Marijuana and Real Estate: A Budding Issue

Transcription

1 Marijuana and Real Estate: A Budding Issue November 2018 National Association of REALTORS Research Group

2 Residential Real Estate and growing in home or common areas. Six percent report that homeowner associations did allow growing or smoking in home or common areas. Residential Real Estate Trends NAR surveyed its membership regarding their interaction with marijuana and the real estate sector in states where marijuana is legal. This report is a Selling a Grow House summary of the findings. One percent of members were marijuana specialists in residential real estate. As marijuana intersects with real estate, the demand for both residential and commercial properties is a growing market. Currently, only one to two percent of residential respondents where marijuana is legal for medical or for medical and recreational use were aware of their MLS containing a specific marijuana field. The highest share of respondents reported they currently have residential inventory available in their market. Between 11 and 15 percent of respondents in states where marijuana is legal to some extent believe inventory was tight for multiple reasons, including all-cash purchases from the marijuana industry. More than three-quarters of members have not seen a change in residential property values near dispensaries. Onetenth have seen an increase and 12 to 14 percent have seen a decrease in residential property values near dispensaries. Approximately two-thirds of respondents said that homeowner associations often have rules and restrictions against smoking Approximately three-quarters of members in states where marijuana is legal had never tried selling a grow house. One in twenty of these residential members had sold a grow house in the past. Among residential members who have sold a grow house, 27 percent in states where medical marijuana is legal had a difficult time selling a grow house. Thirty-three percent of members in states where both medical and recreational marijuana is legal had difficulty selling a grow house. Among members who had sold a grow house, seven in 10 did disclose the house was used as a grow house. Among those who sold a grow house in the past, nine in 10 had no title issues selling the grow house. Three percent of members who had sold a grow house in states where medical marijuana is legal and one percent where medical and prescription use is legal used a specialized company for the title. Five percent of members who had sold a grow house in states where medical marijuana is legal and one percent where medical and prescription use is legal were not able to find a title company for the home sale.

3 Residential Real Estate Property Management About one-third of members had seen addendums added to leases which restrict growing or smoking on properties. Fortythree percent of members in states where medical marijuana is legal and 36 percent of members in states where both medical and recreation marijuana is legal had no issues leasing a property after the growth or use of marijuana in a property. The most common issue was the smell, which nearly one in five members had encountered. Moisture issues were more common in areas where only prescription use is legal. Some states allow growing on personal property. When a tenant is allowed to grow marijuana in their rental property, it was most common for the tenant to pay the utility costs. When tenants were allowed to grow marijuana in their rental units, nine percent of those in states with legal medical marijuana said self-contained machine/boxes were required. This was also the case among six percent of those in states where both medical and recreational marijuana is legal. As marijuana is an all-cash business, earnings from those in the business were cash proceeds. About one-quarter of landlords were unwilling to take cash for rent. About one-quarter of those in states where prescription marijuana is legal would take cash for rent, and about onefifth of those where marijuana is legal for both prescription and recreational use would take cash for rent.

4 Residential Real Estate

5 MLS Contains Marijuana Fields As marijuana in real estate is a growing market, currently only one to two percent of residential respondents were aware of their MLS containing a specific marijuana field. MLS Contains Marijuana Fields DOES NOT CONTAIN MLS FIELD 61% 73% DON'T KNOW 26% 37% 1% DOES CONTAIN MLS FIELD 2% 0% 20% 40% 60% 80%

6 Residential Inventory Due to All-Cash Purchases The highest share of respondents reported they currently had residential inventory available in their market. One percent each of respondents in states where only medical marijuana is legal and in states where both medical and recreational marijuana is legal had seen tightened housing inventory entirely from all-cash purchases. Between 14 and 10 percent of respondents believed inventory was tight for multiple reasons, including as a result from this industry. Residential Inventory Tightened Due to All-Cash Purchases from Marijuana Industry NO, HAVE INVENTORY 41% 47% NOT SURE 44% 43% YES, TIGHTENED, BUT THIS IS JUST ONE ASPECT 10% 14% YES, TIGHTENED, AND ENTIRELY DUE TO THIS 1% 1% 0% 10% 20% 30% 40% 50%

7 Residential Property Values Near Dispensaries More than three-quarters of members in states where marijuana is legal to some extent had not seen a change in residential property values near dispensaries. One-tenth of members in these states had seen an increase and 12 to 14 percent had seen a decrease in residential property values near dispensaries. Residential Property Values Near Dispensaries INCREASED SUBSTANTIALLY 3% 3% INCREASED SLIGHTLY 7% 6% NO CHANGE 78% 76% DECREASED SLIGHTLY 10% 10% DECREASED SUBSTANTIALLY 2% 4% 0% 20% 40% 60% 80%

8 Homeowner Association Rules and Regulations Just under two-thirds of respondents reported that homeowner associations often had rules and restrictions against smoking and growing in home or common areas. Six percent of respondents said that homeowner associations did allow growing or smoking in home or common areas. Homeowner Association Rules and Regulations HAVE RESTRICTIONS SMOKING IN COMMON AREAS HAVE RESTRICTIONS GROWING IN COMMON AREAS HAVE RESTRICTIONS GROWING IN EXPOSED AREAS (PRIVATE YARDS W/OUT FENCES) HAVE RESTRICTIONS GROWING INSIDE HOME ALLOW GROWING INSIDE HOME ALLOW SMOKING IN COMMON AREAS ALLOW GROWING IN EXPOSED AREAS (PRIVATE YARDS W/OUT FENCES) ALLOW GROWING IN COMMON AREAS NONE OF THESE NOTED Common Answer to Other: HOAs may be relying on privacy restriction in laws to contain use/growth inside of home. OTHER 11% 10% 3% 3% 2% 3% 1% 0% 0% 0% 16% 16% 14% 13% 22% 25% 29% 26% 45% 45% 0% 20% 40%

9 Selling a Grow House

10 Grow House: Experience Selling Approximately three-quarters of respondents had never tried selling a grow house. One in twenty of these residential members had sold a grow house in the past. Experience Selling a Grow House NO, HAVE NEVER TRIED 73% 78% HAVE SOLD GROW HOUSE 6% 5% NO, TRIED BUT UNABLE 2% 1% DON'T KNOW 18% 17% 0% 20% 40% 60% 80%

11 Grow House: Difficulty Selling Among residential members who had sold a grow house, 27 percent in states where medical marijuana is legal had a difficult time selling a grow house. Thirty-three percent of members in states where both medical and recreational marijuana is legal had difficulty selling a grow house. Difficulty Selling a Grow House 73% NOT HARD TO SELL 67% 27% HARD TO SELL 33% 0% 20% 40% 60% 80%

12 Grow House: Disclosed Home Sale Among members who had sold a grow house, seven in 10 did disclose that the house was used as a grow house. Disclosed Home Sale as a Grow House 71% YES, DISCLOSED 75% 18% NO, DID NOT DISCLOSE 11% 11% DON'T KNOW 14% 0% 20% 40% 60% 80%

13 Grow House: Title Issues Among those who sold a grow house in the past, nine in 10 had no title issues selling the grow house. Three percent of members who had sold a grow house in states where medical marijuana is legal and one percent where medical and prescription use is legal used a specialized company for the title. Five percent of members who had sold a grow house in states where medical marijuana is legal and one percent where medical and prescription use is legal were not able to find a title company for the home sale. Title Issues Selling a Grow House NO ISSUES 86% 90% YES, USED A SPECIALIZED TITLE COMPANY 3% 1% YES, COULD NOT FIND A TITLE COMPANY 5% 1% Common Answer to Other: OTHER Some sellers do not disclose it is a grow house. 7% 7% 0% 20% 40% 60% 80% 100%

14 Residential Property Management Experience

15 Addendum or Provisions in Leases: Restricting Growing or Smoking The majority of residential property managers had not seen addendums added to leases which restrict growing or smoking on properties. About one-third had seen addendums added to leases which restrict growing or smoking on properties. Addendum or Provisions Added to Leases Restricting Growing or Smoking NO ADDENDUMS ADDED 52% 55% ADDENDUMS ADDED 32% 36% OTHER Common Answer to Other: No smoking of any type allowed. DON'T KNOW 7% 7% 5% 6% 0% 20% 40% 60%

16 Difficulty Leasing Property After Growth or Use of Marijuana Forty-three percent of members in states where medical marijuana is legal and 36 percent of members in states where both medical and recreation marijuana is legal had no issues leasing a property after the growth or use of marijuana in a property. The most common issue was the smell, which nearly one in five of these members had encountered. Moisture issues were more common in areas where only prescription use is legal. Difficulty Leasing Property After Growth or Use of Marijuana YES, SMELL IS DIFFICULT TO REMOVE 18% 18% YES, MOISTURE ISSUES 3% 7% NO ISSUES 36% 43% 0% 20% 40%

17 Tenant Growing: Utility Costs When a tenant was allowed to grow marijuana in their rental property, it was most common for the tenant to pay the utility costs. Utility Costs When Tenant is Allowed to Grow 41% TENANT PAYS UTILITIES 36% 1% LANDLORD PAYS UTILITIES 1% 33% DON'T KNOW 35% 0% 20% 40%

18 Tenant Growing: Self-Contained Growing Box/Machine When tenants were allowed to grow marijuana in their rental units, nine percent of those in states with legal medical marijuana said self-contained machine/boxes were required. This was also the case among six percent of those in states where both medical and recreational marijuana is legal. Self-Contained Growing Box/Machine When Tenant is Allowed to Grow YES, SELF-CONTAINED MACHINE/BOX REQUIRED 9% 6% NO BOX NEEDED 3% 3% DON'T KNOW 63% 68% 0% 20% 40% 60%

19 Landlords Willing to Take Cash from Marijuana Proceeds for Rent As marijuana is an all-cash business, earnings from people in the business are cash proceeds. About one-quarter of landlords were unwilling to take cash for rent. About one-quarter of those in states where prescription marijuana is legal would take cash for rent, and about one-fifth of those where marijuana is legal for both prescription and recreational use would take cash for rent. Landlords Willing to Take Cash from Marijuana Proceeds for Rent NO, MOST WILL NOT TAKE CASH AT ALL 23% 29% MOST LANDLORDS WILL TAKE CASH AND DON'T ASK WHERE CASH COMES FROM 14% 22% NO, MOST WILL NOT TAKE CASH FROM ILLEGAL FEDERAL ACTIVITY 10% 12% YES, SOME TAKE CASH 5% 5% YES, NEARLY ALL ARE 2% 2% 0% 20%

20 Commercial Real Estate

21 Commercial Real Estate Inventory and Demand In states where prescription marijuana use is legal, 34 percent of commercial members had seen an increased demand in warehouses, 31 percent in storefronts, and18 percent in land. In states where prescription and recreational marijuana use is legal, 27 percent of these members had seen an increased demand in warehouses, 17 percent in storefronts, and14 percent in land. One-fifth of members had seen an increase and 10 to 13 percent had seen a decrease in commercial property values near dispensaries. Nearly one-quarter of members had seen an increase and six percent have seen a decrease in commercial property values near growing lands. About three in 10 commercial members noted some tenants did not want to be near a dispensary; however, the highest share did not know. states where both prescription and recreational marijuana is legal, 31 percent of commercial members reported no change in the perception of crime and 18 percent cited an increase in the perception of crime. While the perception of crime seemed to increase, actual crime had only marginally risen in respondents opinions. In states where only prescription marijuana is legal, 43 percent of commercial members cited no change in crime and seven percent reported an increase in crime. In comparison, in states where both prescription and recreational marijuana are legal, 28 percent of commercial members cited no change in crime and eight percent said there was an increase in crime. Perception of Crime In states where only prescription marijuana is legal, 39 percent of commercial members said there was no change in the perception of crime, while 16 percent reported an increase in the perception of crime. In comparison, in

22 Commercial Real Estate Commercial Leasing The majority of commercial members were not currently leasing to marijuana related businesses. Seventeen percent of commercial members in states where prescription marijuana is legal were leasing to marijuana businesses. In states where both recreational and prescription marijuana is legal, six percent were leasing to marijuana related businesses. Half of commercial members said that no additional addendums were added to leases when the business was related to marijuana. More than one-quarter of commercial members in medical marijuana states and one-fifth of in medical and recreational marijuana states did have lease addendums. The most frequently cited concern of commercial members was the smell when leasing to marijuana related businesses, followed by theft of cash on property, fire hazards, and moisture issues. About half of commercial members cited landlords were unwilling to accept cash for rent. About one-quarter cited some landlords would take cash for rent, but a small portion would not ask where the cash came from.

23 Commercial Inventory Changes The largest share of commercial members in states where marijuana is legal to any extent had not seen a change in inventory for commercial properties due to marijuana. In states where prescription marijuana use is legal, 34 percent of members had seen an increased demand in warehouses, 31 percent in storefronts, and 18 percent in land. In states where prescription and recreational marijuana use is legal, 27 percent of members had seen an increased demand in warehouses, 17 percent in storefronts, and14 percent in land. Commercial Inventory Changes NO CHANGE IN DEMAND 45% 47% DEMAND HAS INCREASED FOR WAREHOUSES 27% 34% DEMAND HAS INCREASED FOR LAND DEMAND HAS INCREASED FOR STOREFRONTS 18% 17% 14% 31% DEMAND HAS DECREASED FOR STOREFRONTS DEMAND HAS DECREASED FOR WAREHOUSES DEMAND HAS DECREAED FOR LAND 0% 2% 0% 2% 1% 1% 0% 20% 40%

24 Commercial Property Values Near Dispensaries Approximately two-thirds of members in states where marijuana is legal to some extent had not seen a change in commercial property values near dispensaries. One-fifth of members had seen an increase and 10 to 13 percent had seen a decrease in commercial property values near dispensaries. Commercial Property Values Near Dispensaries INCREASED SUBSTANTIALLY 7% 8% INCREASED SLIGHTLY 12% 13% NO CHANGE 66% 71% DECREASED SLIGHTLY 9% 9% DECREASED SUBSTANTIALLY 1% 4% 0% 20% 40% 60% 80%

25 Commercial Property Values Near Growing Land Approximately two-thirds of members in states where marijuana is legal to some extent had not seen a change in commercial property values near growing lands. Nearly one-quarter of members in these states had seen an increase and six percent had seen a decrease in commercial property values near growing lands. Commercial Property Values Near Growing Land INCREASED SUBSTANTIALLY 4% 13% INCREASED SLIGHTLY 18% 15% NO CHANGE 66% 73% DECREASED SLIGHTLY 5% 4% DECREASED SUBSTANTIALLY 1% 2% 0% 20% 40% 60% 80%

26 Change in Who Will Lease Near a Dispensary About three in 10 commercial members noted some tenants do not want to be near a dispensary; however, the highest share did not know. Change in Who Will Lease Near a Dispensary DON T KNOW 42% 43% SOME TENANTS DO NOT WANT TO BE NEAR A DISPENSARY 29% 27% NO CHANGE 19% 20% DEMAND TO BE NEAR A DISPENSARY 2% 1% Common Answer to Other: Too early to know. OTHER 9% 9% 0% 20% 40%

27 Perception of Crime

28 Perception of Crime Changed Near Dispensaries In states where only prescription marijuana is legal, 39 percent of commercial members said there was no change in the perception of crime. 16 percent cited an increase in the perception of crime. In comparison, in states where both prescription and recreational marijuana is legal, 31 percent of commercial members reported no change in the perception of crime, and 18 percent reported an increase in the perception of crime. Perception of Crime Changed Near Dispensaries DON T KNOW 37% 43% NO CHANGE IN CRIME 31% 39% INCREASE IN CRIME 16% 18% DECREASE IN CRIME 2% 1% OTHER 6% 7% 0% 20% 40%

29 Crime Changed Near Dispensaries In states where only prescription marijuana is legal, 43 percent of commercial members cited no actual change in crime and seven percent said there was an increase in crime. In comparison, in states where both prescription and recreational marijuana is legal, 28 percent of commercial members said there was no change in crime and eight percent reported an increase in crime. Crime Changed Near Dispensaries DON T KNOW 42% 57% NO CHANGE IN CRIME 28% 43% INCREASE IN CRIME 7% 8% DECREASE IN CRIME 1% 1% OTHER 7% 8% 0% 20% 40% 60%

30 Commercial Leasing

31 Leasing to Marijuana Related Businesses The majority of commercial members were not currently leasing to marijuana-related businesses. Seventeen percent of commercial members in states where prescription marijuana is legal were leasing to marijuana businesses. In states where both recreational and prescription marijuana is legal, six percent were leasing to marijuana related businesses. Leasing to Marijuana Related Businesses NO NOT LEASING TO MARIJUANA BUSINESSES 70% 81% YES, LEASING TO MARIJUANA BUSINESSES 6% 17% DON'T KNOW 4% 5% 9% OTHER Common Answer to Other: 9% Will and would like to lease to marijuana businesses. 0% 20% 40% 60% 80%

32 Lease Addendum or Provisions: Growing, Storage, or Sales of Marijuana Half of commercial members reported that no additional addendums were added to leases when the business is related to marijuana. More than one-quarter of commercial members in medical marijuana states and one-fifth of in medical and recreational marijuana states did have lease addendums. Addendum or Provisions Added to Leases Restricting Growing, Storage, or Sales of Marijuana NO ADDENDUMS ADDED 50% 51% ADDENDUMS ADDED 20% 27% OTHER 8% 9% DON'T KNOW 16% 20% 0% 20% 40% 60%

33 Leasing Concerns of Marijuana Businesses The most frequently cited concern of commercial members was the smell when leasing to marijuana related businesses, followed by theft of cash on property, fire hazards, and moisture issues. Leasing Concerns of Marijuana Businesses NO ISSUES 36% 44% SMELL 28% 34% THEFT OF CASH ON PROPERTY 22% 29% FIRE HAZARDS 11% 20% MOISTURE ISSUES 16% 16% CROP THEFT 12% 11% BURNING OF CROPS 4% 5% 0% 20% 40%

34 Landlords Willing to Take Cash from Marijuana Proceeds for Rent About half of commercial members cited landlords were unwilling to accept cash for rent. About one-quarter said that some landlords would take cash for rent, but a small portion would not ask where the cash comes from. Landlords Willing to Take Cash from Marijuana Proceeds for Rent NO, MOST WILL NOT TAKE CASH AT ALL 23% 22% NO, MOST WILL NOT TAKE CASH FROM ILLEGAL FEDERAL ACTIVITY 17% 16% YES, SOME TAKE CASH 14% 18% MOST LANDLORDS WILL TAKE CASH AND DON'T ASK WHERE CASH COMES FROM 5% 7% YES, NEARLY ALL ARE 5% 7% 0% 20% 40%

35 Methodology The 2018 Marijuana and Real Estate survey was sent through in September 2018 to a random sample of 75,000 NAR members who practice residential real estate and 62,000 NAR members who practice commercial real estate. The survey received 6,987 responses from residential members and 949 responses from commercial members for an overall response rate of 5.8 percent. The confidence interval at a 95 percent level of confidence is +/-1.35 percent. All information in this report is representative of NAR member characteristics in The sample was divided by states who legalize medical marijuana only and states who legalize marijuana for both medical and recreational use. As of October 2018, nine states and D.C. legalize both medical and recreational marijuana use (Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Vermont, Washington, and Washington, D.C.). As of October 2018, 24 states legalize only medical marijuana use (Arizona, Arkansas, Connecticut, Delaware, Florida, Guam, Hawaii, Illinois, Louisiana, Maryland, Michigan, Minnesota, Montana, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, and West Virginia). There were 2,768 respondents from states who legalize only medical marijuana and 2,403 respondents from states who legalize marijuana for both medical and recreational use National Association of REALTORS All Rights Reserved. May not be reprinted in whole or in part without permission of the National Association of REALTORS. For reprint information, contact data@realtors.org.

36 The National Association of REALTORS is America s largest trade association, representing 1.3 million members, including NAR s institutes, societies and councils, involved in all aspects of the real estate industry. NAR membership includes brokers, salespeople, property managers, appraisers, counselors and others engaged in both residential and commercial real estate. The term REALTOR is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS and subscribes to its strict Code of Ethics. Working for America s property owners, the National Association provides a facility for professional development, research and exchange of information among its members and to the public and government for the purpose of preserving the free enterprise system and the right to own real property. NATIONAL ASSOCIATION OF REALTORS RESEARCH GROUP The Mission of the NATIONAL ASSOCIATION OF REALTORS Research Group is to produce timely, data-driven market analysis and authoritative business intelligence to serve members, and inform consumers, policymakers and the media in a professional and accessible manner. To find out about other products from NAR s Research Group, visit nar.realtor/research-and-statistics NATIONAL ASSOCIATION OF REALTORS Research Group 500 New Jersey Avenue, NW Washington, DC data@realtors.org