According to the theory of government failure, nonprofit organizations emerge when governments fail to provide goods or services to a public with heterogeneous demands. This study approaches this fundamental theory of the nonprofit sector from a pluralist political viewpoint, marrying the theory of government failure to resource-driven nonprofit arguments via updated modeling and measurement strategies. This paper proposes a new, conditional demand heterogeneity hypothesis, wherein the effect of demand heterogeneity on the nonprofit sector increases in the presence of increasing resources: nonprofit service delivery is most likely when those experiencing government failure have access to resources. This paper is the first to test supply and demand nonprofit arguments in tandem using an interactive modeling specification, and the first to operationalize demand heterogeneity using policy-based measures. I employ a finite distributed lag model with an interactive term in a time series, cross sectional analysis of public and nonprofit land conservation in the United States. I find that nonprofit land conservation increases when citizens express greater environmental concern but only in the presence of increasing disposable income. Examining nonprofit theory within the context of land conservation provides a comparable measure of government and nonprofit service provision, controls for the nature of the good provided by these institutions, and allows for a policy-driven measure of demand heterogeneity, improving upon previous studies’ employment of diversity-based proxy measures. The results advance our understanding of how to test and measure demand heterogeneity nonprofit arguments and suggest that access to resources conditions which interests find expression in nonprofit organizations.