Decoding Land Use Rules for Recreational Cannabis Businesses in New York

Chante Harris & David Scatterday

Introduction

After near passage in 2019, New York State finally approved the Marijuana Regulation & Taxation Act (MRTA) on March 31, 2021, legalizing the production, distribution, and use of marijuana for recreational uses.

The MRTA unlocks a goldmine of opportunities for entrepreneurs: a massive market of nearly 20 million consumers. While the MRTA introduces complex permitting requirements for recreational cannabis businesses, all successful applications share a common element: access to real estate that is fully compliant with zoning and land use regulations set by the MRTA.

New York State Market Overview

Estimates value the New York State legal cannabis market at $1.8 billion in 2018. New York State currently has ten licensed medical marijuana companies, which operate 40 dispensaries and serve five hundred thousand residents. New York is market leader in access with a dispensary-to-patient ratio that is double that of Illinois, triple the ratio in Michigan, and seven times Florida’s dispensary-to-patient ratio.

Today, licensed firms must manufacture medical marijuana products in an indoor, enclosed, secure facility located in New York State and can only produce medical marijuana products in forms approved by the Commissioner of Health. The registered organizations (RO) administered through the Compassionate Care Act in 2015 and the expansion of licenses of 2017 include:

Under the MRTA, license categories will expand to include cultivation, processing, distribution, retail dispensaries, consumption sites and delivery. A new cooperative license category will authorize groups of individuals to cultivate and process cannabis products, and a nursery license category to allow for immature plants to be grown and sold to other licensees.

MRTA encourages entry into the legal market primarily through a micro-license structure that allows small scale production, sales and delivery. A microbusiness license allows the holder to cultivate, produce, and retail their own cannabis products, but will be limited in size. Unlike many other markets, complete vertical licenses are not permitted, leaving New York ripe for newcomers or those with experience looking to expand into an emerging market. The MRTA includes a goal of 50% of licenses being issued to social equity applicants in the adult-use program.

Zoning & Real Estate

A new Office of Cannabis Management (OCM) will be tasked with regulating the manufacture, wholesale, retail production, distribution, transportation, and sale of cannabis, cannabis-related products, medical cannabis, and hemp cannabis within the State of New York. The OCM will have all regulatory responsibility for administering licensing, production, and distribution of cannabis products in the adult-use, industrial, and medical cannabis markets.

Licenses will be required for producers, distributors and retailers and producers will be prohibited from also owning retail cannabis establishments.

OCM will also supervise the continued expansion of the current medical cannabis program.

The application process for these licenses will operate similar to the current process of applying for a liquor license in New York. An individual will submit an application to the Bureau of Marijuana Policy which will review and issue the license, if granted.

For physical locations, the property intended for use must meet zoning requirements that parallel zoning for locations that sell alcohol, including their distance from a school or place of worship. In New York City, The Alcoholic Beverage Control Law prohibits certain licenses from being issued if the location of the establishment is on the same street and within 200 feet of a building that is used exclusively as a school, church, synagogue or other place of worship. This restriction is commonly called the 200 foot rule and applies to any retail establishment where liquor will be sold for on premises consumption and any retail establishment where liquor or wine will be sold for consumption off the premises

The Alcoholic Beverage Control Law, also contains restrictions on the approval of certain on premises liquor licenses if the location is within a 500 foot radius of certain other establishments with on-premises liquor licenses. After application approval, the Bureau of Marijuana Policy will then notify the local municipal government or community board and allow for public input in their determination of whether or not to approve or deny a license.

Given the highly parallel nature of zoning for liquor sales, cannabis entrepreneurs should use current ordinance governing liquor licensing to identify locations for recreational cannabis businesses in New York City.

Given the highly parallel nature of zoning for liquor sales, cannabis entrepreneurs should use current ordinance governing liquor licensing to identify locations for recreational cannabis businesses in New York City.

MRTA will provide cities, towns, and villages with an option to opt out from having adult-use dispensaries and/or adult-use social consumption sites located in their communities and will require the appropriate governing body to pass a local law in order to opt out. Any opt-out laws will need to be passed by Dec. 31, 2021. In addition, any local law opting out of adult-use retail or consumption sites can be overturned by a local referendum process.

Introducing NYC UrbanScape

Real estate is the backbone of the cannabis industry. Applicants cannot obtain a legal license without first securing a real estate location. Additionally, where applicants secure a license will be crucial to the success of any cannabis enterprise. Is the area of operation ripe for future business, foot traffic, or your business's ideal customer profile? All of these items are critical to understanding ideal areas for impact and ROI, as well your go-to-market strategy.

Certified siting maps are a critical asset to successfully onboard investors and partners. Many incentive and tax programs that allow owners to maximize the use of and support for their real estate require an intent or leasing letter as demonstrated through the existing process for a medicinal license in New York and other key programs run by entities like NYCEDC and ESD.

NYC UrbanScape helps cannabis entrepreneurs quickly and accurately identify prospective sites for production cultivation, processing, distribution, and retail dispensaries that comply with local zoning requirements. The solution also has the ability to help you gain unique insights into a potential customer profile that can inform a unique growth strategy accurately represents those in the area and/or overlay key datasets in communities to inform a premier top tier list of potential sites that prioritize an existing customer profile your team knows and understands.

We provide growth strategy and go-to-market advisory services for cannabis entrepreneurs. To learn more about our advisory services and how we help build and measure high-growth cannabis firms, contact us here.