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Is Pot the New Pets?

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(Warning: Don’t read this if you’re not interested in hearing a provocative point of view)

I was meeting with a client of mine who has communities in California, and they shared a letter they were sending their residents. The letter was informing residents that, while California had passed a recreational marijuana initiative, the law gave apartment owners the right to declare their property to be marijuana free. The letter went on to inform residents that this company was exercising that right and that any use of marijuana in their apartments would be a violation of their lease and could result in eviction.

As a resident of Colorado (one of the earliest states to approve recreational use in homes) and a demand management modeler, this got me thinking. I wasn’t surprised that my client exercised their right; in fact, I expect that virtually all professionally managed communities will do or have done so already.

But is that really the right business answer? Perhaps the continued disconnect between these state laws and federal laws makes it the right answer. Perhaps there are indirect liabilities I’m not fully aware of (though not a lawyer, I would struggle to understand how liabilities surrounding marijuana would be any different than what already exists with alcohol consumption)? Or perhaps there are legitimate concerns related to managing issues like the potential for, shall we say earthy, aromas to permeate a building and annoy other residents (more on that later)?

All of which reminded me of pets and the late 1990s. Those of you in the industry long enough may remember that few mainstream operators allowed pets (excluding fish and maybe birds). There were legitimate concerns: noise, increased wear and tear on the unit and common area issues like damage to landscaping and owners not responsibly picking up pets’ solid waste.

I remember that the company I was with at the time was one of the earlier operators to introduce pet friendly policies (with accompanying pet rent). I was particularly convinced of the validity of our policy when I visited one of our communities. Archstone South Market was right on the edge of San Francisco’s financial district and attracted many professionals in its resident base. As I toured, I noticed a lot of pets. It seemed as if half the residents or more were walking a dog.

I asked the community manager about this, and she told me we were the only community in or near the financial district that accepted pets. In fact, our competitors would refer prospects with pets to us because their company policies (at the time) forbade pets. Imagine that, I thought…by allowing pets (while getting paid for it), we had turned our comps into one of our better sources of leads!

Of course, today virtually everyone accepts pets for at least part of their community (if not all). So the competitive advantage no longer exists; but it was sure nice while it lasted!

Which brings me to the title of this blog. Could marijuana be an opportunity, like pets, for innovative, early adopters to have a meaningful point of differentiation versus their comps? Sure, there are issues; but there were issues with pets that got solved. Maybe, for example, we start with allowing recreational use limited to a single building (in a garden community) or a single wing (in a high-rise community)? Analogous to pet rent (or for that matter south facing units), we could put a premium on those units and thus get paid for this. As a demand management modeler, I love the idea of this as a possible premium rent segment (just like pet owners); and it doesn’t even have to be as explicit a charge since a unit amenity rolls into the overall rent.

I’m sure there are other logistical and/or legal concerns to work out. That’s beyond the scope of this initial blog on the subject. My point is that some enterprising operator is going to take the new law and find opportunity in it rather than the easy, somewhat knee-jerk reaction of simply keeping the rules the same as they have always been. What will you do?

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  • From my point of view, there is an incredible divergence between Millennials and older generations on the subject of pot, and I believe that the tide won't stop at Colorado, Washington, and more liberal states. From what I have seen, Millennials simply don't believe in the harmful effects of pot, as they felt lied to for years from DARE programs at school, that tried to say that pot was just as bad as heroin because it was a "gateway drug". In this respect, I think Millennials will see bans on pot to be very restrictive, even if they don't smoke themselves.

    I think there are some issues with smoke and smell between adjacent units, so that is a concern. But I think that allowing for edibles is a no-brainer.

    As for charging rate premiums, I think if all other comps are restricting use, then this could be an interesting strategy while it lasts.

  • Brent,
    Well said. I don't want to get into a debate about the merits/evils of marijuana as that's not the point of this. But I will risk venturing there by saying there are studies that have shown marijuana is less damaging than alcohol in many ways (also perhaps more damaging in others). It certainly doesn't prompt violence from its users the way alcohol can. So I agree that Millennials see a hypocrisy in government's wildly different treatment of one vs the other. This is a thing...it's not going away. So I look for the opportunities it presents.

  • Nadeen Green

    Food for thought indeed (and I am not talking brownies). To add to the discussion: once the door is open to recreational marijuana, there will likely be a slew of reasonable accommodation requests to smoke elsewhere (other common areas, other apartments not in the smoking zone) and for a waiver of any ancillary income costs. We see this every day as to pets, where people claim their animals are service animals in order to be exempt from restricted and costs... If marijuana however, is not allowed at all, the reasonable accommodation requests fail...

  • Kelly Mayo

    Thank you for this perspective! So much of what we do is positive presentation, and this perspective certainly falls right in line with that outlook. While our local community has mostly been experiencing the complaints and concerns of non-partaking residents, I look forward to a time and place (likely in the not-so-distant future) when we begin to adjust our policies and marketing in a similar fashion so that we can profit from such accommodations.

  • Angel Rogers

    Very interesting perspective. I was one of those properties that benefitted from my competition not accepting pets so while it may be risky, I totally see the advantages of allowing marijuana. We should have a fun year here in California!