Study Shows Legal Weed Boosts Property Values, However...

The relative value of legalizing marijuana remains a complicated debate with several layers seemingly having little to do with each other. While it’s difficult to argue that the advent of recreational weed has boosted state tax revenues significantly, questions about how the “normalization” of marijuana would impact culture and crime were less clear. While the debate over the message sent or not sent to young people by legalizing pot will rage on, a recent study indicates that property values benefit from having recreational marijuana stores in their proximity.

A common argument against the legalization of marijuana is that regardless of the tax revenue it accumulated, the nefarious characters and related crime that such stores would attract would diminish if not outweigh the benefits. Of course, this argument sounded like it was torn out of the Reefer Madness screenplay to many. Still, the iteration of the anti-legalization pitch that posited weed stores could decrease property values by increasing undesirable foot traffic seemed to hold water, at least on a theoretical basis.

Settling this debate would take time. Initially, it became clear that it would take a boatload of crime to negate the combined revenue from taxes, licenses and fees derived from the legalization of recreational marijuana. Those revenues have absolutely exploded since they were first recorded in 2014, when the state collected $67,594,323. In 2017, that number had ballooned to $247,368,473. 2018 remains on a similar pace.

The debate around legalization’s impact on crime remains speculative, but it doesn’t appear positive. The soaring marijuana-related revenues would suggest that out-of-state residents have moved in since 2014, taking advantage of the legal weed. Unless Colorado’s resident population has drastically altered their consumption patterns, this conclusion is difficult to avoid. Two years after recreational marijuana was legalized in 2014, Colorado was one of the few states in the nation to see a rise in crime per 100,000 people in its largest cities.

‘Last year’s number of homicides — 189 — marked an 9.9 percent increase over the 172 in 2015, according to the Colorado Bureau of Investigation report “2016 Crime in Colorado.”… Factoring in the state’s population grown, the homicide rate increased 6.3 percent per 100,000 residents, the CBI reported.’ (Denver Post)

Some have not shied away from accusing the legal marijuana industry directly.

‘Some Colorado lawmakers, police and legal experts partly blame the marijuana industry, claiming that it has lured transients and criminals to the state.’

However, proponents of legalization can now point to a recent study from the Cato Institute’s James Conklin, Moussa Diop, and Herman Li that shows property values in the proximity of recreational marijuana retail stores. The study covers a period beginning on January 1st, 2014, when the law legalizing recreational marijuana came into effect. It must be stated that only medical marijuana facilities were permitted by law to sell recreational marijuana, so the study examines a “retail conversion”, and is not necessarily reflective of trends that would emerge in a city introducing completely new recreational marijuana facilities.

The findings regarding the effect of property values were unequivocally positive.

‘Our results indicate that retail conversion has a large positive effect on neighboring property values after controlling for property attributes and neighborhood characteristics. We find that after the law went into effect, single-family residences close to a retail conversion (within 0.1 miles) increased in value by approximately 8.4 percent relative to houses that are located slightly farther from a conversion (between 0.1 miles and 0.25 miles).’ (Cato Institute)

The study also found that the rise in property values was highly localized, an indication that it is not simply coincidental regional trends, but the existence of the marijuana retail locations that are responsible for these property value trends.

‘Properties within 0.1 miles of a retail conversion experience a large increase in value; however, properties farther than 0.1 miles appear not to be affected by retail conversion.’

The findings of the study explain that potential explanations for these trends ‘include, but are not limited to, a surge in housing demand spurred by marijuana-related employment growth; lower crime rates; and additional amenities locating in close proximity to retail conversions.’ It’s also likely that the foot traffic created by massive demand for these marijuana retail locations has increased business in the immediate area. The virtually-guaranteed potential consumer pool that comes to an area to acquire a product that sells itself – weed – is almost undoubtedly a boon for even modestly competent businesses located in the direct vicinity.

It’s an interesting phenomenon to consider: while crime rates in Colorado and Denver specifically – a city that accounts for 1 in 3 of the state’s homicides – are on the rise, the areas immediately surrounding recreational dispensaries is relatively low. Critics would easily explain this away; would-be criminals may be attracted to the states by legal weed, but aren’t likely to commit their crimes in high-traffic, visible areas where business is booming and property values are rising because of that commerce.

The report conducted by the Cato Institute’s researchers seems to parry criticism of recreational marijuana on its face. In a sense, if the measure was simply the benefit on businesses, property values and quality of life in a .1 mile radius of these shops, that would be true. And, the state’s tax revenues would support this sentiment. However, the increasing crime rates in the state more broadly and the unanswered questions about the intangible effects of legalization – cultural and otherwise – mean that the debate over the net value or detriment of recreational marijuana remains open.

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