- Luke Eastman
Call it a different kind of Reefer Madness.
The 1936 cult film portrayed "devil weed" marijuana as a gateway to depravity. But a new study predicts that legal cannabis can pave the road to riches — when it comes to property values. States that have recently legalized recreational pot use — Vermont among them — "can expect to see home values rise once the law is fully implemented," according to the study, conducted by national real estate brokerage and information firm Clever.
Now, before you ask WTF these researchers have been smoking, many economists agree that the opening of legal cannabis dispensaries creates a ripple effect in surrounding communities — think increased employment opportunities and additional tax revenues from commercial real estate transactions.
But does the high extend to your home? Clever's 2021 report, "How Legalizing Recreational Marijuana Impacts Home Values," contends that a legal pot shop is an amenity that will make nearby houses more attractive — and thus more valuable — to home buyers.
"Between April 2017 and April 2021, property values rose $17,113 more in states where recreational marijuana is legal, compared to states where marijuana is illegal or limited to medicinal use," according to the Clever report, which also shows that Vermont's average home value increased by $44,295 in that period. The study suggests that legalization would have added $16,521 to that bump.
Yet several real estate professionals who've seen the study are hesitant to certify a cause and effect. What is true is that the average price of a residential home in the Green Mountain State has increased by nearly 22 percent in the last year, according to the Vermont Association of Realtors. So when weed-tailers open shop in October 2022, will homes be worth even more?
Spoiler alert: Maybe.
"I would say the presence of a dispensary in your town does increase [residential] property values," Andrew Subin said. He and Tim Fair, partners and attorneys at Vermont Cannabis Solutions, said they represent about 180 businesses that will be pursuing cannabis licenses. States such as Washington, where medical and recreational marijuana has been legalized, have seen highly increased demand for warehouses and storefronts, Subin pointed out.
"You go to the established states out West, and a cannabis retail store is part of the amenities of your neighborhood, just like a grocery store," Subin said.
Imagine a broker's sales pitch to would-be home buyers touting a Budbusters store just down the street.
"I think that it's very realistic," Brian Armstrong said. He's cofounder and CEO of KW Vermont, a real estate franchise, as well as an investor and COO of Magic Mann, a CBD business in Essex Junction. Armstrong said any neighborhood convenience is a plus: "I do not see the difference between saying, 'Hey, there's a great brewery down the road' and 'There's a great cannabis dispensary down the road.'"
Former state senator John S. Rodgers, co-owner of Vermont Farmers Hemp Company in the Northeast Kingdom, said he thought legalization of adult-use cannabis would bring "huge investment" into Vermont and greatly benefit the owners of empty warehouses and former businesses that could be leased by the new enterprises. But he called it a stretch to expect the same impacts on residential housing.
Vermont attorney Carolyn Dubé, who tracks real estate trends, said it would be "almost impossible to account for the sheer number of factors driving those values skyward" in states where weed has been legalized.
Even with some variables controlled in the study, "I am not sure this is representative of the current housing market, with the ongoing significant effects of the pandemic and housing shortage in the state," she added.
To help clear the air, Seven Days went to the study's author, Francesca Ortegren, who manages data science and research for Clever. Using data produced by Zillow, the national online real estate marketplace, her team at Clever specifically targeted marijuana legalization for potential positive correlation with home values.
Ortegren admitted that "it was difficult to make predictions" about Vermont due to the influx of out-of-staters during the pandemic "and a ton of other factors." She added, "I will say we didn't control for all of them, because that's impossible, but also [it] was kind of beyond the scope of what we were trying to do here."
According to Jeff Keller, a Georgia, Vt., data scientist working at Cox Automotive, the study's methodology was badly flawed.
"The author is attempting to draw a causal relationship between marijuana legalization, the number of dispensaries, marijuana tax revenue and home values," he explained. "But ... there is a very good chance that part or most of the effect on home values is driven by unobserved factors that also contributed to marijuana legalization, the number of dispensaries and marijuana tax revenue. For example, legalization may have been the result of a progressive attitude among legislators."
The same attitude may favor other policies that can boost home values, such as funding for public schools, parks and sidewalks, Keller pointed out. "Claiming that the increase in home values was caused by marijuana legalization is shaky at best and potentially misleading," he said.
Mark Twain was fond of declaring, "There are three kinds of lies: lies, damned lies and statistics." Even Armstrong, who is evangelical on the economic and socioeconomic benefits of legalization and fervently believes property values will rise, noted that the study didn't account for many potential value-raising factors.
Rodgers — who helped craft Vermont's regulations governing cannabis sales and thus has a legislative legacy, as well as a business future, at stake — agreed.
"I find it hard to believe," he said, "that a dispensary set up in a town is going to do much for the property values in that town, other than for the folks that are supplying the dispensary."