Event Detail

Green Acres? Cannabis agriculture, formalization, and rural land values in Northern California

Presented by:
Ben Schwab
Department of Agricultural Economics
Kansas State University

Wednesday, February 20, 2019
Taylor-Hibbard Seminar Room (Rm103)
12:00 pm-1:30 pm

Cannabis legalization has progressed rapidly in the last decade. Unlike previous efforts, which concentrated on the retailing and consumption of cannabis, recent changes in the legal regime include widespread formalization of the entire cannabis supply chain. These reforms will have important consequences, particularly for existing regions in which cannabis production for the grey or black market already exists. We study the relationship between land prices and cannabis production in perhaps the largest cannabis supply area in the United States: Humboldt County in Northern California. We explore this link in two ways. First, we link data on the location of cannabis cultivation and land sales over the previous decade, and find a generally positive relationship between cannabis farming and the sale price of nearby land. That finding supports the anecdotal perception of a positive link between the real estate market and cannabis, and suggests that the higher potential net return on cannabis outweighs potentially negative externalities associated with the production of an illicit or quasi-licit good. Two, we find that the enactment of a permitting process that allowed land owners of parcels meeting specific agro-ecological criteria to participate in the legalized cannabis supply chain led to a sharp increase in land prices of parcels meeting the eligibility criteria. That result suggests suppliers in a region known producing largely for the illegal market perceive significant positive future returns from entering the legal supply chain, despite the existence of potentially costly regulatory and tax burdens.