According to recent national headlines, legal cannabis already boosted sales for fast-food chains like McDonald’s and Taco Bell, which one might expect, but a new Wisconsin School of Business study found something many might not expect. Published in August 2017, “Contact High: The External Effects of Retail Marijuana Establishments on House Prices” examined the impact on home values in Denver neighborhoods where medical cannabis dispensaries converted into recreational retail outlets.
“Single family residences close to a retail conversion increased in value by approximately 8.4% relative to houses that are located slightly farther from a conversion,” wrote the authors, who characterized the gain as “a large positive impact.”
The study defined “close” as within a tenth of a mile, which it compared to properties between a tenth and a quarter mile away. The researchers also controlled for property attributes and neighborhood characteristics. The findings are slightly higher than a 2016 study, “The Effect of Legalizing Retail Marijuana on Housing Values,” which found a six percent increase with retail outlets.
What caused the homes to appreciate in value? Per the Wisconsin School of Business, potential explanations include “a surge in housing demand spurred by marijuana-related employment growth, lower crime rates, and additional amenities locating in close proximity to retail conversions…. The obvious direct effect of a retail conversion is the increase in asset value that accrues to an owner of a property, which we approximate to be almost $27,000 for an average house within 0.1 miles of a conversion.”
Interestingly, the study noted yet another benefit from legalization. The public recognizes the increase in tax revenue from retails sales, but home appreciations also increase property tax revenue, which is then funneled into public schools and other services.
For homeowners, the appreciation in property value is certainly worth the longer lines to order Nacho Cheese Doritos Locos Tacos Supreme or whatever other late-night munchies call your name.