Over the past two years, the Las Vegas Valley, like most desirable places to live in the United States, has seen an unprecedented escalation in the price of homes and raw acreage. The influx of thousands of people moving to Las Vegas over the past few years seeking to take advantage of job availability and reasonable home prices has drawn speculators also interested in the very attractive home prices - along with confidence in the knowledge that the demand for housing would cause real estate values to increase as demand exceeds supply.
These speculators, many from California where housing costs have priced the market out of reach for many people, moved into the Valley and purchased homes at comparatively low prices. The speculators quickly "flipped" the properties at a substantial profit causing the sudden explosion of real estate values in the Valley and resulting in a pricing situation that has made home ownership less attainable, particularly for first-time home buyers.
In order to head off what could become a full-blown housing access issue, local business leaders and Government officials, concerned that the Las Vegas market is headed for a crisis, has proposed an array of possible measures designed to boost the availability of attainable housing. Among these proposals are:
Under this proposal, home builders would set aside ten to twenty percent of new homes under construction that would be priced especially for low to moderate income buyers unable to afford prevailing housing costs. As an example, these set-aside homes would sell for an average of $175,000 to $200,000 in a development of homes averaging $250,000 to $300,000.
The negative aspect of this scenario is that the builder would, of necessity, be forced to defray the costs of these set-aside homes by raising the prices on non-inclusionary homes. In other words, inclusionary zoning would shift costs to buyers who can afford to pay more.
Another alleviating possibility to the shrinking availability of affordable housing is the recent increase in vertical buildings. A number of developers in the Las Vegas area are taking to mid-rise three to five story structures and high-rise buildings.
Taller buildings allow developers to spread the cost of land among more units per acre. Mid-rise development can accommodate thirty to seventy units per acre and high-rise developments much more.
The down side to high-rise building is the built-in high costs of developments such as underground or first level parking garages and the expense of steel framing required for building over four stories in height.
OUTLYING AREA DEVELOPMENT
The rising cost of homes in the immediate areas of Las Vegas, North Las Vegas, Henderson and Green Valley are causing many prospective home buyers to look to outlying regions to the west and north such as Pahrump, Coyote Springs and Mesquite.
As experienced by home buyers in most large cities, the further outside the city, the more affordable the housing. This is a trade-off: lesser housing costs versus further travel time to the city and higher commuting costs.
BLM LAND RELEASE
The Federal Bureau of Land Management has approximately 40,000 acres of land available for development in the Las Vegas Valley but only releases two or three thousand acres for auction twice a year.
There are pressures from some developers who would like the BLM to release all available land at one auction. The reasoning behind this is the hope that a large release of land would help to stem the skyrocketing cost of land with the developers being able to offer housing at a lower cost.
Opposed to a massive land release are some municipal planners who reason that a massive land release could overwhelm development and infrastructure capabilities. This would create problems in providing services to all the new residents of the homes being built.
Zoning is a key factor in any consideration of bringing more affordable housing to the market. Zoning was originally created in the late forties and was designed to separate residence areas from commercial development. However, it is an unfortunate fact that zoning evolved into an exclusionary tactic.
Used to exclude certain classes of people and to create high tax values, many exclusively zoned developments are inefficient and over the long term, unsustainable. Additionally, some building codes call for minimum square footages and materials for construction beyond the necessary for livability and safety.
These zoning "pressures" result from homeowners who are concerned that certain kinds of development could lower home values. Further, restricted zoning discourages construction of affordable and attainable housing.
Local area employers often have a major impact at zoning hearings where they can convince regulators that attainable housing is a key factor in the availability of workers and an assurance that employers have access to a viable workforce. Keeping key employers in the area then becomes a major factor in influencing zoning regulators.
COMMUNITY LAND TRUSTS
Among other proposals being considered for creating more attainable housing in the Las Vegas Valley is the establishment of a Community Land Trust. This works by making a nonprofit Trust that allows the building of homes and commercial buildings on land owned by the Trust.
In this case, buyers pay only the cost of purchasing the structures. Since no land costs are included in the purchase price, homes and commercial building purchases are made more affordable. Although as many as thirty-one states have such Trusts, land trusts provide only a modest amount of housing nationwide.
Furthermore, there is some controversy as to whether land trust purchases are worthwhile investments given the fact that the purchaser cannot build equity in the land which is a major component of purchasing or selling costs.
CONSTRUCTION DEFECT CLAIMS
Another rapidly skyrocketing cost is in liability insurance premiums. Many builders have avoided construction of affordable attached homes and condos because of prohibitive liability insurance premium costs. Builders advise that despite current land costs, they can still get the density needed in order to build affordable housing. The problem, however, lies in the fact that subcontractors, discouraged by unaffordable insurance premiums, will not and often cannot participate.
A possible solution is to reduce construction defect claims by bypassing trials and sending all construction defect lawsuits to binding arbitration.
Detractors say that binding arbitration would deprive homeowners of impartial decisions made by a judge or jury. There are some concerns that arbitrators could develop a tendency to find in favor of builders to ensure a continuation of work - whereas community members with no such considerations would tend to render much fairer decisions.
One way or another, attainable, affordable housing is a problem area that must be solved.