Is sprawl a manufactured myth changing our culture?

The Census Bureau spends over $1,000,000,000 per year to prepare and analyze the results of the 2010 census so they can tell us about ourselves. 

You can’t debate the statistics that define us as a nation. 

Of course the initial premise is that we must believe the data is accurate.

Assertion: Sprawl is detrimental to our culture and must be reversed before we deplete our land and resources.

Government policies, regulations, and standards support this notion we have sprawl and that suburbanization over urbanization is detrimental to our culture.

Let’s review the facts:

Source: US Census 2010 - % of population

71% live in urban areas

10% live in urban clusters (suburban areas)

19% live in rural areas

UN’s Division for Sustainable Development --- AGENDA 21

The following excerpt is taken directly from the UN Agenda 21 document:

Section 1, Chapter 7

9(f) All countries, especially developing ones, should, as appropriate, formulate and implement programmes to reduce the impact of the phenomenon of rural to urban drift by improving rural living conditions

President Obama issued Executive Order #13575 on June 9, 2011.

This executive order established THE WHITE HOUSE RURAL COUNCIL and in part:

Executive Order

Sec. 4. Mission and Function of the Council.

The Council shall work across executive departments, agencies, and offices to coordinate development of policy recommendations to promote economic prosperity and quality of life in rural America, and shall coordinate my Administration's engagement with rural communities.

 

Our LAND – who owns it and what it is used for?

According to the  

Congressional Research Service the United States has a total land area of 2,300,000,000 acres.

Federal Government owns approximately 28%.

State and local governments own about 11% of the land in the US.

The following illustration shows the federal government’s percentage of land owned in each state.

About 60% of the land is privately owned and 1% is in foreign ownership.

Forbes Magazine, March 2011 issue listed the top six private landowners in the United States.

John Malone 2.2 million acres                    State of Delaware - 1.9 million acres

Ted Turner 2.1 million acres

Red Emmerson 1.72 million acres            State of Rhode Island - 1.0 million acres

Brad Kelley 1.7 million acres
Irving Family 1.2 million acres
Singleton Family 1.1 million acres

What do they know that we don’t?           Nothing!                       It is all in the land.

The USDA publishes how the land is used and it would be appropriate to compare the uses leading up to the housing bubble. The following graph illustrates how the major land uses have changed since 1945. To put everything into context:

US population in                  1945   142,000,000                         2007   301,000,000

Definition of Special Uses:

Highways, roads, and railroad rights-of-way, plus airport facilities outside of urban areas.
Rural parks, wildlife areas, Federal and State parks, wilderness areas, and wildlife refuges.
Defense and industrial areas, Land owned by Department of Defense and Department of Energy and used for airfields, research and development, housing, and miscellaneous military uses.
Miscellaneous farmland, Farmsteads, farm roads, and lanes plus misc. farmland.

Definition of Urban Land:

Densely-populated areas with at least 50,000 people (urbanized areas) and densely-populated areas with 2,500 to 50,000 people (urban clusters).

Major Land Uses:

                                   2002                  2007

Forest-use land                                    28.8%                          30%

Grassland pasture                               25.9%                          27%
and range land

Cropland                                              19.5%                          18%

Special uses – parks                          13.1%                          14%
 and wildlife areas

Other uses                                           10.1%                          9 %

Urban land                                         2.6%                            3%.

Source: Multi-Resolution Land Characterization (MRLC) consortium (a group of federal agencies)

                                                                        Percent Breakout of the Urban Land

Water                                                                          5.2%

Perennial Ice snow                                                   0.02

Low Intensity residential                                      3.2

High Intensity residential                                     1.39

Commercial/Industrial/transportation               0.54

Developed high intensity                                     0.19

Bare rock/sand/clay                                                 1.19

Deciduous Forest                                                    11.05

Evergreen Forest                                                    12.11

Mixed forest                                                              2.12

Shrub/scrub                                                              21.24

Grasslands                                                                14.31

Pasture/Hay                                                              6.8

Row Crops                                                              15.54

Woody wetlands                                                      3.88

Emergent Herbaceous wetlands                          1.24

Today, do you have the impression that we are running out of land for real estate development projects? If you do; you are wrong.

We have plenty of land but government is slowly removing land from real estate use through regulations imposed by a long list of federal agencies.

I have heard the phrase and have used it many times – “All the good land is gone”. This simply means that the best located and easiest to develop land has already been used and reused.

But consider the following; if you purchased farmland (agricultural zoned land) and rezoned it to residential, the value of the land automatically increases without any improvements. Review the following graphs but keep in mind that all land prices are based on local markets. 

There are only four (4) ways to use land as an investment strategy. In all four strategies, remember to always complete a comprehensive site analysis review of each property.

1.       Purchase Land for Future Use

Purchase unimproved raw land at below market prices. Always make a yearly site assessment to protect the property from down zoning, master plan changes that restrict the use and changes to adjacent properties. Consider rezoning opportunities increasing value.

2.         Sell Unimproved Raw Land with Approved Plans and Permits

Anyone can enter the land development field. Option the property while completing designs, entitlements, permits and regulatory approvals. Sell the design, approvals and permits. This strategy actually removes risk and limits cash investment from end users. There is a need for inventory in this category.

           

3.         Sell approved and improved right of way

            Business plan of a “developer”

            Developer has the greatest risk but also the greatest reward

            A developer markets to builders

            End users are builders, individual homeowners

            Requires substantial cash flow & bonding capacity

            Design to allow product flexibility

            Requires covenants and restrictions to protect value

            Design project in phases to limit cash flow and control lot absorption

           

4.         Improve Right of Way and Build/Sell Homes

            Business plan of a “builder-developer”

            End users are individual home buyers

            Market sensitive and knowing the market is essential for success

            Market segmentation may become more pronounced  

            Slower absorption rates at higher prices may be the new norm

                                   

The real estate industry continues to be upside down but land is the most important real estate asset you should have in your portfolio. We do not have spawl – it is a myth.

I will be publishing an e-book on due diligence this year and if you are interested in having a digital copy, please send me an email with your contact information.