A new study conducted by researchers at the Wisconsin School of Business has found that marijuana legalization has had a large impact in Denver.
New research from the Wisconsin School of Business at the University of Wisconsin–Madison reveals that property values in the immediate vicinity of Denver’s retail marijuana establishments increased by more than eight percent since the law took effect on January 1, 2014. Moussa Diop, Wisconsin School of Business assistant professor of real estate & urban land economics, along with James Conklin of the University of Georgia and Herman Li of California State University, says the relationship between house prices and retail conversions is particularly important with voters in four states legalizing recreational marijuana use last November and others likely to follow.
“The presence of retail marijuana establishments clearly had a short-term positive impact on nearby properties in Denver,” says Diop. “This suggests that in addition to the sales and business taxes generated from the retail marijuana industry, municipalities may experience an increase in property taxes. It’s an important piece of the puzzle as more and more voters and policy-makers look for evidence about the effects of legalizing recreational marijuana, as the issue is taken up by state legislatures across the country.”
According to a press release from the University of Wisconsin; “Single family residences within 0.1 miles of a retail marijuana establishment saw an increase in value of approximately 8.4 percent compared to those located slightly further—between 0.1 miles and 0.25 miles—from the site. That increase in property value was estimated to be almost $27,000 for an average house in the area.”
While the study did not seek to identify the underlying drivers of what led to an increase in property values near retail conversions, the authors did identify potential explanations including:
- 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 findings are in line with a 2016 study that identified a six percent increase in housing values on average in municipalities across the state of Colorado that allowed retail marijuana sales.
The study relied on residential property information from the City of Denver’s Open Data Catalog and a list of retail licenses granted by the Colorado Department of Revenue, the agency responsible for administering the new law.
The paper, “Contact High: The External Effects of Retail Marijuana Establishments on House Prices” will be published in Real Estate Economics.