Realtors Say Home Buyers Are Cool With Cannabis As Lawmakers Try Again With Weed Banking Bill

In states where marijuana is at least partially legal, its presence has very little effect on the sales or value of residential properties, according to realtors nationwide. That’s good news if you’re selling a home where owners or tenants smoked pot and left behind a whiff of weed. Steady real estate markets in these areas may also help the cannabis industry overcome negative notions that have kept the banking system virtually inaccessible to the sector’s businesses and employees.

Most states across the U.S. have already legalized cannabis for medical use, and an increasing number are allowing its recreational use too. In states where medical marijuana is legal by prescription, 40% of respondents to a recent National Association of Realtors (NAR) survey say they have seen no impact on the value of residential properties near dispensaries, with another 4% reporting an actual increase and only 8% reporting a decrease in values.

The biennial study’s publication coincides with Congress’s re-introduction of the SAFE Banking Act, which would clear the way for banks to work with state-licensed cannabis companies free from federal regulators’ interference.

“We still cannot bank with the major financial institutions, but smaller community banks and regional banks are happily banking and in some cases lending to our industry,” says Luke Flood, vice president of real estate at Curaleaf, which operates more than 150 cannabis dispensaries nationwide. “This is also an issue for our team members, sometimes finding difficulty in securing mortgage lending, for example.”

Congress To Address Cannabis Banking, Again

Big banks typically avoid doing business with cannabis-related companies and individuals  for fear of federal prosecution. Now, a bipartisan group of lawmakers has just reintroduced the SAFE (Secure And Fair Enforcement) Banking Act, a bill that would allow federally regulated banks to accept state-licensed cannabis businesses as clients.

The bill has been brought up numerous times with bipartisan support. Since the first version was introduced in 2013, the bill has passed seven times in the House, but it has never reached the Senate floor. The current SAFE Banking Act proposal was introduced on April 26; the Senate version has 38 co-sponsors, while the House version has nine.

If it became law, the act would help people who earn their living through legal cannabis businesses. Thus far, weed merchants and their employees who have been locked out of the banking system have had to pay rent or invoices in cash, rather than by check or auto pay. Not all landlords will accept cash rent, however. Also, as Flood notes, mortgage lenders often turn down cannabis workers due to the source of their income.

Five to 10 years ago, “the thought of things like bank financing were just a hope, but now we’re even seeing participation by institutions in real estate lending,” says Flood. “Ideally, over time as the banking and federal walls come down, we will be able to bank with the big players and be offered lending opportunities just like any other business and industry.”

Marijuana No Drag on Residential Real Estate

Most realtors say that when potential buyers notice weed’s “skunk” smells inside or outside a building, that rarely prevents the property from being sold. Grow houses, where marijuana has been farmed, also sell easily. Roughly 70% to 75% of NAR’s survey respondents who’ve sold a grow house in states where cannabis is partially or entirely legal said they had no difficulty making the sale.

In part, buyers’ indifference to the use and smell of marijuana may be because they’re more accustomed to it as states continue to legalize the drug.

As of April 24, 2023, 38 states, three territories and the District of Columbia allow medical marijuana use, according to the National Conference of State Legislatures. On a wider scale, 47 states and Washington, D.C., have partial or total legalization of cannabis and related products.

“People have a more positive impression now that it’s legal [in many states] so the negative connotations have gone by the wayside,” says Bryce Rowland, a realtor at Coldwell Banker Realty in Washington, D.C. “My older clients are much more accepting than they used to be, too.”

Realtors often say their clients are more deterred by the smell of tobacco than they are of marijuana.

Tobacco smoke “is a huge red flag. It’s so hard to remove cigarette or cigar smoke from a home,” says Katie Dunwoody, a realtor in Maryland at Next Step Realty. Meanwhile, she says, the presence of cannabis dispensaries and marijuana use has “not really affected the real estate market all that much, at least not in my experience.”

Buyers Unfazed in Chronically Tight Housing Market

Another reason that pot smells don’t deter many home shoppers could be that the housing market is still incredibly tight, with elevated home prices, high mortgage rates and low inventory. So when home buyers find a home that fits their preferences and budget, they take it—even if it reeks.

As of March, the monthly supply of new homes for sale in the U.S. had fallen to 7.6 months. That’s down almost 25% since September 2022, when there was a supply of new homes that would last 10.1 months, according to the St. Louis Federal Reserve. The new home supply is calculated based on the current pace of home sales if no additional homes are built.

Tenants Sometimes Face Stricter Rules

Between 56% and 65% of NAR survey respondents said they’ve seen residential lease addendums that restrict smoking in states where recreational cannabis use is legal. It was slightly more common two years ago, when the survey was last conducted.

Rowland says he has been asking property managers about whether they add marijuana restrictions to leases in major metro areas like D.C.

“They haven’t at this point,” he says. “But they might consider doing it soon.”

Demand for Commercial Real Estate Has Gotten Higher

While cannabis use seems to have little impact on residential real estate, it’s actually showing some positive signs for commercial real estate sales and valuations.

Realtors surveyed by NAR said they have seen an uptick in demand for warehouses (25% to 29% of respondents), storefronts (18%) and land (13% to 15%) in states where all marijuana use is legal. In states limited to prescription use, 17% of respondents said there was an increase in commercial property values near dispensaries, a much higher share than the 8% who reported a decrease in values.

“Think of being in a commercial property near a dispensary…there’s an increase in activity and foot traffic near you,” says Matt Christopherson, NAR’s senior research survey analyst.

Even without federal legalization of cannabis, the market is projected to grow to $35 billion in legal sales in 2023, up from $30 billion in sales last year, according to New Frontier Data. As the cannabis market grows, so will its impact on commercial real estate, including how landlords of commercial properties view the industry.

And as the industry has become legal in most states, and more visible to consumers, the once negative perceptions have dwindled.

“While it seems people would expect dispensaries to decrease the residential values in that area, and it may come with that stigma,” Christopherson says, this study “can put people at ease. So if I’m in a state where cannabis use is legalized and a dispensary is near me, it won’t hurt my property value.”

Insuring a Home in Cannabis-Legal States

Buying a home in a state with legal cannabis does call for a little extra care in choosing homeowners insurance. Check with your insurer to be sure your policy covers weed products grown or stored at home, and potential liability for people who may partake at your place.