Neighborly Love

New empirical data suggests that Denver home values are surging near recreational dispensaries. The positive economic impact of cannabis storefronts on neighboring real estate is finally being recognized in an academic setting.

The new report, ingeniously titled “Contact High: The External Effects of Retail Marijuana Establishments on House Prices,” suggests that homes near cannabis dispensaries have increased in value. The study, led by James Conklin Ph.D., was conducted by researchers with the University of Georgia, the University of Wisconsin and California State University.

“To our knowledge, our paper is the first to address the relationship between retail conversions and house prices, which is important because several states are currently considering legalizing recreational marijuana and others are likely to follow.”

The study frequently mentions “retail conversion” referring to Colorado medical dispensaries that converted to recreational dispensaries in early 2014, when Colorado recreational cannabis sales began. Researchers compared housing values of homes within a 0.1 mile radius of recreational dispensaries versus further away homes between 2013 and 2014. The time span includes the periods directly before and after the passage of Amendment 64.

The findings suggest that single-family residences within 0.1 mile radius of a retail conversion increased in value by over eight percent more than far away properties between 0.1 and 0.25 mile away over that same time period. What that means for homeowners is there was an average of a nearly $27,000 boost in home value for homes near recreational dispensaries. “Our results indicate that retail conversion has a large positive impact on neighboring property values after controlling for property attributes and neighborhood characteristics,” researchers summarized.

We reached out to Dr. Conklin to break down the implications of the study. “What my co-authors and I find is that after stores converted to retail in 2014, houses located close to a retail conversion experienced an increase in prices relative to houses that were located slightly farther away.,” Dr. Conklin told CULTURE. “However, we are not able to say exactly what caused this increase in prices, so I am cautious of calling this a causal relationship.”

The cause of the rise in home values is not fully understood, but the researchers said that driving factors could include a surge in demand due to cannabis-related employment growth, lower crime rates and the influx of additional amenities around converted dispensaries.

The economic impact of recreational dispensaries is rousing, to say the least. But researchers didn’t look at the impact of medical dispensaries on housing values. Prior to 2014, all dispensaries in Colorado were medical only, but have somewhat fallen out of favor to make way for the recreational industry.

Before now, little has been done to analyze the relationships between recreational storefronts and housing prices. “To our knowledge, our paper is the first to address the relationship between retail conversions and house prices, which is important because several states are currently considering legalizing recreational marijuana and others are likely to follow,” researchers proudly stated.

As of October 11, the number of licensed recreational cannabis business in Colorado includes 502 stores, 702 cultivation businesses, six operators, 272 manufacturers, 13 testing facilities and five transporters, according to Colorado’s Marijuana Enforcement Division. Colorado’s Responsible Vendor Program is voluntary, so store owners can elect to participate.

The future of recreational cannabis hinges upon the public perception of how this is all playing out. Studies like this protect the future of the recreational industry and the same logic could be applied in other states with legal cannabis.