Thursday, April 21, 2005

Uncle Sam, The Robber Baron

In Prescott, Arizona yesterday I was told there are buyers, just no sellers. But nobody could suggest there is no land available in that valley. This blog has pointed to several reasons for a lack of sellers; taxes, high replacement costs, etc. This SunSentinel report is making that assumption, and then concludes that is why building is down.

"'Regardless of how good market fundamentals are, we're running out of land,' said David Dabby, in Coral Gables. "With the kind of land restraints we have, it's no wonder single-family starts are down.'"

Think about this editorial when you hear government types say the only solution is to make loans easier to obtain. "The federal government owns somewhere between 600 and 700 million acres of land, or about 30 percent of all U.S. land. No one knows for certain."

Remember the homesteading days, when the government gave land away? Now, its sits on huge chunks of the country, driving up prices and freely loaning to the citizens to buy in at these prices.

11 Comments:

At 11:01 AM, Blogger dryfly said...

One of the reasons Prescott is so in demand is that it is so beautiful... the biggest reason it is so beautiful is that the place isn't covered with a blight of ugly housing developments...

If the gov't put a lot of that land on the block and turned it into a 'high desert Tempe'... I think more than a few folks would want to sell... so they could escape and go looking for another Prescott.

I'm all in favor of the Feds releasing some of the 'less environmentally significant' BLM holdings like the 'Joshua Flats' around Vegas and other hell holes but have no problem with them sitting on the Kaibib, Prescott & Tonto...

JMHO.

 
At 11:09 AM, Anonymous Anonymous said...

Ben,

I'm not sure that Rahn's rather simplistic solution to our money problem (selling off gov't land) couldn't come back to bite us hard in the future.

I lived in the Prescott area for 4 years in the late 1980s. Even back then, the real estate frenzy was in full sway with prices going up daily (although nothing like today's bubble).

At that time, Prescott had a fanatic California transplant as mayor. He advocated growth of the city at all costs and believed an unlimited number of bodies could be squeezed into the rather confined space that is Prescott.

He promoted this unchecked growth despite many reports that central and southern Arizona was facing a coming water crisis. Phoenix didn't help matters any with their water farm project sucking down the aquifer of central AZ to irrigate that city's golf courses.

Still, in the coming years, growth in Prescott and surrounding towns continued unchecked. Most of the land surrounding Prescott for miles could be described as basically a desert terrain where one cow needs a couple hundred acres just to survive.

Now the government does own a lot of land in Arizona and other western states. So, what if the feds decided to take Rahn's advice and sell off their most wretched land in western states to developers who then carved up great chunks of it into McMansion subdivisions? In comes an army of cashed out Californians looking for the good life -- in a parched, water poor land where existing residents are already scratching their heads over the current water shortages. Don't expect the pathetic Colorado River to solve any future water problems.

A new plague cometh to the land.

A good read on the west's long history of water misuse is Cadillac Desert.

 
At 11:21 AM, Blogger Ben Jones said...

Thanks for the comments. Water is an issue and so is traffic, which is getting terrible. All in all, Prescott is much better than Phoenix and I like the way some homes have more land around them. I don't want the forests cut down either, but young families could use some of the governments' desert.

 
At 11:27 AM, Blogger Sunny said...

Miami developers: lack of land leads to lower housing starts.

 
At 11:54 AM, Anonymous Anonymous said...

Fascinating. All this in the land of free enterprise. 20 to 30 % of the land owned by the government ? This is certainly part of the source of the price distortion on real estate. Lack of real value created by government intervention. We saw this kind of distortion in the Japaneese real estate market because of zoning laws. You remember why the Nikkei went to 48,000 and down to 10,000 ? REAL ESTATE BUBBLE wealth created a stock bubble that exploded. Since then (1990) Japan has had almost 0% interest rates but no economic expansion and just more debts. You are doing the same thing in USA. Very encouraging.

 
At 3:41 PM, Blogger dryfly said...

Cadillac Desert is a must read... if you don't have time buy the PBS version - both are great.

You guys all have a point - water is the key. If you could enact some sensible regs coupling growth to severe water rationing (and not just the new dev's - but the whole community - say 'no new water' like 'no new taxes' - and then see how excited the community is about growth - new bodies, new buildings.

The funny thing is folks from my part of the world (Upper Mississippi River Valley & Great Lakes Regions) move out there and don't even think a second about any of that - think water just falls from the sky - 'cause where we live it does, lots of it.

This time of year after the snow melts there is water everywhere - clean too - stupid amounts of it. But not a lot of sunshine.

You can't have it all. There are always tough choices.

 
At 6:10 PM, Blogger John Law said...

I don't know how accurate the 30% is because some areas do allow development. seems like the industry is just going for a scapegoat.

 
At 6:30 PM, Anonymous Anonymous said...

Wait just a minute. Don't many of us agree that there is no real shortage of housing, pointing out that units per capita have actually been increasing in many of the areas where the bubble is most intense? Regardless, it's never a good idea for the government to sell off assets to reduce debt. Those assets, once sold, are gone for good, but the debt, once paid down, is guaranteed to return.

 
At 6:40 PM, Blogger Ben Jones said...

I like Harry Browne's idea of selling the assets to fund Social Security liabilities, etc. Plus the govt. does a terrible job managing the land. They lease it to ranchers and lumber firms for a small percentage of what it's worth. Here is Arizona, it just sits there while a quarter acre is selling for big bucks.

I would also be for a lottery, where all citizens could own some land, free.

 
At 6:41 PM, Blogger Omari said...

I think the Times editorial oversimplifies the impact of government land holdings on housing prices.

Certainly the government owns a great deal of land around, for example, Las Vegas. However, the government also has a policy of selling land in such areas to private parties on a yearly basis. In addition, as other commenters pointed out, housing costs are not necessarily increasing due to land shortages.

Furthermore, the post-Cold War closing of military bases (including many in California, that most bubblicious of places) has released much federal land for real estate development. In Denver, for instance, at least two major bases have closed. One of the old bases is in the middle of town and now is home to many houses.

Selling off federal land may be a good idea for other reasons, but I'm convinced that it will have no impact on housing prices.

 
At 8:44 PM, Blogger dryfly said...

Selling off ALL the land is as terrible an idea as suggesting gov't hold all the land...

I lived in and still travel through Iowa which has the highest percentage of privately held land of any state in the union... something like 98%.

And while real estate is affordable, the quality of life is NOT as good by most every other measure as those in other states with forests and parks and scenery - almost all of it on public land.

Believe me - you don't want an Iowa-ization of the west. Not if you want to live in a place that still looks like the west (and not a dry Iowa).

Having a wiser land use plan - one that allows the gov't to both sell land in places like the west where it has massive holdings while maybe BUYING land in places like Iowa (for public use like hunting or bike trails) makes sense but a wholesale sell off would be a national disaster.

And a lottery would work about as well as the 'Soviet' state industry 'transfer'. Probably end up being owned by the Japanese Central Bank.

There needs to be some balance between public and private interests. And a lot better management. Looking at how badly most companies are managed doesn't give me hope they could manage land any better.

 

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