The last decade has seen a slow move toward nationwide marijuana legalization. The Pew Research Center reported at the beginning of January that 61% of Americans support marijuana legalization. An April Quinnipiac University poll put the number at 63%. Theres clear and unprecedented support for legal pot.
But what will happen to our communities and our quality of life if marijuana is legalized? Moreover, talk is cheap: people might say they want pot legalized, but do they walk the talk, so to speak, with where they choose to live?
Apparently, they do. According to new research published in the July 2018 issue of Economic Inquiry, legalizing retail sales of marijuana in Colorado increased housing values by about 6%or an average of $15,600 per house.
Using data on home sales from 2010 through 2015, economists Cheng Cheng and Walter J. Mayer from the University of Mississippi and FNC, Inc. Director of research Yanling Mayer compared the increases in home prices in Colorado municipalities that legalized retail marijuana sales to home prices in Colorado municipalities that did not and found that there was a bigger jump in home prices in municipalities that legalized retail marijuana sales. Legalizing pot stores, it seems, increased home values.
So how does this happen? One of the cool things about real estate prices is that they reflect a lot more than just walls, roofs, and lawns. They also reflect the value of local amenities (like a nearby park) and local disamenities (like a nearby landfill).
When people decide where to live, they vote with their feet and their money for different bundles of local public policies (heres the Wikipedia page for the Tiebout model). Real estate prices reflect--not always perfectly--peoples willingness to pay for different bundles of public policies and local amenities. Real estate prices reflect whether people think a policy makes a place a more attractive or less attractive place to live.
The researchers evidence suggests that legalizing retail marijuana sales is more like a park than a landfill. As judged by the effect on real estate prices, legal retail marijuana sales make a town a place where more people want to live and fewer people want to leave.
Theoretically, this could go either way. Perhaps people dont want to live near a marijuana store. Maybe pot shops attract a bad element. Maybe pot is an input into other crimes, like intoxicated driving or what have you.
If these costs exceeded the benefits in the minds of potential home buyers, then we would expect to see prices fall. But we dont: the researchers evidence suggests that people are willing to pay more to live in places where retail marijuana sales are legal. As they note, the timing of the jump in home prices is coincident with the legalization of retail marijuana sales. This suggests theres a causal effect.
This is closer to the first word than the last word on the local effects of marijuana legalization. I expect we will see a series of follow-up studies using data from other states that have legalized retail marijuana sales and different methods to identify the effect of marijuana legalization and the legalization of retail marijuana sales on home prices. These will give us a much clearer picture. For now, though, the evidence suggests that homebuyers think pot shops are good neighborsor, at least, not bad ones.
|Art Carden is a Research Fellow at the Independent Institute and an Associate Professor of Economics at Samford Universitys Brock School of Business.|