Marijuana Becomes Growing Issue in Real Estate
February 11, 2020
As more states move to legalize recreational and medical marijuana, the real estate industry is increasingly being impacted. For one, commercial practitioners are finding increased demand for land, warehouses, and storefronts used for growing and selling marijuana. Real estate pros are also reporting an uptick in cannabis being consumed in rental properties as well as homeowner associations that are grappling with creating rules around its use. Also, title questions are emerging when selling a home where the product has been grown and consumed, finds a new survey of more than 3,500 residential and commercial REALTORS® who live in areas where cannabis is legal, either for recreational or medical reasons. The survey, “Marijuana and Real Estate: A Budding Issue,” was released by the National Association of REALTORS® on Tuesday.
Marijuana is still an emerging niche in real estate, with most practitioners reporting limited involvement in selling grow houses. But opportunities are, indeed, growing.
For example, states where medical or recreational marijuana has been legalized the longest—three years or more—have seen greater increases in demand for commercial properties, the NAR study finds. In states where prescription marijuana is legal, 19% of commercial members reported an increase in demand in warehouses, 18% in storefronts, and 15% in land. Moreover, some commercial properties near marijuana dispensaries are reporting a rise in property values, with more than one in five real estate pros seeing increased property values near dispensaries, the survey found. “These numbers show that marijuana has been a boon to commercial real estate,” says Jessica Lautz, NAR’s vice president of demographics and behavioral insights.
Housing inventories are tight in areas where marijuana has been legal the longest. Real estate pros say part of the reason is because of the demand ignited from the marijuana industry. Between 9% to 23% of REALTORS® surveyed said they believed housing and commercial inventory was scarce partially driven by all-cash purchases from the marijuana industry.
“As more states legalize marijuana, the real estate market will progressively have to adjust,” Lautz says. “From property owners, to manufacturers, to those who simply want to engage for leisure—it all touches real estate in some form.”
The residential industry is starting to feel marijuana's impact in a variety of ways, too. “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,” says Lautz.
Many real estate pros have had limited involvement with selling a grow house, although that may be due to the newness of laws legalizing it in their area. About three-quarters of respondents in legalized states said they have never tried selling a grow house, compared to six out of 10 in states that legalized it more than three years ago, the NAR study shows.
Disclosures are important. Of those agents who have sold a grow house, about two-thirds in states where medical and recreational marijuana is legal and more than three-fifths in states where only medical marijuana is legal disclosed that the house was used as a grow house. Only 2% to 5% of residential real estate pros surveyed say they are aware of their MLS containing a specific marijuana field for marketing such properties.
Some property owners and commercial practitioners in legalized areas report having to include addendums on leases that restrict growing on properties.
In states where cannabis is legal, between 35% to 49% of real estate pros reported having no issue leasing a property after it was previously occupied by a tenant who legally grew marijuana. For those who did report issues, the most common problems with these properties included lingering odors and moisture issues, according to the survey. The issues were more commonly reported in areas where recreational marijuana has been legal for a longer period of time.
“Marijuana and Real Estate: A Budding Issue,” National Association of REALTORS® (Feb. 11, 2020)
Updated: June 18, 2021