Affordability drives density

By Brian Wargo / Staff Writer

A carpenter frames a KB Home at the Inspirada master-planned community in Henderson. Photo by Steve Marcus

Las Vegas is surrounded by desert and open space, but the limits of available land, its high price and the need for affordable homes will continue to drive density increases in the valley, a panel of experts said.

The Urban Land Institute Las Vegas brought together developers, local government planners and others in the development industry for a June 7 conference at the Four Seasons Hotel to address regional trends in density and problems they create such as traffic gridlock.

More and more developers are requesting higher densities to make their projects pencil out given the expense of land and infrastructure. Many local governments have changed their codes or are in the process of doing so to facilitate higher densities and a mix of uses that combine residential and retail.

The need for density is driven by affordability, said John Ritter, chief executive of Focus Property Group, the developer of such master-planned communities as Mountain's Edge, Inspirada, Providence and Kyle Canyon. A boom in the housing market pushed prices to the point where they are no longer affordable, and that led to the slowdown in the industry, he said.

"Land values are not going to come down," Ritter said. "So how do you build more affordable homes or attached products and still be able to deliver to the marketplace great products and affordable products. It is clearly through density. I don't know of any other way it has been done."

Last week, the Henderson City Council approved Focus Property Group's request to increase the density at Inspirada from 11,500 to 13,500 units. That increase will occur in a 300-acre section of the 2,000-acre development that will have 5,000 instead of 3,000 units. Henderson will allow a height up to 200 feet but the majority of buildings are limited to 80 feet.

Ritter predicted that more developments in the Las Vegas Valley will mirror Inspirada with higher density, narrow streets and traditional designs and walkability. There will also be more mixed-use development combining residential with other uses.

"This isn't rocket science," Ritter said. "Every major American city that has had strong demand has gone through the same thing. People ask me if midrise is going to work. I am not sure of anything, but I do believe if you look at every other city that has gone through what we have gone through, it has worked there and in my opinion it will work here."

In 2003, 13 percent of total new home sales were attached - a figure that grew to 34 percent in 2006, said Tim Sullivan, president of the Sullivan Group Real Estate Advisors, the keynote speaker of the conference. He predicted that in five years, the percentage of detached new home sales will be 50 percent as Las Vegas, following the trend of other major markets on the West Coast.

Las Vegas has already been moving in that direction in more dense single-family neighborhoods whose lot size has gone from 6,000 square feet in 2001 to 4,200 square feet in the first quarter of 2007, Sullivan said. High rises are too expensive to build to serve as affordable housing, but densities of 12 to 20 units per acre are a solution, he said.

"When you look at the housing market in 15 years, if you want to buy new, it will be attached," Sullivan said. "If you want to buy detached and close in, it will be the resale market."

Higher densities, however, don't always translate to affordability even when it comes to single-family developments, said Christopher Stephens, executive vice president of Rhodes Design and Development.

"Density is extremely important as it relates to affordability, but it has not been the panacea that builders thought it would be," Stephens said. "What it does is keep prices fairly level for smaller units and allows people to still afford homes when traditional single-family homes are going up."

A panel of planners from local governments outline plans for facilitating higher densities and mixed-use development to meet the latest trends in development and need for more affordability.

Ten years ago, Henderson didn't want a large concentration of multi-family housing in any area, but has since has reversed that position in approving such projects as Inspirada, said David Norris, principal planner for Henderson. The city is even requiring some developers to make a certain percentage of their homes affordable in exchange for increasing densities.

While increasing densities improves affordability, it creates challenges that must be addressed, panel members said. There is the need for park space because people have smaller backyards. There is also great demand on the school system and transportation network.

Sullivan said the region is 20 years behind in its long-range planning, but it's not too late to try and address such problems as traffic congestion.

"I think we have some tremendous challenges here with transportation if we don't embrace some type of mass transit," Ritter added. "As much as we talk about mixed use, the majority of people that live in Las Vegas work on the Strip or downtown."

Brian Wargo covers real estate and development for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at (702) 259-4011 or by e-mail at wargo@lasvegassun.com.

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