By Peter Psotny - October 25, 2017
It is common knowledge that states where marijuana is legal have seen a drastic influx of people relocating to area. Colorado has been at the forefront of this migration for the last several years. How has this specifically affected residential real estate?
The Starbucks Effect
The “Starbucks Effect” is a real estate concept that has proven time and again to be accurate. Homes within a quarter mile of a Starbucks (this is also true for other coffee shops depending on the area) are worth notably more, with the increase attributed to the proximity of the coffee shop.
According to results from a recent study by the University of Wisconsin Madison, houses in Colorado that are located 0.1 miles or less from a marijuana dispensary experienced price increases that are eight times higher than homes that were similarly situated except that they were farther from dispensaries. The estimated difference on average was a $27,000 increase.
The Dispensary Study and Outside Factors
The study was conducted in 2013 and 2014, which were the initial years leading into marijuana legalization in Colorado. Experts contend that there are several other underlying factors that may have contributed to the increase. Several areas that are home to dispensaries are also near shopping, coffee shops and restaurants, which can increase a home’s value. The large influx in people and businesses is often attributed to the legalization of marijuana, also known as the “green rush.”
“Taken together, 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,” wrote the researchers, “In fact, if many of these buyers have marijuana-related jobs, living near a retail dispensary could be considered an amenity.”
Community Specific Results
There are affluent areas in the state in which the presence of a dispensary would not increase the price of a home. Areas such as Bonnie Brae, Lower Highland and West Washington Park stereotypically prefer to keep marijuana consumption discreet due to the stigma that still surrounds the product in certain demographics.
Whether or not the presence of a dispensary nearby can still be equated with a notable effect on housing prices cannot be said for certain. Regardless of reason, many properties near dispensaries are still worth more (for better or worse) than their counterparts further away.