BAM Key Details:

  • A new report by Real Estate Witch shows home values in states with recreational cannabis are six figures above those of states without. 
  • Over the last decade, from 2014 to 2023, home price growth for states with recreational weed has outpaced those of states without by an average of $48,983. 

Buyer demand is higher, on average, for homes in states with recreational cannabis than those in other states, according to a new report by Real Estate Witch and Leafly. 

In fact, according to a 2022 study, a majority of those who live in U.S. states where cannabis is illegal (51%) say they’re thinking of moving to a state where recreational use is legal. 

The mass appeal of states that have legalized recreational weed has had a significant impact on property values. Over the past decade, from 2014 to 2023, home price growth for states that have legalized recreational cannabis has outpaced that of other states by an average $48,983.

Today, a typical home in a recreational pot-friendly state is worth $417,625—41% or $122,287 more than the value of a typical home in a non-recreational state ($295,338).

While this isn’t the best news for homebuyers in this market, it’s great news for homeowners in these states. And the benefits don’t stop there. 

Recreational cannabis is legal in just under half of U.S. states

For its report, Real Estate Witch partnered with Leafly, the leading online marketplace and information resource for cannabis consumers—where a strain of cannabis seeds with the name  “Cheetah Piss” has a strong 4.5 star rating (lagging just behind “MAC,” aka “Miracle Alien Cookies,” and “Gelato 42”). 

Recreational cannabis is legal in a little less than half of all U.S. states (23 states and Washington, D.C.). 

Since 2014, recreational states have seen home values increase by an average of $185,075, compared to $136,092 in states where recreational cannabis is still illegal. That’s a difference of $48,983. 

Seven of the 10 states with the steepest increases in home values have legalized recreational cannabis—which is still illegal in nine of the 10 states with the smallest increases. 

Home values grow faster in cities with recreational cannabis dispensaries

The difference in property value is also noticeable at the metro level. Since 2014, in states where recreational cannabis is legal, home values have increased by an average of $168,292, compared to $100,933 in metros without dispensaries—for a difference of $67,359. 

States with medicinal cannabis also see faster price growth

States that have legalized cannabis only for medicinal use (i.e., not recreational) have seen property values increase by an average of $166,609 since 2014, compared to $137,320 in states without medicinal cannabis—for a difference of $29,289. 

Today, the typical home in states with medicinal cannabis has a market value of $337,360, compared to $281,343 in non-medicinal states—a difference of $56,017 or 21%. 

As of October 2023, medicinal cannabis is legal in 37 U.S. states. 

Legalized cannabis benefits states through tax revenue and jobs

By the end of 2023, the cannabis industry is projected to bring in $25 billion in total sales revenue—more than $1 billion per state with legalized recreational cannabis. 

Much of that sales revenue goes to the state as taxes. In 2022, the average amount of tax money for the 12 states with a full year of recreational cannabis tax revenue was $307 million per state, totaling $3.7 billion (for all 12).

California is at the front of the line with $1.1 billion in cannabis tax revenue in 2022. And by the end of 2023, this state is expected to reap about $4.9 billion, according to Reuters

But tax revenue isn’t the only benefit pot-friendly states are seeing since they gave the green light to recreational cannabis. According to a Leafly report, the cannabis industry supports more than 428,000 American jobs. And that number has grown by at least 27% per year since 2017.

According to projections for 2023, these are the 10 states with the highest tax revenues from the recreational cannabis industry:

  1. California ($4.9 billion)
  2. Michigan ($2.7 billion)
  3. Illinois ($2 billion)
  4. Massachusetts ($1.78 billion)
  5. Colorado ($1.6 billion)
  6. Missouri ($1.56 billion)
  7. Arizona (1.36 billion)
  8. Washington state ($1.2 billion)
  9. Washington, D.C. ($1.2 billion)
  10. New Jersey ($1.09 billion)

When it comes to the benefits of legalizing cannabis for recreational use, the earlier the better, generally speaking. States that gave the green light before 2020 are expected to bring about $1.7 billion in cannabis sales revenue in 2023—compared to roughly $660 million in states that legalized it in 2020 or later. 

How states are using cannabis tax revenue 

So, what are recreational states doing with the additional tax revenue? In many, those funds are going to public programs and policies aimed at improving the quality of life for the people who live there. 

States that use the revenue in this way are hoping to attract more people to the area, some of whom will pay cannabis taxes, increasing total tax revenue and perpetuating a cycle of civic investment and improvement. 

It makes sense as many are moving to these states precisely because of their pot-friendly laws.

Data on how states are allocating their recreational cannabis revenue is accessible to the public, allowing citizens to see where their tax money is flowing. 

California, for example, allocates 60% of its cannabis tax revenue to programs that address and prevent substance abuse among teens. The other 40% is split in half and set aside for law enforcement and environmental protection. 

Across all recreational states (and D.C.), the most popular spending categories include— 

  • Education
  • Infrastructure
  • Law enforcement
  • Substance abuse treatment

So, the same money spent on recreational cannabis often goes to state-funded programs that prevent more harmful addictions. 

For more details, read the full report on Real Estate Witch.