Recent studies into the economic impact of cannabis legalization have uncovered increases in hotel revenue, job growth and now, according to new analysis from a team of economists at the University of Oklahoma, property prices. Based on their findings, house valuations climbed the most when a cannabis retail outlet was positioned nearby.

Only properties in the cannabis-friendly states of Colorado and Washington were analyzed by the economists; the team utilized information from real estate listings featured on Zillow.com. Their analysis tells us that cannabis legalization has had “beneficial spillover effects at both the state and local levels.”

Data pulled from a separate study conducted in 2016 also demonstrated that “legalization leads to an average six percent increase in housing values, indicating that the capitalized benefits outweigh the costs.”

House prices increase most during the early days of cannabis legalization

The key takeaway from this study is that housing prices were directly affected following the approval of cannabis legalization ballot measures. Moreover, the most expensive homes saw the largest valuation increase once a cannabis legalization law had passed. Less expensive homes, on the other hand, only seemed to increase in price once the cannabis stores in their area had actually opened for business. 

The research was published in SSRN — formerly known as Social Science Research Network. Most notably, their findings spotlighted a seven percent price increase when cannabis retailers initially launched for business in Colorado’s neighborhoods. 

“Considered together, this research suggests that there are second order benefits associated with [cannabis] legalization that policy makers and voters should be aware of when deciding the drug’s legal status,” wrote the economists, who claim that highly-valued properties were more likely to increase in price following legalization, as opposed to cheaper homes. However, properties of all prices experienced a spike in valuation after cannabis was legalized. 

Cannabis study researchers say that their findings support full cannabis legalization

One of the main motives of the University of Oklahoma’s economists was to dispel concerns related to the potentially negative impact that federal legalization may have on crime rates. It seems as though they have succeeded in their mission.  

“Concerns about the potential effect on crime rates and the difficulty in policing impaired driving have been cited as reasons to slow-walk the path to full recreational legalization,” wrote the study’s authors. “This research contributes to the discussion, providing evidence that recreational [cannabis] legalization (RML) has large positive spillover effects on the local housing market.”

University of Oklahoma’s economists stated how they discovered “positive effects in the top of the distribution following the success of the ballot measure legalizing recreational [cannabis], but no effect in the lower half.”  The team noted how this has had a positive influence on tax revenue for states that have legalized cannabis.

“If the primary mechanism in our cross-state models is the economic development effect, then it is possible that the impact is only felt once the first dispensaries open and a large volume of [cannabis] sales take place, thereby generating tax revenue,” wrote the researchers, adding that, “cannabis’ liberalization provides a novel source of tax revenue which states have used to fund capital expenditures, especially in education and it acts as an amenity via the dispensaries that distribute it.”

In summary, the development of a new legal cannabis market has “direct implications for the local economy.” In addition to increased housing prices, the study authors also attributed economic growth to the fact that less money is being spent on arrests; since fewer people are being arrested in legal states. Moreover, cannabis dispensary jobs are creating extra revenue for legal states. 

“All of these factors have well-established impacts on housing markets,” concluded the economists.