Rising land prices is leading KB Homes to begin building three-story homes like these near Ann and Commerce roads in North Las Vegas as a way to make homes more affordable for buyers. Photo by Gary Thompson.

KB Home executive Christopher Stephens saw a dramatic shift in the local housing market two years ago.

That's when Stephens, senior vice president of KB Home, said he and other executives noticed that pro formas -- the hypothetical balance sheets and income statements builders use to determine a project's viability -- stopped working based on rising land costs.

The skewed projections led KB to unveil in recent months a crop of fresh products, including three-story homes and five-unit townhome buildings.

Stephens, speaking Tuesday at a housing seminar held by the Urban Land Institute's Las Vegas chapter, said several factors have combined with land costs to increase median home values from $150,000 five years ago to about $300,000 today.

Stephens reeled off a litany of expenses that compose the asking price for a house. And in every case, those costs have jumped exponentially.

Land costs contribute 34 percent to the price of a home; developable residential property in Las Vegas now commands $850,000 to more than $1 million. KB is paying 220 percent more for land today than it was in 2000, Stephens said.

Development costs, which include grading, road construction, utility installation and drainage, total 17 percent of a home's price. Basic development activities at KB cost 65 percent more than they did in 2000.

At 41 percent, the cost of vertical construction contributes the biggest chunk to a house's price. Expenses such as labor, building materials and taxes and fees have shot up a combined 45 percent since 2000, Stephens said.

"You can't build today without charging more or building more units," Stephens said.

Demographic drifts will add to the affordability crunch in coming years, said John McIlwain, a senior resident fellow of the Urban Land Institute who addressed the crowd of about 100.

The United States is adding 3 million residents a year, and will continue to do so through at least 2030, McIlwain said. About one-third of that growth comes from immigration; the rest is due to the birth rate. The United States is the only industrialized nation with an expanding population, and only China and India are growing faster.

But America's new population won't blanket the country evenly. Most people will continue to gravitate toward big cities such as Las Vegas, where jobs are plentiful. Plus, increasing land-use restrictions nationwide are limiting potential sites for new construction.

McIlwain said those trends are running head-on into the 20th century notion of suburbia -- the 2,500-square-foot, single-family home on a 7,000- to 10,000-square-foot lot.

The problem, McIlwain said, is zoning. Too many municipalities frown on adjoining mixed uses, such as residential and retail, and dense development. Public officials therefore write zoning codes prohibiting intensive land uses that could help bring prices down. He called for remaking zoning codes to encourage higher densities and multiple uses near each other.

McIlwain also suggested a citywide, public-private effort to forge a vision laying out land-use and zoning patterns for the Las Vegas Valley over the next 20 years.

"It could take five years to build a consensus in the community that says, 'We want higher densities, (neighborhood) connectivity and some protection of land,' " he said. "The most important thing you can do is understand this is a long-term problem that requires long-term planning."

Some builders aren't waiting for a long-range vision to create attainable housing.

Ehud Mouchly, vice president and director of California projects for affordable-housing developer UniDev, said his company has found several ways around the constraints that block many builders from constructing attainable homes. Based on UniDev's approach to building, a $300,000 house becomes a $205,000 house, Mouchly said.

"It's not rocket science, but you have to relax rules that some people think must in the absolute be obeyed," he said.

First, UniDev, which has built in California and the east, has in some markets received exemptions from prevailing wages. States set prevailing wages based on what they're paying to build public-works projects; critics argue prevailing wages artificially inflate construction workers' salaries, which are passed on to consumers via housing prices and lease rates.

Mouchly said his company has also earned municipal approval for "value engineering" -- the ability to simplify home designs and avoid some of the flourishes and aesthetic touches some codes require. In addition, UniDev has talked cities into relaxing impact fees and allowing various uses to intermingle in a development "without going through entitlement (permitting and approval) hoops," Mouchly said.

UniDev has removed land costs from the equation by entering ground-lease agreements with land-owning organizations such as redevelopment agencies, universities, hospitals, school districts, charitable foundations and major employers. Under a ground-lease pact, the entity maintains ownership of the land, and UniDev builds homes on the property and sells the houses. A buyer owns the physical structure, but not the land underneath it.

"Buyers can do improvements to the home, but when they end their tenure there, they can't take advantage of the land profit," Mouchly said. "We're not playing the estate-building game. We're giving people shelter. The benefits are property-tax and mortgage-interest deductions. That's it."

Working with landholders also eliminates marketing expenses, because UniDev has a specific segment to sell to: Employees or constituents of the landholder. For example, a school district that partners with a builder to create attainable housing would offer a ready consumer supply of teachers who otherwise couldn't afford a home.

Mouchly also recommended that builders dig for lower-priced financing. For example, find lenders who have obligations under the Community Reinvestment Act, contact them and ask if they've met their reinvestment quota yet. If not, tell them you have a project that might qualify. Check with "obscure federal and state agencies," because they often have funding programs "no one's ever heard of," he said.

It sounds like a lot of up-front work for any developer. But streamlining costs and finding more affordable construction money are essential to preserving quality of life in America, Mouchly said.

"Our future as a society depends on cities, and cities without a middle class will die," he said.