A “retail conversion” refers to a medical marijuana dispensary that was converted to recreational in the beginning of 2014. Remember that in the early days, only medical license holders were allowed to get into retail sales, so all of the first pot shops were “conversions.” According to the Marijuana Enforcement Division (MED) of Colorado’s Department of Revenue, 103 such licenses were issued in the first year of retail sales in Denver.
In particular, the report found that single-family residences within .1 mile of a retail conversion increased in value by over 8 percent more relative to comparable properties farther away (between .1 and .25 mile away) over that year. That’s an average of almost $27,000 in added value, whereas homes more than .1 mile away from a conversion weren’t impacted.
The researchers emphasized that they’re looking at effect, but not cause. There could be other drivers of the rising home values near recreational marijuana dispensaries. “Potential explanations include,” they wrote, “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.” Other caveats they note are that the scope of their study doesn’t take into account the initial impact of the dispensaries pre-conversion — i.e., they already existed as medical dispensaries, so whatever impact their establishment first had on neighboring home values is ignored.
Job growth during this period and the coinciding pressure on the city’s housing supply aren’t taken lightly by the researchers who cited a study done by the Marijuana Policy Group showing that in its first two years, the legal marijuana industry generated over 18,000 jobs in Colorado. In January of this year, Leafly.com found the number of marijuana industry jobs in Colorado had grown to over 23,000.
“Taken together,” the researchers wrote, “an increase in marijuana-related jobs, a tightened housing market, as well as the evidence we present that the housing stock near (within .1 mile) of a medical dispensary is relatively lower valued than other housing stock all combine to provide a story that there were many competitive buyers for the more affordable units in the city and the fact that they are located near retail dispensaries is not considered a disamenity. In fact, if many of these buyers have marijuana-related jobs, living near a retail dispensary could be considered an amenity.”
Though the scope of this study is narrow, it could be relevant to other cities that are considering the potential impact of legalizing recreational marijuana. Its findings are in line with a 2016 study out of the University of Mississippi that found a 6 percent increase, or an average of $16,500 per property, in home values in Colorado municipalities that allowed retail sales between 2010 and 2015. That study too, theorizes that legalization increases housing demand. Both studies also note that as property values increase, so too do local governments’ tax receipts.