Contact High: The External Effects of Retail Marijuana Establishments on House Prices

Abstract

Using publicly available data from the city of Denver and the state of Colorado, this study examines the effects of retail conversions (conversions from medical marijuana to retail marijuana stores) on neighboring house values in Denver, Colorado. The study period reflects a time before and after retail marijuana sales became legal in Colorado in 2014. Using a difference-in-differences approach, we compare houses that were in close proximity to a conversion (within 0.1 miles) to those that are farther away from a conversion. We find that single family residences close to a retail conversion increased in value by approximately 8% relative to houses that are located slightly farther away. We perform a battery of robustness checks and falsification tests to provide additional support for this finding. To our knowledge this is the first study to examine at a micro-level the highly localized effect of retail marijuana establishments on house prices and hope that it can contribute to the debate on retail marijuana laws.

Keywords: Retail marijuana, house prices, difference-in-differences, recreational marijuana legalization

JEL Classification: K20, R21, R28