant professor of real estate & urban land economics and James Conklin of the University of Georgia and Herman Li of California State University found that cannabis legalization in Colorado directly caused an increase in home property values in the vicinity of Denver’s retail cannabis shops.

“The presence of retail marijuana establishments clearly had a short-term positive impact on nearby properties in Denver,” said Diop, in a statement. “This suggests that in addition to the sales and business taxes generated from the retail marijuana industry, municipalities may experience an increase in property taxes. It’s an important piece of the puzzle as more and more voters and policy-makers look for evidence about the effects of legalizing recreational marijuana, as the issue is taken up by state legislatures across the country.”

According to the study, since Colorado’s recreational marijuana law took effect on January 1, single-family residences within 0.1 miles of Denver’s marijuana shops saw an 8.4 percent greater increase in value compared to properties located between 0.1 miles and 0.25 miles from shops. The increase in property value equates to an estimated $27,000 for an average house in the area.

Diop and Conklin suggested that the reasons for the significant increase in property values near marijuana retail stores may have to do with a surge in housing demand spurred by marijuana-related employment growth, lower crime rates, and additional amenities arriving in close proximity to retail stores.

A study published last year by also found median home price increases in Colorado over recent years. Since marijuana retail shops opened in 2014, the analysis found, median home sale price in the state increased from $248,000 in the first half of 2014 to $298,000 in the first half of 2016.

“There’s no direct evidence tying the legalization of the drug to the population boom,” the report read, “ but real estate agents say more of their clients are relocating to the state because of it.”

Colorado is one of eight U.S. states to legalize recreational marijuana and one of 29 states to legalize medical marijuana. The state’s cannabis market has continued to grow, and is up 25 percent compared to last year, topping $750 million in the first half of 2017. Taxes on recreational marijuana sales have been used for school construction, homeless population support, anti-bullying programs, mental health clinics, and college scholarships.

There is an active campaign effort underway to legalize adult use marijuana in Michigan, and market analysts suggest the end of marijuana prohibition could extend to all 50 states by 2021.

For its analysis, the study used residential property information from the City of Denver’s Open Data Catalog and a list of retail licenses granted by the Colorado Department of Revenue.

The study, “Contact High: The External Effects of Retail Marijuana Establishments on House Prices,” is accessible through the Wisconsin School of Business. It will be published in Real Estate Economics.

Learn more about the marijuana laws in Colorado and throughout the U.S. through our education page.