Housing booms in Metro Tucson Leapfrog projects, higher-end homes fuel growth; desert preservation a priority
by Jonathan J. Higuera
The Arizona Republic

It's not uncommon for first-time visitors to Tucson to fall in love with the lush Sonoran Desert landscape and decide to make it their new home.

Accommodating demand for housing and maintaining the desert environment have created a challenge that has sparked many a contentious debate within the community.

Since 2000, new-home permits have jumped nearly 65 percent, although they are dwarfed by the 63,570 new-home permits in metro Phoenix in 2005. advertisement




Last year, 11,762 new housing permits were issued, a record for the area, up from 7,172 in 2000. Most of those homes were in Pima County, which has about 950,000 residents and is expected to grow to more than 1 million in a year or two.

The growth is reflected in the number of builders of new homes who have flocked to the area. Toll Brothers, Beazer Homes and K. Hovnanian, to name a few, have established Tucson operations in the past year.

Newcomers to the area and trade-up buyers continue to drive demand for new homes, particularly higher-priced houses.

"From our surveys, it is evident there is more demand in higher-price points," said John Bremond, president of KB Home's Tucson division.

KB has provided a spectrum of housing options, from entry-level, to midrange to upper end. Because the Tucson economy offers lower median wages than the national median, much of the demand for upper-end homes is coming from outside the area.

"People are coming from places where they have established a sizable equity in their homes," Bremond said.

The town of Marana, which sits northwest of Tucson and is accessible from Interstate 10 is one hot spot. The Town Council shrewdly had annexed land during the past few decades and began planning for growth.


2 spots in Marana
Now, more than 14,000 residential lots are being reviewed by the town's planners. At present, Marana is home to two of the region's active master-planned communities: Dove Mountain, a community at the base of the Tortolita Mountains, and Gladden Farms, which has 600 homes built and an additional 1,400 planned in just its first phase.

Most of the growth is south of I-10 in agricultural areas. High-end growth has concentrated north of I-10, which also is where the federal government designated a giant swath of desert as habitat for pygmy owls. The pygmy owl may be de-listed as an endangered species in the near future, and it is unclear what impact that would have on land set aside for them.

It's not something Marana is paying much attention to at the moment, Town Manager Michael Reuwsaat said.

"We're doing about 150 home permits a month," he said. "We've developed and implemented the strictest design standards in the region, and the town has been fairly creative in getting the developers to pay for the infrastructure up front."

For example, the town, which recently completed building its new municipal complex, requires developers and home builders to pay construction sales taxes as well as impact fees to cover the costs of infrastructure. Still, it offers to credit them back some of the money as the infrastructure and amenities are put in place.

The result has been a mix of high-end, midrange and entry- level housing. The golf community of Dove Mountain, which sits at the base of the Tortolita Mountains and extends into several canyons there, is at the high end. Recently, its Gallery Golf Club was chosen as the site of a PGA Tour event, starting in 2007.

Paul Zucarelli and his wife, Beth, moved to Canyon Pass, a high-end section within Dove Mountain, about three years ago. They've been in love with their new home and development ever since.

"It's one of the best high-desert canyon settings in the state," said Zucarelli, who owns an employee benefits firm.

In fact, he was so impressed that he moved his mother into a home in Heritage Highlands, the active-adult section of Dove Mountain, and his adult children have a home in the Preserve at Dove Mountain.

"You have homes that young families can afford, and you have high-end million-dollar homes," he said. "My neighborhood has unbelievable spacing."

Steve Huffman, a state legislator who now is running for the congressional seat set to be vacated by the retiring Jim Kolbe, is a real estate agent for Realty Executives.

He said, "Marana has done a really good job of getting buy-in from the community. They are really the model.

"They are one of the fastest-growing communities in the state, and when they move forward on a plan, there's not a lot of controversy."


Seeking cheaper land
This year, the number of new-home permits for the entire metro area is expected to drop to about 10,200 permits as the frenetic pace of last year's buying frenzy cools, said John Strobeck, a housing market consultant who tracks the area's new-home activity.

Still, long-term, some are projecting new-home permits to reach 15,000 and beyond in the next five years.

This year, only 8,000 new homes will be built in Pima County. The rest will be in the neighboring counties of Pinal and Cochise. The percentage of new homes built outside Pima County's boundaries will continue to grow in subsequent years, Strobeck predicted.

Land prices have shot up in Pima County, sending developers across county lines in search of less expensive dirt to develop.

"We're seeing tons of leapfrog growth," said Strobeck, referring to developments that increasingly are on the fringes of metro Tucson. "There's no concentric growth."

A major reason for the spiraling land prices is the lack of availability of developable land. Although similar in size to Maricopa County, Pima County has but 821,000 acres of its nearly 6 million in private hands. That compares with about 1.8 million acres of private land in Maricopa County.

Much of Pima County's land is owned by the state and federal government. Indian reservations also take up more than 40 percent of the county's land mass.

"Land is beginning to be a problem," said Marshall Vest, a senior economist at the University of Arizona, who follows the housing industry closely.

The land squeeze could be eased by the state Land Department as it begins to auction off some of its holdings, but those auctions have yet to occur.

The department did open an office there last year and is planning to hold several auctions this year, although the parcels are small by developer standards, ranging from 40 to 400 acres.

High land prices have in turn led to higher home prices. In February, the median price of a new home was $254,000, up from $219,000, in the same month in 2005.


Affordability issues
Other factors driving up prices were speculators, who bought homes with the intention of flipping them for profits; rising costs for construction materials; and government-required impact fees paid by developers and home builders. The Southern Arizona Home Builders Association maintains that government-imposed impact fees tack on an average of $16,000 to the price of a new home in the Tucson area.

That may be one reason developers increasingly have catered to high-end consumers with bigger, more expensive homes.

"Developers can look to build densely packed affordable homes or go after the higher-income marketplace," Huffman said. "It seems like the focus has been on the higher end the last couple of years."

Even on the resale side, the past few years have been tough for first-time home buyers, he added. "It's an issue we, as a community, have to work on, and it won't be solved overnight."

To make way for the growth and to balance conservation, Pima County created the Sonoran Desert Conservation Plan two years ago to limit building in unincorporated parts of the county, further cutting into developable land. Also, a federal designation of land as critical habitat for the endangered pygmy owl shut off areas for growth.

The number of active master-planned communities could triple in the next few years, said Will White, head of the Tucson office for Arizona Land Advisors, a land brokerage firm.

"We've got a really unique area here," he said. "The challenge will be integrating the beauty of the desert with the amount of growth and people moving here."