How pot shops can drive up house prices

This finding raises several questions. For instance, why would housing prices report a proximity premium within such a small buffer zone around the converted stores? What possible benefits could a homeowner expect to derive from being that close to a marijuana dispensary, other than ease of access?

Alternatively, why would a homebuyer not buy a structurally similar house that is a little further away, that was not rising in price so quickly? Equally relevant is the question of whether homebuyers who purchased homes near a marijuana store were even aware of the store’s presence.

While Conklin and his coauthors were mindful of these limitations and “agnostic as to the underlying cause of our results,” it is possible to speculate about some potential explanations.

One possibility not raised in the study is that homes around marijuana dispensaries had been subject to a discount prior to legalization, but that legalization lifted the stigma around such homes.

Another is that the stores had knock-on economic effects that were highly localized and boosted the economic profiles of their specific neighbourhoods.

While those are only guesses, theirs is not the only research demonstrating a strong linkage between the legalization of marijuana and higher housing prices.

In a recent paper in Economic Inquiry, Cheng Cheng and co-authors found almost similar results suggesting a 6 per cent premium in prices for homes sold in municipalities that legalized retail sales of marijuana, versus those that didn’t.

Cheng and co-authors found that by August 2015, 46 out of the 271 incorporated municipalities in Colorado had passed laws enabling retail marijuana sales. Using even a more rigorous approach by restricting their analysis to dwellings that sold multiple times during the study period they found similar results as Conklin and his co-authors.

The Canadian government expects annual recreational marijuana sales to be around $4 billion, which will be subject to a 10 per cent excise tax and additional provincial sales taxes. These taxes are expected to raise net new revenue mostly for provinces.

Whether homeowners also see a high remains to be seen.