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Legalizing Marijuana Increases Housing Prices, Study Finds

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So much for “there goes the neighborhood.” A new analysis suggests that states that legalize marijuana actually see a boost in housing prices, with the effect most pronounced once nearby retail outlets open for business.

Economists at the University of Oklahoma attempted to tease out the impact of adult-use cannabis legalization by examining listings on Zillow.com and tracking them against legalization in Colorado and Washington State. Their findings suggest legalization “has beneficial spillover effects at both the state and local levels,” casting doubt on the parade of horribles sometimes warned of by law enforcement and other critics.

“Concerns about the potential effect on crime rates and the difficulty in policing impaired driving have been cited as reasons to slow-walk the path to full recreational legalization,” the study’s authors write. “This research contributes to the discussion, providing evidence that recreational marijuana legalization (RML) has large positive spillover effects on the local housing market.”

marijuana legalization and housing prices

Via SSRN.

Specifically, neighborhoods in Colorado and Washington saw a 7 percent price increase as marijuana retailers there opened shop, the study, which was published online this week by SSRN, found. “Considered together, this research suggests that there are second order benefits associated with marijuana legalization that policy makers and voters should be aware of when deciding the drug’s legal status.”

“Once recreational marijuana becomes available to buy easily at a dispensary and tax revenue is generated, there is significant home price appreciation.”

It’s not the first time researchers have looked into the effects of legalization on nearby home values. In 2018, researchers at Colorado State University found that home prices within a half mile of a retail cannabis store went up by 7.7 percent. A 2017 study, “Contact High: The External Effects of Retail Marijuana Establishments on House Prices,” found an 8 percent increase in the value single family residences that were “close to a retail conversion,” or store opening, compared to homes that were farther away. A 2016 analysis had similar findings, concluding that “legalization leads to an average 6% increase in housing values, indicating that the capitalized benefits outweigh the costs.”

The new study takes the past findings and pulls them into sharper focus. It concludes that legalization tends to impact the values of more-expensive homes differently than less-expensive ones, though homes of all price levels saw increases. The study also identifies variables that may work to lift residential property values in states that legalize, such as increased tax revenue to fund schools.

“Marijuana’s liberalization provides a novel source of tax revenue which states have used to fund capital expenditures, especially in education and it acts as an amenity via the dispensaries that distribute it,” the paper says. “The creation of a new legal market has direct implications for the local economy, as it establishes new dispensary jobs and reduces arrest rates. All of these factors have well-established impacts on housing markets.”

One of the analyses performed by the researchers found that prices among more expensive homes increased immediately following a successful ballot drive to legalize marijuana. Meanwhile, homes in less-expensive areas didn’t see much of a price increase until cannabis stores actually began to open.

As they describe it, the economists found “positive effects in the top of the distribution following the success of the ballot measure legalizing recreational marijuana, but no effect in the lower half.”

“The greatest impact occurs once it becomes legal to sell marijuana, with large positive effects across the price distribution, especially in the middle three deciles,” they write. “Heterogeneous responses to a policy shock have not been well-researched in the housing literature, making the findings here one of our major contributions.”

Legalization itself led to “positive effects upwards of ten percent in the top half of the price distribution,” the study says, “and between five and fifteen percent across the distribution after the state enacts the ballot initiative and the first legal sales take place.”

Why the lopsided effect? The economists say a number of mechanisms could be at work, with a big one being access to liquidity among the rich: “The wealthiest households can more rapidly move to (legal) states if they believe there to be some positive spillovers from legalization.”

The researchers attempted to address some confounding variables in their analysis, such as by assessing house prices by square foot rather than taking each property as a whole. “Geographic heterogeneity in our sample suggests that simply using house price as the dependent variable could bias the results since treatment homes are in high-price states,” the authors write. “By using house price per square foot as the dependent variable, we can ensure that this potential source of bias is accounted for.”

They also took particular note of when stores actually opened. “If the primary mechanism in our cross-state models is the economic development effect,” the study says, “then it is possible that the impact is only felt once the first dispensaries open and a large volume of marijuana sales take place, thereby generating tax revenue.”

“[W]hen a dispensary opens nearby, homes closest to it appreciate in price the most. This is consistent with our interpretation that new dispensaries act as amenities in the local housing market.”

One big question the researchers still can’t answer: Will it last? “Without the benefit of foresight,” they write, “our research is not able to determine whether the positive effect will persist.”

Other big unknowns remain, such as whether the effect was due to more people immigrating to the state after legalization, which would mean states that legalize later could see a diminished effect.

But for now, the effect is robust. And from what the researchers can tell, people don’t just seem to want the benefits of legal marijuana. They also want marijuana stores themselves to be near their homes. When the economists modeled home prices by distance to the nearest outlet, the data “show price appreciations for homes as the distance to the nearest dispensary decreases.”

“This demonstrates that [it is] not simply the benefits of increased tax revenue, but also the existence of the dispensaries themselves, that is driving the price increases,” the researchers found. “The dispensaries act as commercial amenities that the public puts a premium on being nearby.”

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Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

Ben Adlin is a Seattle-based writer and editor. He has covered cannabis as a journalist since 2011, most recently as a senior news editor for Leafly.

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Marijuana Legalization Increases Home Property Values, New Study Finds

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There are plenty of marijuana NIMBYs out there, but a new study found that cannabis legalization and the presence of dispensaries actually increases home property values.

The research from Clever Real Estate draws on data from Zillow, the U.S. Census and other sources. A main takeaway is that 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.”

Part of the reason for the increased value is that legalizing and regulating cannabis means tax revenue for states. And that revenue translates into “new investment in things such as public services and infrastructure,” the company found, driving up property value.

For every $1 million in additional tax revenue from marijuana sales, home values increase by $470, according to the study.

Take Illinois as a case in point. Last year, the state sold about $670 million in cannabis and took in $205.4 million in tax revenue. And that revenue has gone towards a wide range of causes such as supporting organizations that work to decrease street violence. If successful, reducing violence in a given community would be one simple way to increase property value.

The Clever Real Estate study also found that states that legalize for adult use see the greatest gains in home value.

“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,” it said. And for the states that have enacted legalization but where sales have yet to start, “home values are predicted to increase by an average of $61,343.”

The presence of cannabis dispensaries nearby also seems to be correlated with an increase in home value.

“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,” the study says. “With each new dispensary a city adds, property values increase by $519.”

“When we controlled for other factors, we found that home values in areas that have legalized recreational marijuana leapt by $17,113 more than places where marijuana is illegal or only allowed for medicinal use. Even when we limited the comparison to recreational versus medicinal legalization, this disparity persisted. Places that legalize recreational marijuana saw home values increase by $15,129 more than those that only legalized medicinal use.”

Last year, a separate analysis from economists at the University of Oklahoma similarly found that states that legalize marijuana actually see a boost in housing prices, with the effect most pronounced once nearby retail outlets open for business.

“This demonstrates that [it is] not simply the benefits of increased tax revenue, but also the existence of the dispensaries themselves, that is driving the price increases,” the researchers found. “The dispensaries act as commercial amenities that the public puts a premium on being nearby.”

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Photo courtesy of WeedPornDaily.

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Missouri Governor Vetoes Medical Marijuana Tax Deduction Bill

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The measure, if enacted, would not have changed the federal 280E provision that remains in effect against cannabis businesses.

By Jason Hancock, Missouri Independent

Missouri Gov. Mike Parson (R) vetoed legislation Friday that would have lifted a prohibition on licensed medical marijuana companies deducting business expenses on their taxes.

In his letter vetoing the measure, Parson didn’t mention the medical marijuana provisions. He said his decision to reject the bill came down to a section lawmakers included that would have provided tax relief for businesses impacted by city-wide or county-wide public health restrictions.

Parson said those provisions would have created “significant unintended consequences that could greatly harm localities.”

In vetoing the bill, however, the medical marijuana provision was also struck down.

Missourians voted to legalize medical marijuana in 2018. But under federal law, growing, transporting or selling marijuana remains a crime.

Because of this dynamic, marijuana companies differ from every other legal business in the state because they can’t deduct ordinary and necessary business expenses on their tax returns.

While federal law remains unchanged, the legislation approved nearly unanimously in both the House and Senate would have changed that for state taxes.

David Smith, a certified public accountant from St. Louis County who works with numerous medical marijuana companies, said during a Senate hearing earlier this year that Missouri’s existing law could mean an effective tax rate for those businesses of 70 percent or higher.

“Some companies may even be subject to income taxes while operating at a loss,” Smith said.

Andrew Mullins, executive director of MoCannTrade, said it was “both common sense and smart public policy to put medical cannabis businesses on a level playing field with all others that pay state business taxes.”

“While disappointed in the veto, we remain encouraged by the overwhelming bipartisan support for a measure of basic tax fairness that received near-unanimous votes in both the state House and Senate,” Mullins said in a statement to The Independent. “As our state’s newest industry continues to create thousands of new jobs and generate tens of millions in new spending each month, we look forward to again passing this policy change and seeing it signed into law.”

Another casualty of the veto was a provision providing sales tax exemptions for certain cancer treatment devices. Parson wrote in his veto letter that he supports this tax deduction and hopes lawmakers will pass it again next year.

This story was first published by Missouri Independent.

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First Full-Service Marijuana Delivery App Launches On Apple Store Following Policy Change

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Apple has long restricted marijuana companies from conducting business on its app store. But following a recent policy change, the cannabis delivery service Eaze on Thursday announced that consumers can now shop and pay for marijuana products on its iPhone app for the first time.

This marks a “major milestone for the legal cannabis market and consumers,” Eaze said in a press release. “The Eaze app allows customers to complete all aspects of delivery seamlessly: registration, ID verification, product selection, payment, and receipt to the doorstep.”

Via Eaze.

Previously, people buying marijuana through the nation’s largest cannabis delivery service had to leave the prior version of the app and submit orders through a less-convenient mobile version of the company’s web page. The Apple policy change means the service is streamlined, and it represents a significant development in the evolving relationship between Big Tech and the marijuana industry.

“Eaze has always been about using the latest developments in technology to make shopping for legal cannabis more accessible,” CEO Rogelio Choy said. “It’s hard to overstate how important this is to our company and the industry. It’s deeply gratifying to launch the Apple Store’s first fully-functional cannabis delivery app, making it even easier for our two million registered customers to legally consume.”

Via Apple/Eaze.

In contrast to Apple, Google’s Android app hub updated its policy in 2019 to explicitly prohibit programs that connect users with cannabis, no matter whether it is legal in the jurisdiction where the user lives.

“We don’t allow apps that facilitate the sale of marijuana or marijuana products, regardless of legality,” it says, adding that some examples of violations would be “allowing users to order marijuana through an in-app shopping cart feature” or “assisting users in arranging delivery or pick up of marijuana.”

It also says that “facilitating the sale of products containing THC (Tetrahydrocannabinol), including products such as CBD oils containing THC” is against its policies.

Eaze Distinguished Engineer CJ Silverio said that the “flexibility and depth of our technical team allowed us to respond immediately to the changes in Apple’s policy, and create an app that offers our customers the ideal experience for cannabis delivery.”

Chris Vaughn, CEO of the California delivery service Emjay, previously told WeedWeek that he believes Apple’s decision was informed by the continuing legalization movement in states like New York, as well as Amazon’s recent announcement that it will no longer be drug testing workers for cannabis in addition to lobbying for a federal legalization bill. He added that he thinks Google will “follow quickly” to update its own policies.

The tech industry has had a strained relationship with the marijuana industry, even as a growing number of states have decided to legalize and regulate the sale of cannabis.

Facebook, which in 2019 showed off its artificial intelligence technology that’s capable of identifying images of marijuana, continues to prohibit the commercial advertising of cannabis products, regardless of the legality of the business under state law.

Noncommercial cannabis news sites such as Marijuana Moment and state regulatory bodies like the Massachusetts Cannabis Control Commission have also been caught up in the anti-marijuana policy despite the fact that they do not promote or sell cannabis products. In some cases, it appears these organizations have been hidden from appearing in search results—a practice known as “shadowbanning.”

Despite marijuana firms being banned from Google’s app market, some of the company’s top officials seem pretty bullish about loosening cannabis laws. Google co-founder Sergey Brin joked about supplying employees with joints at a post-election meeting in 2016.

“I was asking if we could serve joints outside on the patio, but apparently these things take a little while to take effect,” Brin said, referring to the implementation of California’s cannabis legalization measure. “It was a huge, huge disappointment. I’ve been bemoaning that all week, I’ll be honest with you.”

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Photo courtesy of Martin Alonso.

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