The Effect of Marijuana Dispensary Openings on Housing Prices

Abstract

We evaluate the effect of medical and recreational dispensary openings on housing prices in Denver, Colorado. Using an event study approach, we find that the introduction of a new dispensary within a half‐mile radius of a new home increases home prices by approximately 7.7% on average. The effect diminishes for homes further from new dispensaries but is consistent over time. Our results provide important and timely empirical evidence on the socioeconomic impacts of marijuana legalization. (JEL R32, R38, R5)

Getting High and Low Prices: Marijuana Dispensaries and Home Values

“…Table 2, column (3) adds census tract by year fixed effects. Under this specification, the estimated effect of a dispensary is slightly positive, consistent with the prior research (Conklin, Diop andLi 2017, Burkhardt andFlyr 2018). However, this specification does not account for the possibility that dispensary location is endogenous to differential price trends within tracts.…”

“…However, Conklin, Diop and Li (2017) remained agnostic regarding the true underlying causal mechanisms. Burkhardt and Flyr (2018) also examined the Denver market and followed a similar methodology to Conklin, Diop and Li (2017), but estimated the average effect of a local dispensary generally, rather than estimating the effect of conversions from medical providers to recreational dispensaries. The study found that a home within a half-mile of a dispensary sold at an 8% premium, confirming the positive effect identified in Conklin, Diop and Li (2017).…”

“…To the author's knowledge, the above studies represent the totality of empirical research estimating the effect of dispensaries on home values. Given that the estimates of Conklin, Diop and Li (2017) and Burkhardt and Flyr (2018) are surprising in their magnitude, and potentially the direction of the effect, it is worth effort to build additional evidence from other environments. As noted in the past studies, the effect of dispensaries on home prices may vary depending on the city studied and the details surrounding the legal status of marijuana.…”

Geographical access to recreational marijuana

“…Retailers may choose to locate in a specific place for a variety of reasons, like anticipating greater demand for marijuana, greater visibility to the public, cheaper property, or lower chances of being required to move by local laws and regulations. Additionally, individuals may choose to move toward or away from retailers, due to an appreciation/aversion of marijuana, concerns of effects on family members, or perceived effects on property values (Burkhardt & Flyr, 2018; Conklin et al, 2017). We examine the effect of travel time on various demographic characteristics to see if stores tend to locate near certain groups of people or if these groups tend to move in response to new stores.…”

“…31 31 See, for example, Burkhardt and Flyr (2018) and Swensen (2015) for studies that address concerns of endogenous marijuana retail and substance abuse treatment clinic locations, respectively. …”