Free Market Watch - October 2007

Federal Land Policy

Creating Economic Hardship in Clark County

by Charles F. Barr

Ever since Nevada achieved statehood in 1864, federal agencies have controlled most of the state’s land, refusing to release more than token amounts for construction of homes, schools, parks and businesses.

Currently, about 89 percent of Clark County’s surface area is managed by the federal government. Until recently, this situation had little impact on day-to-day living for most county residents. Now, however, it is causing economic harm and, in many cases, genuine hardship to local developers, workers, renters and would-be homeowners.

That is the subject of a recent study I conducted for the Nevada Policy Research Institute titled, “The Federal Land Stranglehold – and What Nevada Can Do About It.”

The study details how government-induced scarcity of buildable land — in an area surrounded by miles of wide-open spaces — has triggered massive increases in the prices of any remaining privately-owned land.

Today, average families can no longer afford mortgage payments for median-priced homes. Numerous multi-million-dollar residential and commercial projects have been cancelled or put on hold, resulting in thousands of lost construction jobs, simply because the high land prices have made such projects too costly to build. Construction of affordable two- and three-story apartment complexes has been severely reduced, causing rents for existing apartments to rise sharply.

Increases in industrial and commercial rents have been passed on to local consumers in the form of higher prices. As a result, the cost of living in Las Vegas now exceeds that of other major western cities such as Phoenix, Denver, Salt Lake City and Portland.

Escalating costs are having an increasingly negative impact on Clark County’s ability to attract and retain the new businesses needed to support and diversify its growing economy. Until recently, Southern Nevada was a magnet for companies trying to escape high-cost environments in California and elsewhere. This advantage has now disappeared.

“Big corporations look at our land prices and they just turn away,” said a local business leader. “Our land prices make any deal out of the question, no matter what incentives we offer.”

Some of the most serious effects of the federal land policy are being felt by a demographic group that is critical to the continuing success of Clark County’s economy: low- and moderate-income workers, including school teachers and many hotel/casino employees.

Living costs for workers in Clark County’s all-important hospitality sector are increasing much faster than earnings. The county’s median home price has surged more than 75 percent in the past five years, overwhelming wage increases during that time. Increased living costs will ultimately force hotel/casinos to offer higher wages to attract new workers and retain existing staff, reducing profits and making new growth-oriented projects more difficult.

Higher living costs are also a major contributor to teacher shortages, negatively impacting the education of thousands of children in the county’s primary and secondary schools. Once, Clark County’s relatively low cost of living was a major selling point for teacher recruitment.

“However, with dramatically escalating housing costs and with new teachers more interested in purchasing-power than retirement benefits, recruiting teachers is becoming increasingly difficult,” statewide school officials recently reported.

In the last seven years, the Bureau of Land Management auctioned only 20 square miles of public land in Clark County, far short of the 29 square miles of suitable land per year needed to maintain the area’s current population density. If this policy continues, overcrowding and escalating costs will make Clark County a progressively less desirable place to live and work.

Charles F. Barr
Charles F. Barr is a research analyst specializing in economic and demographic modeling and a policy fellow of the Nevada Policy Research Institute.