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In Colorado, Legal Pot Increases Housing Values

Homeowners are getting high, and so is the value of their residences.
Leadville, Colorado.

Leadville, Colorado.

If you want the value of your house to increase, make sure it's in a neighborhood with desirable features. Good schools. Reliable public transportation.

And, of course, easy access to marijuana.

new study reports the legalization of pot in Colorado produced, on average, a 6 percent increase in housing values. The availability of recreational marijuana in a given area created "strong housing demand, while having no discernible effect on housing supply," writes a research team led by University of Mississippi economist Cheng Cheng.

That's an economic equation so simple it makes sense even if you're high.

Colorado became one of the first two states in the nation to legalize recreational marijuana in November of 2012. In the journal Economic Inquiry, Cheng and his colleagues note that, under the law, "local governments—namely counties and municipalities—can decide whether to permit retail sale" of the drug.

By August of 2015, they write, 46 out of the state's 271 incorporated municipalities had put into place a licensed-based regulatory system permitting the sale of pot products. The researchers compared the rise in housing values in those cities and towns with the figures for similar areas where marijuana was not sold.

"Our estimates show that, on average, legalizing retail marijuana in Colorado increases housing values by approximately 6 percent, or $15,600 per property," they write. This amounts to "about 27 percent of the overall price appreciation" during the period they examined (2010 to 2015)."

"Housing values experienced an immediate jump of 3 percent within one quarter after the adoption of retail marijuana laws," they add. "The effect is largest in populous areas, and strongest among properties in low and middle price tiers (below $500,000)."

Cheng and his colleagues note that there are costs associated with legalizing pot—the most obvious one being adverse effects on public health. They note that legalization resulted in large increases in marijuana-related emergency-room visits, hospitalizations, and traffic deaths.

But fears that having a marijuana store in a neighborhood would lower property values by increasing crime appear to be unwarranted. If Colorado housing prices are any indication, such shops actually make a city or town a more desirable place to live.