3 Ways Cannabis Legalization Impacts Real Estate Market
August 1st, 2014
Policy, Top News
Cannabis legalization efforts have drawn widespread support throughout the United States, with 23 U.S. states adopting medical marijuana laws and two U.S. states adopting recreational marijuana laws. While many advocates and oppositionists argue over issues like safety and taxation, there are many other important considerations associated with legalization, such the impact on other industries.
#1. Residential Property Damage
Colorado’s legalization of recreational marijuana means that anyone can now grow up to six marijuana plants in their personal residence. While indoor growing may sound benign, purchasing a home that was used to grow marijuana can be problematic for many homebuyers. Even six marijuana plants can consume a lot of energy and water, which can create some key problems to avoid.
According to Colorado Inspection Services, grow house damages may include things like unsafe wiring, oversized fusing, damaged fixtures, holes for ventilation, wood rot, rusted hallow columns, rusted appliances, mold from venting to interior spaces, and deterioration of chimney mortar from venting to the fireplace. These issues are caused largely from unsafe modifications needed to meet growing requirements.
#2. Legal Issues with Federal Housing
States like Colorado may have legalized recreational marijuana, but the drug is still classified as a Schedule I Controlled Substance under federal law. As a result, the consumption of marijuana remains illegal within properties build or operated with federal funds or insured by HUD, despite state legalization. These laws affect nearly 300 federally subsidized projects across the state of Colorado alone.
According to ColoradoRealtors, these policies could change over the coming years as the Obama Administration has been discussing new policies that will address public housing rules regarding the use of marijuana. When these policies will come into play remains to be seen and many experts predict that any liberalization could come at a steep political cost for Republicans that remain largely opposed.
#3. Rising Commercial Real Estate Prices
The use of commercial real estate for the cultivation and sale of marijuana will likely raise commercial real estate prices in states where the drug has been legalized. According to a recent Bloomberg piece, many warehouse owners in Colorado have had no trouble leasing to tenants seeking to grow indoor marijuana. These are also largely all-cash deals given that the industry has no access to formal banking yet.
In some cases, marijuana growers are paying upwards of $20 per square foot to lease Denver warehouses, compared to the average rent for an industrial building of just $4.43 per square foot. These dynamics are creating upward pressure on pricing for many non-marijuana firms, which could end up hurting their profitability or even ability to survive within the market in some cases.
This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.
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