Article appeared in Las Vegas Review Journal
on Thursday, February 13, 2003
by Hubble Smith

Execs: Affordable Housing in LV Hinges on Planning

Higher-density zoning and smart urban planning are going to play pivotal roles in keeping homes affordable in Las Vegas, a panel of housing executives said Wednesday. With land prices at about $200,000 an acre, Southern Nevada homebuilders are trying to keep their prices down by squeezing more lots onto the acre, reducing lot sizes to 1,500 square feet in some cases.

They're getting about six homes to the acre now, looking to push it up to eight to 10 as the valley's population grows to a projected 2 million by 2010.

That's what it's going to take as land prices continue to escalate, creating what some Wall Street analysts have called a real estate "bubble" across much of the nation.

"This really is an urban valley and people are used to being close to each other," Tom McCormick, president of Las Vegas-based Astoria Homes, said at a housing market seminar at the Four Seasons hosted by the Meyers Group and Urban Land Institute. "There's always going to be demand for wide-open spaces, but how much are people willing to pay for that?"

The median price of a new home in Las Vegas rose an average of 7.9 percent during each month in 2002, ending the year at $186,827, Home Builders Research reports.

It's predicted to top $200,000 early this year.

"As Las Vegas has grown and matured, this city has become a bastion for the middle-income group, and that drives the housing market and what they're able to pay," said Steve Petruska, area president for Pulte Homes, the No. 6 builder in Las Vegas last year with 919 sales.

"It's really been a shift in the type of people coming to town and the income they produce and that's going to continue as the population grows to 2 million."

Some of them have the ability to pay a premium for their lot size and are willing to fork over $300,000 for a home on a half-acre.

Left behind are people of lesser means. They're now living in apartments, mobile homes and with their parents. Getting a house with a postage-stamp yard for a monthly mortgage roughly equivalent to their rent is still a move up for them, said Robert Lewis, president of Lewis Operating Corp.

Dan Van Epp, president of The Howard Hughes Corp., developer of the Summerlin master-planned community, said something has to be done about construction defect litigation, which has practically destroyed the lower-priced, higher-density attached housing market. That's fueled demand for single-family detached homes, he said.

Master-planned communities such as Summerlin have succeeded because of upfront planning, and local municipalities should look at them as a model when laying out new residential developments, said John Restrepo, a real estate consultant in Las Vegas.

"Public sector master plans are not market-driven like private master plans are. That's one of the major reasons for the high volume of nonconforming use change requests," he said. "Public land planning authorities should adopt some of the master-planning techniques that private master planners use. This would eliminate a large percentage of master plan change requests, while enhancing property values and property tax revenues to local governments."

Clark County Commissioner Chip Maxfield, also on the panel, said there are land use guidelines that haven't been touched for more than a decade, and perhaps they need to be changed.

Las Vegas land prices rose by about 4 percent prior to 1992, increasing by about 12 percent from 1992-97 and 15 percent since then, said Marta Borsanyi, principal of the Concord Group. "So I don't like the trend," she said.

Lewis, who once owned about 6,500 residential lots in Las Vegas Valley before selling his home-building business to KB Home a few years ago, has gone outside of Las Vegas for value-added land purchases.

He's buying land in Southern California, Sacramento, Calif., and Reno, grabbing dairy farms at $60,000 to $100,000 an acre.

"I'm not buying land here because I'm trying to add value as opposed to hoping the tide will rise and I go up with it," Lewis said.

Local home builders have to count on rising home prices to justify the prices they're paying for land, which is about 30 percent of the cost of a home, he said.