Legalizing cannabis should be a priority for every homeowner in this country, according to Francesca Ortegren’s recent analysis. Ortegren found that when a state ends prohibition and legalizes, property values go up across the board.
And not insignificantly, either.
“We were interested in what exactly is driving that relationship,” Ortegren, a former professor at the University of Southern Indiana and current data scientist for Clever Real Estate, says.
That interest was born of a previous study that Clever Real Estate published in 2019; it looked at whether crime was rising in states that had legalized cannabis, and what effects that might be having on housing markets. It found evidence that seemed to indicate crime was actually going down in legal states and housing prices were going up.
This recent meta-analysis that Ortegren authored was a follow-up to that previous study. Clever Real Estate wanted a closer look at the relationship between cannabis and real estate prices, with fresh data, to see how much the former affected the latter.
“We wanted to take another look at the data now that it’s been a couple of years and more areas have legalized marijuana,” Ortegren says, “to see if those trends were continuing and if we were continuing to see them through the craziness that was the last year-and-a-half in terms of housing value.”
For the analysis, Clever Real Estate used publicly available data from Zillow, the U.S. Census, and other sources, to explore the relationships between home values, marijuana legalization, dispensaries, and tax revenue. They then used multiple regression analyses to model current trends and predict patterns in the future.
“We definitely expected to find something similar in that the states that had legalized marijuana—recreational marijuana specifically—were going to have higher, faster growing home values,” Ortegren says.
However they didn’t really expect the observed relationship to be as strong as it apparently is.
According to their results, just between April 2017 and April 2021 property values in states where recreational marijuana is legal rose $17,113 compared to states upholding prohibition (in California, where property values rose the most since 2017, that number was $128,341). Home values, specifically, rose $6,338 over that time period in legal states, compared to states where cannabis remains illegal.
They also found that, on average, home values rose $470 for every $1 million in marijuana tax revenue the state collects. In Colorado, $387,480,110 was collected in marijuana taxes and fees just in 2020.
“Recreational marijuana seems to have a larger impact on home values,” Ortegren says. “We don’t see the same increase in home values in those areas [with just medicinal marijuana] compared to the handful of states that have recreational marijuana legal as well.”
That’s largely because it opens up sales to more people, and results in much higher tax revenue that can then be pumped back into communities.
In the states that have legalized recreational marijuana but have yet to begin actual sales, the analysis predicts property values will go up $61,343 compared to prohibition states, once sales begin.
The analysis also concludes that “dispensaries are positively correlated with higher home values, suggesting legalization boosts jobs and economic growth.”
Cities that had recreational dispensaries saw a $22,090 rise in property values, compared to cities that didn’t. For every recreational dispensary a city added, property values rose $519.
“A lot of people have a stigma or a fear around legalizing marijuana. There’s a lot of negative press around it,” Ortegren says. “In states that are having difficulty legalizing marijuana or that are interested in legalizing marijuana, I think having this type of data is helpful for the argument that this is good for a community, that home values increase and economic activity increases.”
There are a lot of anecdotal claims out there about marijuana’s health benefits and medicinal uses that are unsubstantiated by science (for now). People can debate those, Ortegren says, but this data represents hard numbers that show a real and tangible financial benefit. You don’t have to support recreational cannabis use, or believe in its medicinal qualities, to gain from its legalization.
All you have to do is own property, and the cannabis market will do the rest.
“Regardless of your feelings about marijuana or whether you want to smoke it or you want your family members using it, I think at a community level, hopefully, eventually there will be a consensus that this is not necessarily bad,” she says. “Hopefully this shines a more positive light on recreational marijuana sales.”
