In the last three weeks, I have discussed my journey through my meetings with regulators, a bank and the Financial Accounting Standards Board. This fourth visit is to a city that was hard hit by the financial crisis. The city was incorporated in 1905 as a trading post but has grown to be one of the world’s best known entertainment destinations. This week I am in Las Vegas and I will discuss my meetings with the Mayor’s Office and other institutions.
In the last three weeks, I have discussed my journey through my meetings with regulators, a bank and the Financial Accounting Standards Board. This fourth visit is to a city that was hard hit by the financial crisis. The city was incorporated in 1905 as a trading post but has grown to be one of the world’s best known entertainment destinations. This week I am in Las Vegas and I will discuss my meetings with the Mayor’s Office and other institutions.
I started by visiting the 19thMayor of Las Vegas, Mayor Oscar B. Goodman who was re elected in April 2007 with 84 percent of the vote to a third 4-year term. The Mayor is well known for developing the city and promoting Las Vegas as an entertainment destination. The major challenge for the city is water because it is based in a desert. The current water resources can only last up to 2035. Nonetheless, the city has drawn large numbers of people due to its climate.
We discussed the financial crisis and one of the interesting points that emerged from the meeting was that fewer families were affected as the homes were owned by speculators as an investment or a second home. The main strategy adopted by the City Hall was to buy foreclosed homes (where the bank sells or repossesses property after the borrower has defaulted on payment), rehabilitate and sell to families.
This was implemented through the Neighbourhood Stabilisation Program under the Department of Neighbourhood Services. The Program assisted households purchase a home through providing funds for mortgage down payments and costs, providing affordable rental housing and allowing households to lease affordable housing until their personal finances improved.
I thereafter visited the University of Las Vegas where I was fortunate to meet Dr. Nasser Daneshvary, Ph.D., Professor of Economics and Director of Lied Institute for Real Estate Studies. He had conducted a study on the negative spill over effects of foreclosures on neighbours who had not defaulted on their mortgages.
From our discussions, he provided three reasons for this: (1) Foreclosed homes suffer neglect, abandonment and vandalism as there is little incentive for homeowners to invest in these properties. This reduces the attractiveness of the neighbourhood to potential buyers; (2) Foreclosed homes reduce the value of property as they are sold at a discount; and (3) Foreclosures increase the supply of houses available in the market.
I also visited a policy and research institute based in Nevada. From our discussions, housing prices had dropped by over 60% which made it difficult for borrowers to sell their houses or continue to repay their mortgages due to the decline in prices, which effectively meant that they were making repayments for an overvalued property. This decline in property prices led to a spiral effect where homeowners voluntarily defaulted on their mortgages.
I ended my visit with a meeting with the Nevada Conservation League which is the independent political voice of the conservation community. We discussed the Las Vegas Valley where several cities were located with a population of 1.8million.
The Colorado River had provided water to the Las Vegas Valley for more than three decades. However, conditions had changed due to explosive population growth, prolonged drought, climate change and other factors. Hence, water conservation was very important and as we discussed I reflected on the lavish casinos on the Las Vegas Strip which had large man made waterfalls and lakes and wondered if the city was also "gambling on the water table.”
Florence Gatome is a Senior Manager with PwC Rwanda