Feds Drive Up Nevada Home Prices
- Monday, August 12, 2002
Inaction by our representatives in Washington and overreaction by environmentalists is keeping more land in federal government hands and creating a land shortage in Clark County. That in turn is driving up home prices and leaving more and more potential homebuyers out of the market.
In October of 1998, due to the efforts of John Ensign, the Southern Nevada Public Land Management Act of 1998 was signed by then president Clinton. The purpose of the act is to provide for the orderly disposal of federal land in Clark County, and in turn provide funding for the purchase of environmentally sensitive land throughout the state. Eighty-five percent of the proceeds from federal land sales fund these purchases. Ten percent of the sales dollars are allocated to the Southern Nevada Water Authority and the remaining five percent goes to Nevada’s public schools.
The Department of the Interior, through the local Bureau of Land Management (BLM) office, manages the federally owned land in Clark County and is charged with selling approximately 27,000 acres of it. But because the federal government owns 90 percent of Clark County, the Act essentially drew a tight ring around the Las Vegas valley. While the BLM land inside the ring will be sold to private parties, the land outside the ring currently stays in government hands.
In the meantime, 6,000 people a month continue to move to Las Vegas. They come for the same reasons we all did—economic opportunities, warm weather, no state income tax and affordable housing. Fortunately, government can’t screw up the weather. The other three, however, it can—and regularly does.
Given the large influx of newcomers, demand for housing in Las Vegas is as strong as anywhere in the country. Homebuilders have sold 19,000 to 22,000 new home per year for the past several years, and with over 11,000 new home sales closing in the first six months of 2002, this year appears likely to set another record. Meeting this kind of demand, home prices escalate. In 1995, the median price of a new home in Las Vegas sold for $124,100. This May, the median reached $186,858. If prices continue to increase at the same rate, the median price at the end of the decade will be over $280,000.
But to build and sell homes, builders first need land. Builders develop 5,000 to 6,000 acres of land a year for housing. Thus, at the current pace, with the federal government continuing to horde valuable acreage, only 10 years of land are left for residential development. Major homebuilders, knowing this, are bidding the price of residential land to levels thought unimaginable just five years ago. In the late 1990s residential land sold for $40,000 to $50,000 per acre. That same land is now selling for $200,000 per acre, and the price of higher-density residential land for affordable, “cluster” homes is fetching $250,000 per acre and up.
On July 30, after a delay of months caused by an environmentalist lawsuit, the BLM completed an auction of over 201 acres. For the first time the BLM received bids on all 39 parcels auctioned. It also netted $30,929,000—or 41 percent over appraised value. The average price per acre was $150,733. That’s a 30 percent increase over the previous auction’s average price of $116,004 per acre.
What this means for future homebuyers are ever-increasing home prices. Ten years ago 74 percent of the new homes sold in Las Vegas were priced under $150,000. That percentage has been cut in half. In the mid-1990s 64 percent of Las Vegas residents could afford a median priced new home, now less than half (47 percent) can. In California, only a third of residents can afford a median-priced home. It’s estimated that for every $1,000 increase in home prices, 1,400 families are kept from buying homes.
Nevada’s leaders in Washington can do something for young working couples looking to buy a part of the American dream. Moving the BLM disposal boundary will take Congressional action and guts. It means ignoring extreme environmentalists—who would rather see people live in cardboard boxes than disturb cactus and lizards—and landowning political contributors—whose assets become more valuable when government curtails the land supply. But the future of Las Vegas’ quality of life is at stake.
It’s now time for the federal government to sell more of its huge Clark County land horde to private developers. More Las Vegas families should enjoy the pride and joy of home ownership at affordable prices.
Doug French, first vice president of a Southern Nevada bank, is a policy fellow of the Nevada Policy Research Institute.