Marijuana and Real Estate: A Budding Issue

The legalization of marijuana continues 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 warehouses, land, and store fronts for marijuana. Residential practitioners are navigating an environment of marijuana being used and/or grown 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 March of 2023.

The real estate industry and its professionals consistently adapt to not only national and local trends, but also local laws and regulations. With changes in the legal status of both medical and recreational marijuana, there have been observed direct effects on multiple facets of real estate. In this report, we compare the effects from marijuana legality on various aspects of real estate, as well as any shifts from the last time the study was conducted in 2021.

Residential Real Estate

18% of respondents in states where marijuana was legal the longest and 14% in states where marijuana has been more recently legalized believed inventory was tight for multiple reasons, including as a result of this industry.
Nearly one-fifth of respondents where marijuana was legal the longest had seen a change in residential property values near dispensaries (one-quarter in 2021).
Respondents in states where recreational marijuana is legal more often reported that homeowner associations often had rules and restrictions against smoking and growing in common areas, and growing in exposed areas.

Bar graph: Homeowner Association Rules and Regulations on Smoking and Growing Marijuana

Selling a Grow House

15% of residential members in states that legalized recreational more than five years ago had sold a grow house.
Among residential members who had sold a grow house, 25% in states where medical marijuana is legal had a difficult time selling a grow house (23% in 2021).
Those in states where recreational marijuana was more recently legalized were most likely to have not found a title company for their sale at only four percent.

Bar graph: Experience Selling Marijuana Grow Houses

Residential Property Management

27% in states that legalized both medical and recreational marijuana prior to 2018 have seen addendums added to leases which restrict growing on properties (down from 44% in 2021), compared to 16% in other states.
Half of members in states where medical marijuana is legal and roughly two-fifths of members in states where both medical and recreational marijuana are legal had no issues leasing a property after the use of marijuana in a property.
In states where recreational marijuana is legal, 56% to 65% of residential property managers have seen addendums added to leases which restrict smoking on properties.
14% to 25% of landlords were unwilling to take cash at all for rent, and 8% to 14% will not take cash from an illegal federal activity for rent.

Bar graph: Addendum/Provisions in Leases: Restrictions on Growing Marijuana

Commercial Real Estate

In states where prescription and recreational marijuana use is legal, 25% to 29% of members had seen an increased demand in warehouses, 18% in storefronts, and 13% to 15% in land.
9% to 17% of members had seen an increase and 4% to 18% had seen a decrease in commercial property values near dispensaries.
18% of commercial members in states that legalized recreational marijuana in the past five years reported an increase in property purchasing over leasing in the past year (29% in 2021), compared to 14% in states that legalized more than five years ago (20% in 2021), and 4% of those in states where only medical marijuana is legal (21% in 2021).
Among commercial members who have seen an increase in property purchasing over leasing in the past year, the majority have seen the increases with warehouses, followed by land, and storefronts.

Bar graph: Commercial Property Values Near Marijuana Dispensaries

Perception of Crime

In states where both prescription and recreational marijuana were legalized, 22% to 28% of commercial members reported a perception of an increase in crime near dispensaries, while 39% to 42% saw no change in perception of crime.
In states where both prescription and recreational marijuana has been legal the longest 18% reported an increase in crime near dispensaries (13% in 2021).

Commercial Leasing

7% of commercial members in states where only prescription marijuana is legal or where recreational marijuana was more recently legalized were leasing to marijuana related businesses.
In states where recreational marijuana was legalized the longest, 11% were leasing to marijuana related businesses.
More than two-thirds of commercial members in states where only medical marijuana is legal reported that no additional addendums were added to leases regarding the sale of marijuana (63% in 2021), compared to 49% to 63% of those where medical and recreational are legal.
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.
In states where recreational marijuana has been legal the longest, 45% say landlords are willing to take cash for rent (42% in 2021).