Home News The U.S. Is Running Short of Land for Housing

The U.S. Is Running Short of Land for Housing

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The hottest commodity in the Sun Belt isn’t oil, copper, or gold. Land. And rancher Robert Thomas has plenty of it.

The Thomas family owns approximately 11,000 acres of ranch northeast of Tampa, Florida. His grandfather owned a newspaper and ran a mineral exploration business, much of which he purchased in 1932 for 10 cents an acre. The metropolitan area he exceeded 3 million people. The Thomas family ranch is now surrounded by a community of single family homes.

A land-hungry homebuilder has offered to buy Mr. Thomas’ land. The family sold part of the property to the developer last year for about $70 million, or about $20,000 per acre, according to real estate records. Developers are now offering him more than double the price for some of the remaining land, Thomas said.

Land prices in Tampa “have never been higher,” he said. “And I’m here where he’s been in charge for 44 years.”

The United States, a vast space nation, is short of land.

At least inhabitable land. Land-use restrictions and lack of public investment in roads, railroads and other infrastructure have made it more difficult than ever for developers to find sites to build homes near large population centers. increase. As people continue to move to cities like Austin, Phoenix and Tampa, land prices are pushing up, further exacerbating housing shortages in these fast-growing areas.

The average price of vacant land per acre in the Sunbelt more than doubled in the past two years through the second quarter, according to property-owned land listing website Land.com.

coster group.

The Federal Reserve’s anti-inflation measures may push prices down. Rising interest rates and construction costs have already weighed on the land market and other parts of the property market are starting to slow, brokers said. Some landowners fear a recession similar to the 2008 financial crisis. The crisis saw home and land values ​​plummet after years of insolvency.

Still, a shortage of supply and strong demand mean land prices are likely to continue rising in the long term, economists and investors say.

Even in cities like New York and San Francisco, whose populations have been wiped out by the pandemic, land is much more expensive today than it was decades ago. Rutgers is currently estimated to be worth more than $20 trillion in residential land in the United States alone, according to Professor Morris Davis, who studies land values ​​at his School of Business.

This historic land boom has brought homeowners a windfall. Land now accounts for 47% of US home prices, he estimates, Davis. This is up from his 38% in 2012 and his less than 20% in the early 1960s. Rising land values ​​have been responsible for almost all of the surge in house prices in recent decades, he said.

Few places have experienced a steeper rise in land prices than the suburbs of Tampa. When Mr. Thomas’ grandfather purchased his family’s ranch during the Great Depression, he was the only bidder. “There weren’t enough trees for the birds to nest,” said 66-year-old Thomas. “It was just a lump of sand in the abandoned wilderness of Florida.”

According to family lore, the bank that managed the ranch on behalf of an estate was so desperate to let it go that a banker urged Mr. Thomas’ reluctant grandfather to make an offer. It is said that “He said he said he had 10 cents per acre, so the banker slammed his fist on the desk and said, ‘Sold! You could have gotten it for a dime,'” Mr. Thomas said. rice field.

Even factoring in the unpaid tax of $5 per acre on the land, it was still a bargain, Thomas said.

Deer on family property.

Over the years the family purchased additional land around the ranch. Much of the site is now covered with dense forest. Cows lounge in the shade of mossy oak trees and white-tailed deer traverse the bush.

Increasingly, it is a green oasis surrounded by construction sites. On a recent Thursday, as Mr. Thomas drove his pickup truck down the road near the ranch, he saw dozens of two-story homes neatly lined up. “He can reach out his own window and knock on his neighbor’s window,” he said.

Asking prices for homes in these new communities are as high as $900,000 because the land underneath is so valuable. This has a lot to do with land use regulations.

Tampa’s zoning rules prevent developers from building anything larger than single-family homes in many parts of the city. When officials in Hillsborough County, including Tampa, adopted his 1950 zoning regulations, they sought to prevent overcrowding and traffic jams and to preserve neighborhood character “for the purpose of preserving building values.” said it was a necessary action. regulation.

These restrictions not only helped preserve home values, but also pushed up the price of developable land. Become. That drives up demand for land, which drives up prices.

Builders are also forced to seek land far from cities and face new restrictions. In late 2019, Hillsborough County imposed a moratorium on rezoning land for residential use in some areas to curb new development. The move followed anti-development protests from residents who said the local infrastructure was not keeping up with the area’s growth.

Pasco County, north of the city, has also imposed a moratorium on rezoning to multifamily use in some areas in 2021.

According to the S&P CoreLogic Case-Shiller Index, from early 2021 to early 2022, home prices in the Tampa metropolitan area rose 35%, the fastest of the 20 metropolitan areas tracked.

Robert Thomas on family land northeast of Tampa.

Just a 30-minute drive from downtown Tampa, many of Thomas’ properties are already designated residential areas and are in high demand. Builders are competing for some of it. “We get letters and emails and phone calls,” Thomas said. “Somehow people got my cell phone number.”

Since 1932, the inflation-adjusted value of the Thomas family land has increased nearly 200-fold, based on last year’s sale price. That’s about 10 times the inflation-adjusted growth rate of his S&P 500 stock market index, which increased about 20 times over that period.

Inadequate infrastructure is also driving up land inflation. For example, in Nashville, U.S. Census data shows that commutes are getting longer as a result of population growth and worsening traffic congestion. With public transport inadequate, commuters often have little choice but to nudge over congested roads. In 2018, voters rejected proposals to build a light rail system and expand bus service. This places value on scarce land close to the city centre.

Lisa Maki, principal at Nashville commercial real estate broker Avison Young, said her team sold two lots in the city’s booming Gulch neighborhood to a real estate investment firm last year for $7.1 million. He said he made arrangements to do so. The seller is a family from California who bought the property for $1.1 million in 2011.

The number of vacant lots zoned for residential use in Nashville fell 43.5% between 2016 and 2021, according to an analysis of public property records by a real estate data, technology and services firm.

Altus Group

for the Wall Street Journal.

A shortage of land for development and rising land prices, combined with high construction costs, have prevented developers from building enough housing to keep up with demand.Nashville apartment asking rents rose 31% in the year to June, according to real estate agents

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The same phenomenon is unfolding across the Sunbelt.

Thomas family ranch.

Five years ago, building an apartment in the hottest Sunbelt market was a no-brainer, said Ryan Williams, executive chairman of a real estate investment firm.

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“Now, almost across the board, you’re fighting for land,” he said. Vacant bidding wars are common in cities such as Atlanta and Austin. Cadre recently researched a lot in Tampa but didn’t have time to bid because another investor bid without even visiting, he said.

The company increasingly competes not only with other developers, but also with investors looking to buy lots for profit and resell them or leave them unused. there is, he said. “This is literal land grabbing,” Williams said.

Wealthy investors such as billionaire distiller Tito Beveridge and golfer Phil Mickelson Started buying up land in the Sunbelt in recent years. Some investors keep their land vacant for years, the stakes keep rising, and they take advantage of tax incentives for undeveloped land.

Land was not always so expensive. Until the late 20th century, the American population was much more dispersed and lived on cheap land. But as more people moved to a few cities where office jobs were plentiful, and local governments passed tougher zoning codes that made housing construction more difficult, land prices and housing costs surged.

According to calculations by Rutgers University-Newark economist Jason Burr, inflation-adjusted land prices in Manhattan rose little from the 1880s to the 1970s. However, from 1977 to 2019, it grew at an average annual rate of about 13%.

Most economists say local governments need to loosen zoning rules and other restrictions to keep land inflation under control and build more homes. But these changes are unpopular with homeowners, who benefit from rising land prices and make up about 65% of U.S. households. Increasing housing often requires significant investment in roads and other infrastructure.

People are still moving to cities in the Sun Belt, and zoning restrictions aren’t likely to go away anytime soon. In the Sunbelt, the same stubborn land that has plagued New York and San Francisco for decades, making them one of the least expensive cities in the country. Some believe that we may see inflation of

Once land inflation sets in, it can be difficult to undo. Landowners who believe their land will increase in value have little incentive to sell today, making it even harder for developers to find sites.

Mr Thomas said his family decided to keep the rest of the land. Thanks to the farming exemption, his property taxes are kept low. The many offers he’s received lately are tempting, but if he’s going to sell, he’ll have to find a place to deposit his new money.

“What are you going to do with what’s left over, which is a better investment than just continuing to own the land?” he said.

Mr Thomas said his family decided to keep the rest of the land.

write destination Conrad Petzier [email protected]

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