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From infrastructure growth to health care availability, there are many traditional drivers that can make property values rise within a state. Now add one more: cannabis legalization. A recently-released study from online referral website Clever Real Estate shows that over the past four years, property values rose $17,113 more in states where recreational cannabis is legal, compared to states where cannabis is illegal or limited to medical use.

The study used publicly available data from Zillow, the U.S. Census Bureau and other sources to reach its conclusions. Overall, the study team found that legalization leads to higher property values and millions of dollars in new tax revenue. In fact, states that legalize recreational cannabis and add new retail dispensaries see far greater property value and tax revenue gains than states that block dispensaries and/or limit cannabis to medical use only.

You’d expect the National Association of Realtors — the industry’s largest trade association — to also have a position on legalization. But surprisingly, they don’t. So this Clever study has generated heavy interest from the real estate community. Among its key takeaways:

  • From 2017 to 2019, home values increased $6,338 more in states where cannabis is legal in some form, compared to states that haven’t legalized cannabis.
  • On average, home values increased by $470 for every $1 million increase in tax revenue. In 2020, the eight states that reported a full year of cannabis tax revenue earned a combined $2.3 billion — $1 billion in California alone.
  • In the five states that have legalized recreational cannabis but have yet to begin sales, home values are predicted to increase by an average of $61,343 when sales go into effect.
  • Cities with more dispensaries are positively correlated with higher home values, suggesting legislation boosts jobs and economic growth. With each new dispensary a city adds, property values increase by $519.
  • Cannabis legalization is shown to create fresh demand for housing, new business and tourism.
  • Despite the pandemic causing unemployment rates to soar, the cannabis industry added 77,300 new full-time jobs to the economy in 2020, for an impressive 32% year-over-year increase.

A similar analysis last year from the University of Oklahoma found that the presence of a dispensary boosts housing prices, as the public puts a premium on having a facility nearby. So those states that have yet to legalize cannabis, or only allow medicinal use, are missing out on millions of dollars in tax revenue as well as seeing property values rise.