Up in smoke? The impact cannabis dispensaries have on property values is far from settled

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Proximity to cannabis dispensaries is often viewed as a positive, but recent research from Vancouver suggests otherwise

Marijuana plants outside the Smoke on the Water cannabis dispensary in Tyendinaga in the Mohawk Territory, outside of Belleville, Ontario. Marijuana plants outside the Smoke on the Water cannabis dispensary in Tyendinaga in the Mohawk Territory, outside of Belleville, Ontario. Photo by Ernest Doroszuk/Toronto Sun/Postmedia Files

Housing values ​​are influenced by their proximity to desirable or undesirable land uses. For example, lakeside properties command a premium, while those overlooking a noisy freeway sell for a discount. Proximity to cannabis dispensaries, however, has proven a mystery, with conflicting evidence pointing to positive, negative, or no impact on home value.

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A 2017 study found a positive impact on home values ​​near cannabis stores in Denver, with homes selling for eight percent more than comparable properties further afield. Another Colorado study came to a similar conclusion when researchers compared housing prices in communities that allowed retail cannabis sales to those that didn’t.

A limitation of such studies is that they often focus on Colorado, where consumer preferences may differ from other places.

But a recent study published in Real Estate Economics looked at the link between home values ​​and proximity to Vancouver dispensaries. Justin Tyndall, an assistant professor at the University of Hawai’i at Manoa, found that homes within 100 yards of a Vancouver pharmacy sold 3.8 percent less than comparable properties further afield.

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The contrasting results raise several interesting questions. Are cannabis dispensaries considered a desirable amenity in Denver but not in Vancouver? Or is the difference in the legal contexts related to recreational cannabis use the reason for the different results?

To clear the smoke around the conflicting findings, let’s delve a little further into the Vancouver study.

Canada decriminalized recreational cannabis use in 2018. Previously, however, some communities, such as Vancouver, were more lax than others in enforcing the law. Vancouver even changed its bylaws in June 2015 to regulate retail cannabis businesses.

The Vancouver study was based on home sales from 2005 to 2015, when recreational cannabis use was not officially sanctioned. The location of pharmacies may have been influenced by their precarious and insecure legal status, pushing them into low-income or less desirable neighborhoods.

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In comparison, recreational use of cannabis in Colorado has been legal since December 2012 and retail sales were sanctioned in January 2014. The Denver study mentioned above looked at home sales both before and after legalization.

Tyndall investigated home sales near 82 pharmacies in Vancouver. He only considered objects that were traded more than once during the study period. The repeat sale approach makes it possible to control for unobserved changes that may have taken place in an apartment over time.

In the period under review, 62,498 sales of 27,091 objects were recorded, of which 20,147 apartments were sold twice and 5,753 houses three times. More than 60 percent of the apartments were condominiums. About 0.37 percent of homes were within 100 meters of a cannabis dispensary and 1.11 percent were within 200 meters.

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The study employed advanced statistical tools to control for factors that might affect a home’s price, including property attributes, an indicator of significant renovations, neighborhood and street-level impacts, and their evolution over time.

The study found that the negative effects of proximity to a cannabis dispensary were limited to properties within 100 meters of a dispensary. Such homes had an average price of $490,481 and would have seen a reduction of $18,266. Residences within 150 meters, 200 meters or more reported no negative association.

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The debate over how cannabis dispensaries affect property values ​​is far from over. The Vancouver study was conducted at a time when recreational cannabis use was not legal in either Vancouver or Canada. As such, proximity to an illegally operated facility may not be considered a desirable attribute.

Cannabis sales have increased in Canada since it was legalized in 2018. However, the growing acceptance of its recreational use does not necessarily mean that users would pay more to live close to the pharmacies.

Murtaza Haider is Professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached through the Haider-Moranis Bulletin website, www.hmbulletin.com.

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