The end of 2021 provided the first glimpse of what New York’s adult-use marijuana industry will look like, as 701 of the Empire State’s 1,530 cities, towns and villages opted out of allowing cannabis retailers or consumption spaces, as of the December 31 deadline.
Each jurisdiction could pass an ordinance prohibiting cannabis retail or consumption businesses within their borders, or they could pass ordinances regulating those types of cannabis businesses. According to data from THC Regs, only six cities, 51 towns and 28 villages passed local laws to allow, but regulate, the cannabis industry.
However, by taking no action, 744 jurisdictions (49%) effectively opted in — a shocking number compared to other states that have had similar opt-out provisions. In New Jersey, for example, only about 25% of municipalities took no action, while 71% of the municipalities enacted bans.
In both New Jersey and New York, many cities that opted out initially will reconsider their bans at a later date; some bans were put in place so local officials could wait and see what the state rules and regulations look like before making a permanent decision. Opting out before the deadline provides municipalities with the flexibility to extend the ban or adopt local laws allowing sales after state regs are released.
Those cities that opted in — either by ordinance or inaction — cannot reverse that decision. And they are generally prevented from implementing de facto bans through onerous zoning regulations.
“In New York, there is a portion of the law that says that even though they (municipalities) have the ability to determine where, when and how the business operates, they can’t unreasonably prevent businesses from operating in the city,” THC Regs co-founder Susan Ameel says.
In or out?
Approximately 6.48 million New York residents — about 32% of the population — live in communities that banned cannabis retailers or consumption spaces.
The largest municipality to opt out was Hempstead, population 759,757. The Long Island town followed the regional trend of banning cannabis businesses, with about 80% of the jurisdictions in Nassau and Suffolk counties opting out.
The largest municipality to opt in for cannabis sales through a local ordinance was Brookhaven, population 486,040, one of the few Long Island towns not to enact a ban.
Poughkeepsie, Tonawanda and the village of Sleepy Hollow are in. Cooperstown, Hyde Park and Mount Pleasant are out. Albany, Buffalo, Niagara Falls, Rochester and Syracuse are all in, by virtue of not opting out. No jurisdictions in New York City opted out.
Jamestown, the city in Western New York whose mayor brazenly courted cannabis companies, is also in, by virtue of not opting out. “We’re happy to blaze a trail,” Eddie Sundquist told Marijuana Venture in a summer 2021 interview.
Not surprisingly, many of New York’s smallest municipalities rejected cannabis, though there were a few exceptions. The village of Dering, with 11 residents, opted out. As did Saltaire (population 37) and Ocean (population 79) and 27 other jurisdictions with fewer than 400 residents. But the town of Hope, with its 403 residents, located in the southeastern corner of Hamilton County, is optimistic about the marijuana industry, opting in for both retail and consumption spaces.
In analyzing the data for municipalities that opted in or opted out, Ameel says tax revenue was one of the primary considerations for some of the smaller jurisdictions.
“I was actually very surprised by some of the local jurisdictions that did opt in,” she says. “It’s going to be very, very big change for New York.”
However, amid all this action — and even more inaction — at the municipal level, the fact that state officials have yet to promulgate rules and regulations puts the entire industry, as well as individual communities, in an uncomfortable limbo.
How are licenses going to be allocated? Where exactly will dispensaries be located?
With so many municipalities not taking action, Ameel is concerned there’s going to be friction when business owners start applying for, and receiving, licenses, with little more than a notice of intent being filed with the local jurisdiction. If the local community doesn’t have a voice in the process, Ameel fears there will be a backlash against the industry.
The likelihood of conflict has the potential to bring about lawsuits at the local level and delay the launch of the entire adult-use program, much as it has in Illinois, where nonstop litigation has almost halted new licenses from being issued.
Meanwhile, other states in the northeast are picking up momentum. Connecticut is on the fast track to having adult-use stores open in July. Vermont is finally making progress. New Jersey is at least eight months ahead of New York. Pennsylvania’s well-developed medical market could transition quickly to adult-use sales once the Legislature grants its blessing. And Massachusetts is enjoying the runway of being the only fully functioning rec state in the region.
“I’m not diminishing the opportunity in New York,” Ameel says. “I think New York is going to be a land of opportunity for a tremendous number of people. … It’s just a question of when the program is going to be up and running, because it is so unique, and in my experience as a securities regulator, unique is always bad.”
The real estate market
The legalization of cannabis has yet to set off a real estate boom in New York, but with the lay of the land now in better focus, as far as which municipalities will allow businesses, some entrepreneurs and organizations are beginning the hunt for the perfect location.
While residential properties outside New York City have been increasing in value, and properties in the city have mostly rebounded to pre-COVID levels, commercial real estate, by contrast, has been hit hard by the pandemic, says Matte Namer, founder of the New York-based real estate brokerage firm Cannabeta Realty.
This could be beneficial for prospective cannabis businesses. For office and retail spaces in New York City, vacancy rates are up and prices are down.
In part because state regulations prohibit dispensaries from being within 500 feet of a school or 200 feet of a house of worship, it’s still going to be tough to find a suitable location for a cannabis business in the city.
“But seeing record high inventory in the retail markets probably makes that a little bit easier,” Namer says.
It’s probably too early for most prospective cannabis entrepreneurs to start investing in real estate or leasing properties, because the state has yet to issue its rules and regulations, so it’s entirely unclear who will ultimately be granted licenses.
That being said, there are advantages to being an early mover and the state’s 10 already-licensed medical organizations, as well as a handful of well-financed newcomers, are already making real estate plays and acquisitions.
“I don’t want to be the typical real estate broker that says, ‘You’ve got to do this now or miss out on the opportunity,’ but I do think there’s probably a little bit of truth in that,” Namer says. “If you are willing to take that risk now, you probably get the reward of having a choice of location before everyone else gets their pick.”
But whether an individual dives into the real estate market or sits back and waits for the bigger picture, it’s important for them to start their homework now.
“I would at least recommend anybody that plans to start a cannabis business or enter the New York or New Jersey or Connecticut markets to put their team together and start to do those kinds of preparations as best they can,” Namer says. “And the sooner you can start having conversations with the municipality or the community board about what you’re planning to do, that’s probably better.”