Marijuana and Real Estate: A Budding Issue
The legalization of marijuana has started to impact the real estate industry. If marijuana is legal within a state, the product is grown, harvested, stored, sold, and consumed within state lines. As such, commercial practitioners are finding increased demand for land, warehouses, and store fronts for marijuana. Residential practitioners are navigating an environment of marijuana being used within rental properties, homeowner associations creating rules about consumption and growth, and title questions selling a home where the product has been grown and consumed. This report dives into these themes using a survey among members of the National Association of REALTORS®.
The report is broken down by how long marijuana has been legal within the state. The legality was based on laws that were in place at the time the survey was deployed in fall of 2019.
- States where medical and recreational marijuana have been legalized for more than three years have seen more increases in demand for commercial properties—specifically for 42% saw an increase in demand for warehouses, 27% an increase for storefronts, and 21% an increase for land.
- In states where it is legal before 2016, 21% had increase in the value of commercial properties near dispensaries, but 18% reported a decrease
- Thirty-two percent of states where in medical and recreational marijuana was legal the longest did have lease addendums regarding growing of marijuana.
- Thirty percent in states where medical and recreational marijuana was legal the longest did have lease addendums regarding sales of marijuana.
- The most frequently cited concern of commercial members was the smell when leasing to marijuana related businesses, followed by theft of cash on property, moisture issues, and fire hazards.
Ripple impact to residential
Residential practitioners are navigating an environment of marijuana being used within rental properties, homeowner associations creating rules about consumption and growth, and title questions selling a home where the product has been grown and consumed.
Impact on residential side:
- In states where marijuana was legal the longest, 27 percent had seen a decrease in residential property values near dispensaries and 12 percent had seen an increase.
- The majority of respondents reported that homeowner associations often had rules and restrictions against smoking and growing in home or common areas.
- One-quarter of residential members in states that legalized recreational more than three years ago had sold a grow house in the past.
- One-quarter of members who sold a grown house in states where marijuana was legal the longest had a hard time selling the home.
- Half of those in states that legalized both medical and recreational marijuana prior to 2016 had seen addendums added to leases which restrict growing on properties
- The most common issue was the smell, followed by moisture issues.
- In states where recreational marijuana is legal, 58 to 67 percent of residential property managers have seen addendums added to leases which restrict smoking on properties.