When a shop selling marijuana opens (or closes), there’s a direct impact on housing and rental prices in the surrounding area, according to a pair of recent studies.
Housing prices for new homes increase by 7.7 percent on average if they’re located within a quarter mile of a new dispensary.
A study published in the journal Contemporary Economic Policy evaluated how the price of new homes in Denver, Colorado, changes when a cannabis dispensary opens up nearby. Researchers compared the prices of homes before and after a dispensary opened within .25 miles, .25-.5 miles and .5-.75 miles.
When new dispensaries opened within .25 miles, housing prices jumped 7.7 percent on average. There was still a 4.7 percent increase for homes located within .5 miles, but the effect “disappears entirely” for houses that are further than .5 miles from a new dispensary. The researchers also found that the effect was slightly more pronounced if the dispensary was the first to the area.
“Our results suggest that despite potential costs, legalization is capitalized as a net benefit in housing prices,” the researchers wrote.
Interestingly, new dispensaries seem to have about the same impact on housing prices as new grocery stores, the study found. But the “mechanisms through which grocery stores affect housing prices are more obvious than dispensaries.”
“If public sentiment surrounding marijuana is positive, homebuyers may also prefer to select into neighborhoods with more dispensaries for convenience. Ultimately however, our data do not allow us to directly determine the underlying mechanisms driving this result, so these potential explanations should be considered speculative.”
Losing a marijuana coffeeshop causes a three percent decrease in Airbnb rental prices.
Amsterdam’s famous cannabis coffeeshops are known tourist attractions, but what happens when one shuts down? For his master’s dissertation, doctoral student Igor Goncalves Koehne de Castro identified at least one collateral effect: Rental costs on Airbnb drop by about three percent on average if the closure was within 250 meters of the lodging.
If the coffeeshop was further than 250 meters, rental prices didn’t change significantly.
There were plenty of examples for de Castro to study, which spanned from 2014 to 2017, because several coffeeshops have closed in response to new laws in recent years, including one in Amsterdam that prohibits the shops from operating within 250 meters of a school.
After controlling for other possible factors, de Castro developed a series of models based on Airbnb data on rental prices over time and their proximity to recently closed coffeeshops. The study revealed that these shops “present a positive impact” on rental prices for lodgings close to the shops—presumably because people who rent through Airbnb are “tourists” who are “sensitive to distances.”
“The findings of this study suggest that, for the city of Amsterdam, the de facto legalization of cannabis actually has a positive externality,” de Castro wrote. “This result puts new evidence to the debate of drug laws and policies, a matter that still lacks data and research.”
Photo courtesy of WeedPornDaily.
Massachusetts Marijuana Tax Revenue Now Exceeds Alcohol By Millions
Massachusetts is officially collecting more tax revenue from marijuana than alcohol, state data shows.
As of December 2021, the state took in $51.3 million from alcohol taxes and $74.2 million from cannabis at the halfway point of the fiscal year.
Overall, Massachusetts has seen $2.54 billion in adult-use marijuana purchases since the market came online in November 2018. Regulators first reported that the state achieved the $2 billion sales milestone in September.
The news about cannabis overtaking alcohol in terms of tax revenue, which WCVB-TV first reported, is a welcome development for advocates who have been arguing that the plant is less harmful than liquor and could be used as a substitute.
Illinois also saw cannabis taxes beat out booze for the first time last year, with the state collecting about $100 million more from adult-use marijuana than alcohol during 2021.
States that have legalized marijuana have collectively garnered more than $10 billion in cannabis tax revenue since the first licensed sales started in 2014, according to a report released by the Marijuana Policy Project (MPP) earlier this month.
And in those adult-use states, regulators are doing what they can to ensure that the tax dollars are effectively invested.
For example, Illinois is dedicating portions of tax revenue to mental health services, as well as local organizations “developing programs that benefit disadvantaged communities.” In July, state officials put $3.5 million in cannabis-generated funds toward efforts to reduce violence through street intervention programs.
California officials announced in June that they were awarding about $29 million in grants funded by marijuana tax revenue to 58 nonprofit organizations, with the intent of righting the wrongs of the war on drugs. The state collected about $817 million in adult-use marijuana tax revenue during the 2020-2021 fiscal year, state officials estimated last summer. That’s 55 percent more cannabis earnings for state coffers than was generated in the prior fiscal year.
Nearly $500 million of cannabis tax revenue in Colorado has supported the state’s public school system. That state brought in a record $423 million in marijuana tax dollars last year.
Banking Activity Increases In States That Legalize Marijuana, Study Finds
While marijuana businesses often struggle to find banks that are willing to take them on as clients due to risks caused by the ongoing federal prohibition of cannabis, a new study found that banking activity actually increases in states that legalize marijuana.
The research doesn’t make a direct connection between state-level marijuana reform and the increased activity, but it does strongly imply that there’s a relationship—even if the factors behind the trend aren’t exactly clear.
Researchers set out to investigate banking trends in states that have legalized cannabis, looking at bank regulatory filings with the Federal Deposit Insurance Corporation (FDIC) from 2011 to 2016. They found evidence that “banking activity (deposits and subsequent loans) increase considerably in legalizing states relative to non-legalizing states.”
That’s in spite of the fact that banks and credit unions run the risk of being penalized by federal regulators for working with businesses that deal with a federally controlled substance.
“While uncertainty can result in overly cautious behavior and hinder economic activity, we do not find evidence of this with cannabis laws and the banking industry,” the authors wrote in the new paper—titled, “THC and the FDIC: Implications of Cannabis Legalization for the Banking System.”
The study analyzed data from “150,566 bank-quarter observations from 6,932 unique banks located in 46 different states.” It found that deposits increased by an average range of 3.14-4.33 percent—and bank lending increased by 6.54-8.62 percent—post-legalization.
“Our results indicate that deposits and loans increased for banks after recreational cannabis legalization.”
Of course, it makes sense that legal states would see increased financial activity in the banking sector after opening a new market, even if only some banks choose to take the risk of working directly with cannabis businesses. The emerging marijuana industry also supports an array of ancillary firms and traditional companies that provide services to dispensaries and grow operations.
As of June 30, there were 706 financial institutions that had filed requisite reports saying they were actively serving cannabis clients. Thats up from 689 in the previous quarter but still down from a peak of 747 in late 2019.
But the question remains: why are some banks deciding to take on marijuana clients while others remain wary of federal repercussions?
The study authors—from the University of Arizona, Drexel University, San Diego State University and Scripps College—put forward two possibilities about why “the risk from regulatory uncertainty did not decrease banks’ willingness to accept deposits or make loans.”
The increase “may suggest that banks were either unconcerned about the potential risk associated with accepting cannabis related deposits or optimistic about the chances that regulations will adapt to the needs of legalizing states,” the paper reasons.
Confidence about working with a federally illegal industry may well have been bolstered in 2014 when the Financial Crimes Enforcement Network (FinCEN) under the Obama administration issued guidance to financial institutions on reporting requirements for cannabis-related businesses.
The second option, optimism about federal reform, also seems possible. It was around the time that the bipartisan Secure and Fair Enforcement (SAFE) Banking Act was first introduced that there was a notable spike in financial institutions reporting that they have marijuana business clients.
In the years since, that legislation has been approved in some form five times in the U.S. House of Representatives, but it’s continued to stall in the Senate. In general, banks reporting marijuana accounts has remained relatively stable since 2019.
“Although many have speculated about the increased legal risks to banks, there is a lack of evidence for instances where banks are criminally prosecuted or lose their federally insured status,” the study states. “If these negative repercussions rarely happen, it makes sense that banks would not respond to the legislative uncertainty.”
“As more state regulators issue statements in support of banks and credit unions serving the cannabis industry, the financial institutions can become more optimistic about the chances that regulations will adapt in their favor with time,” the authors wrote.
Despite optimism for future reform that certain lawmakers have expressed, it doesn’t necessarily take the sting out of the latest failed attempt to secure protections for banks that choose to work with state-legal cannabis businesses as part of a large-scale defense bill.
A pro-reform Republican senator recently slammed Democrats for failing to advance marijuana banking reform despite having a congressional majority and control of the presidency.
For what it’s worth, the secretary of the U.S. Treasury Department recently said that freeing up banks to work with state-legal marijuana businesses would “of course” make the Internal Revenue Service’s (IRS) job of collecting taxes easier.
With respect to the SAFE Banking Act, a bipartisan coalition of two dozen governors recently implored congressional leaders to finally enact marijuana banking reform through the large-scale defense legislation.
A group of small marijuana business owners also recently made the case that the incremental banking policy change could actually help support social equity efforts.
Rodney Hood, a board member of the National Credit Union Administration, wrote in a recent Marijuana Moment op-ed that legalization is an inevitability—and it makes the most sense for government agencies to get ahead of the policy change to resolve banking complications now.
Colorado Earned $423 Million In Marijuana Tax Revenue Last Year
More than $12 billion in marijuana has been sold since legalization in 2014, with the state collecting over $2 billion in taxes.
By Robert Davis, The Center Square
Colorado brought in a record $423 million in tax revenue from marijuana sales last year, according to the latest market report from the state’s Department of Revenue (DOR).
In all, Colorado has sold more than $2 billion in marijuana through November 2021, making it the second consecutive year that the state has eclipsed that mark. In 2020, the state collected $387 million in taxes from the sales.
Colorado’s tax revenue total also implies that the state beat its previous record of $2.1 billion in sales, though DOR said it will release the final numbers next month.
More than $12 billion in marijuana has been sold since legalization in 2014, with the state collecting over $2 billion in taxes.
🚨New record alert!🚨 In 2021, Colorado collected over $423 million in revenue from marijuana sales (compared to the previous record of over $387 million in 2020). Colorado also surpassed $2B in tax and fee revenue and $12B in marijuana sales to date. https://t.co/M5zrEiSNYR pic.twitter.com/XxpZzyV1XQ
— CO Dept. of Revenue (@CO_Revenue) January 12, 2022
Colorado collects its marijuana taxes from a 2.9 percent state sales tax on marijuana sold in stores, a 15percent state retail marijuana sales tax and a 15 percent retail marijuana excise tax on wholesale sales and transfers of marijuana. The state also collects fee revenue from marijuana license and application fees.
In December, Colorado collected more than $30 million in taxes, capping off a five-month streak of declining tax revenue.
The state also recorded more than $158 million in sales in November, with both medical and recreational marijuana showing significant declines in sales.
Colorado sold $131 million in recreational marijuana in November, an 11 percent drop when compared to October.
Similarly, November’s medical marijuana sales totaled $26 million, representing a drop of more than 10 percent on a month-over-month basis.