The Impact of Marijuana on Colorado Home Values

Even advocates of Colorado marijuana legalization have been surprised at how widespread the initiative’s economic benefits have been. Tens of thousands of jobs have been created, billions in tax revenue have been collected by local governments and the Colorado housing market has flourished. But as impressive as it seems on its face, breaking down the numbers behind Colorado’s home prices since legalization shows just how hot the market’s been, and how much of that increase is due to legalized marijuana.

Colorado legalized medical marijuana in 2000, but it wasn’t until 2014 that recreational dispensaries opened. Since then, the median home sale price in Colorado has gone from $248,000 to $380,200. That far outpaces the national average. While some of this growth can be attributed to population growth, as Colorado has been one of the fastest-growing states in the U.S. for several years now, there are some solid correlations between legalized marijuana and home prices.

In Colorado, for example, home prices are higher in the approximately 60 Colorado cities where marijuana is legal, than they are in the cities where it’s not legal. And not only are the homes in legal marijuana cities more valuable, they’re appreciating at a faster rate than homes in non-legal marijuana cities, with home values increasing by 12% year-over-year in legal precincts versus only 9% in their non-legal counterparts.

The patterns seen in Colorado follow national trends that saw home values increasing more in cities that allowed retail dispensaries than they did in cities without legal marijuana. A study by Clever Real Estate found that, from 2014 to 2019, cities that had legalized recreational marijuana sales saw home values go up $22,888 more than in cities where it remained illegal.

This “legalized marijuana effect” was fleshed out in a research brief put out by the conservative Cato Institute, which found that home values within 0.1 mile of a marijuana dispensary increased 8.4% more than homes even slightly further away, even after they controlled for property attributes and neighborhood characteristics. Not only does it pay to be in a city where marijuana is legal, it pays even more to be within walking distance of a dispensary.

One other finding that seems to reinforce the value of full legalization: in cities where only medical marijuana is legal, home values rose at the same rate as in cities where marijuana was fully illegal.

So, what could be causing this increase in home values? It might just be simple supply and demand. In Colorado, marijuana legalization has created over 44,000 jobs. Those workers need places to live, and the closer to work, the better. These are full-time, lucrative jobs, too, so they can afford to pay top dollar. It’s clear that being one of the first states to fully legalize marijuana leads to economic benefits other states can’t actualize.

Tommy O’Shaughnessy is the head of research and PR at Clever Real Estate, an online service that connects home sellers and buyers with a top-rated agent for a fraction of the traditional cost.