A recent study suggests that American states that legalize cannabis are in fact seeing an increase in house prices, with a more pronounced effect once nearby cannabis outlets open their doors.
Economists at the University of Oklahoma have attempted to verify the impact of adult cannabis legalization by examining the ads on Zillow.com and monitoring them since legalization in Colorado and Washington State. Their findings suggest that legalization “has beneficial effects at both the state and local levels.
Concerns about the potential effect on crime rates and the difficulty of controlling impaired driving were cited as reasons to slow the progress toward full recreational legalization. The authors of the study write. This research contributes to the discussion, providing evidence that the legalization of recreational cannabis has significant positive ripple effects on the local real estate market.
Specifically, property prices in Colorado and Washington increased by 7% when cannabis shops opened, according to the study. This research suggests that there are second-order benefits associated with the legalization of cannabis that policymakers and voters should be aware of when deciding on the legal status of the drug.
However, legalization tends to have a different impact on the value of the most expensive homes than the cheapest, even though all have increased in value. The prices of the most expensive houses increased immediately after the legalization vote, while the cheapest areas experienced an increase from the time the regulation was introduced.
The greatest impact occurs once it is legal to sell cannabis. They write. The announcement of legalization resulted in positive effects of more than 10% in the upper half of the price distribution. According to the study, and 5-15% after the state enacted the law and the first legal sales.
Why this unbalanced effect? Economists argue that several mechanisms could be at work, an important one being access to liquidity among the wealthiest populations.Wealthier households can migrate more quickly to (legal) states if they believe that legalization has a positive impact.
They also took particular note of the actual opening of the stores. While the main mechanism of our inter-state models is the effect on economic development. Says the study. The impact may not be felt until after the first dispensaries open and a significant volume of cannabis sales takes place, generating tax revenue.