More states are implementing regulations related to the use and sale of marijuana, whether for medical or recreational purposes. These changes are having significant impacts on other industries, including real estate. A new report from the National Association of REALTORS® (NAR), Marijuana and Real Estate: A Budding Issue, looked at how the marijuana industry is influencing real estate markets, particularly in areas where marijuana has been legalized since before 2016.*
“The commercial industry has been impacted considerably, and we have seen a ripple effect into the residential markets—especially in states where marijuana has been legal for a longer period of time,” Dr. Jessica Lautz, vice president of Demographics and Behavioral Insights for NAR, told RISMedia.
The impact starts off in the commercial space, in states where marijuana can be legally grown, sold and consumed. Growers and distributors are increasing the demand for land, and require warehouse space to store their supply and storefronts for selling it.
The impact is quickly trickling down into residential real estate, as well.
“As more states legalize marijuana, the real estate market will progressively have to adjust,” said Lautz in a statement. “From property owners to manufacturers to those who simply want to engage for leisure, it all touches real estate in some form.”
Who’s doing the work on the agent side? Of those surveyed, only 2 percent were marijuana specialists in residential real estate, but while the sample size of NAR members who have experience with marijuana-related listings and buyers is still small, it is growing, with 2 – 5 percent of residential respondents, in states where marijuana is legal either for medical and/or recreational use, saying they are aware their MLS contained a marijuana field.
REALTORS® are seeing a correlation between limited housing supply and the marijuana industry. According to the report, between 9 percent and 23 percent of members in these states say that cash-only purchases from the marijuana industry, which typically only runs on cash, are one of several reasons for tight inventory.
In terms of how the industry impacts property values, NAR found that between 7 percent and 12 percent of respondents saw an increase in home values for properties located near dispensaries. Meanwhile, 8 – 27 percent saw a decrease in value. Most reported no changes.
Another element to consider: rentals and HOAs. Several HOAs have limits regarding using and growing marijuana on their property; however, 3 percent of those surveyed did say that specific HOAs now allow growing or smoking in the home or common areas.
In the rental space, half of surveyed members say they’ve had no problems leasing a property that was previously occupied by a tenant who legally grew marijuana. There were some downsides, however. These units and homes sometimes had lingering odors and moisture issues—problems that are more common in states where recreational marijuana has been legal for a longer period of time.
“Residential practitioners are getting used to the new normal of having marijuana legally used within rental properties, while homeowner associations are tasked with setting new rules to address consumption and growth,” said Lautz.
There’s a cost for tenants who want to grow or smoke marijuana, however. Out of tenants who regularly smoke in their rental, almost nine out of 10 were responsible for paying their own utility costs.
What might the industry expect from marijuana legalization? There could be a shift in how property management handles marijuana-related cases. Fifty-eight percent to 67 percent have already seen addendums added to leases that restrict smoking on the premises.
“It is impacting rules over growing in buildings and using common areas, and landlords are starting to add addendums having to deal with these matters,” Lautz told RISMedia. “In the future, when we look at the residential side, there could be complications for both landlords and for buying and selling property where marijuana is sold or used regularly.”
*NAR’s report reflects data and responses gathered from states that legalized marijuana (for medical and/or recreational use) both before 2016 and after 2016. To access the report, visit nar.realtor.
Liz Dominguez is RISMedia’s senior editor. Email her your real estate news ideas at email@example.com.