COMMUNITY INVESTOR
SPOTLIGHT: PHOENIX/TUCSON
SOWHO OWNS THE LAND IN ARIZONA?
development and job creation is important, particularly since the presence of a casino or other attraction might seem to be an indicator that an area is staged for growth, but in reality, there may be no land available to nontribal members. Job opportunities may be limited as well. The Arizona Indian Gaming Association (AIGA) represents 15 tribes active in the state’s gaming industry. The association focus- es first on self-reliance for those tribes and secondarily on benefit “to all of Arizona.” AIGA annual reports can give research-oriented investors insight into how tribes work to affect state policy regard- ing land use, economic policy and commercial development. For example, the association has fought hard against commercial fantasy sports, which represent competition to casinos, and AIGA aggressively publicizes tribal con- tributions to the Arizona school systems and local job markets. Read the “fine print,” however, to determine just who is em- ployed by these initiatives and how local tax revenues may suffer if income earners and businesses cited are not required to pay local taxes. The system is definitely complicated. BIG GROWTH IN RELATIVELY SMALL QUARTERS By the time you remove tribal lands and state- and federally controlled lands from the Arizona real estate equation, only about 18 percent of land in the state is available for ownership by private entities, either individual or corporate. This has been a point of contention throughout much of the state’s mod- ern history, with state representatives actually requesting to be excluded from
Understanding the real estate markets in Phoenix and Tucson starts with un- derstanding who owns the land through- out Arizona, and how and why. In 1910, when the territory of Arizona began preparation for statehood, more than 2 million acres of land in Arizona were placed in trust for schools and other public institutions by an act of Congress. These lands remain in trust to this day. About half are located in rural areas of natu- ral beauty and resources, and about half are, today, within or adjacent to urban areas. The Arizona State Land Department (ASLD) manages these lands and has the option to “conserve and protect” them, use them to further the ends of the pub- lic school system, or to drive “economic stimulation.” ASLD does occasionally sell off land to earn money for the trust that holds those properties, but it takes great pride in selling off very little and for extremely elevated prices. In 2001, for example, the department sold 3,500 acres and earned $148 million. In addition to state-owned land, federal land encompasses a large chunk of the available real estate in Arizona. In fact, more than 42 percent of Arizona is federally owned, and although it can be leased for tourism and agricultural pur- poses, it is not part of the tax base for the state, nor is it simple to alter the existing state of the land by developing it. In addition to federal- and state-owned land, Arizona is home to 22 Native Amer- ican reservations, all of which operate under their own governmental structures and may use their land as they choose. They play a vital role in the state’s tourism industry, by attracting visitors who wish to enjoy their often-largely-unspoiled tribal lands and, in many cases, to gamble in the tribes’ casinos or attend confer- ences hosted at their high-end hotels, conference centers and resorts. For real estate investors, under- standing how tribal activities influence
WHY ARIZONA?
consideration for new national monu- ments in 2015. The vast majority of the developed land in the state is made up of this roughly 18 percent, and the areas around Phoenix and Tucson show the heaviest development. Interstate 10 (I-10) opened between the two cities in 1967, and by 2001, the road carried about 50,000 trav- elers a day as the populations of Phoenix (2.8 million at the time) and Tucson (803,618 at the time) traveled back and forth between the two metro areas. I-10 runs across Gila River tribal land, but the Arizona Department of Transportation (ADOT) has a right-of-way agreement and has occasionally worked with the tribe to maintain or expand the road. startup community • Relatively low taxes • Beautiful, warm weather • Safety (ranked 10th most peaceful state in the nation in 2016) • Strong economy • Thriving medical and health care communities • International airport • Sunshine W hen you say, “Why Arizona?” a lot of the answers you get are going to have a lot to do with Phoenix and Tucson. Here is a small sampling of the responses we received from local real estate professionals: • Incredible natural beauty • Affordable cost of living • Affordable housing • Strong job market with upward mobility • Supportive entrepreneurial and
INVESTMENT INSIGHTS FROM I-10 AND THE URBAN PLANNERS The issue for Phoenix, Tucson and investors working in the area is not so much whether the area will continue to grow, but how that growth will manifest in such a relatively limited geographic area. Phoenix boasts a thriving housing market at present, having concluded 2016 with somewhere between 6.9 and 9.4 percent appreciation, depending on your data source, and a resounding prediction from Realtor.com that the city will be “the top housing market in the U.S.” in 2017. We have to note here that such numeric discrepancies in appreciation from credible data sources should cause investors to proceed with caution and that 2017 will likely show a plateau in home-value gains as the
At present, the Phoenix metro area, which is located largely in Maricopa County, boasts a population of about 4.5 million, and Pima County, where Tucson is located, has a population of more than 1.2 million. Pinal County, which sits “cornered” between Pima and Maricopa, has experienced a great deal of growth and expansion of its own as both metro areas have expanded. U.S. Census ana- lysts project that Pima County will have a population of more than 1.3 million by 2020, and Maricopa County is on track to expand dramatically as well. In 2016, the U.S. Census reported that Maricopa County was the fourth-largest county in the country by population, and the Phoenix metro area, which includes Mesa and Scottsdale, ranked fourth in the country in terms of residents gained for the previous year.
market stabilizes. This is, on the whole, good because another year with appre- ciation near 10 percent, as some sources indicate, could be the beginning of a bubble. Slower growth rates could indi- cate the real estate market is recovering and stabilizing instead of remaining in a “boom-bust” cycle. Median rents at present hover around $1,200 a month, and median home values around $250,000, with a number of luxu- ry “pockets” in the area attracting buyers flush with IT-related income and a desire to spend it in the area’s vastly more afford- able economy relative to the West Coast locations from which they often come. The greater metro areas of both cities serve as an attractor not just for U.S. high-tech companies, but also interna- tional ones. “When large international companies look to relocate in the U.S.,
70 | think realty magazine may :: june 2017
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