Arizona’s Affordable Housing Supply at “Crisis Point”

Rising housing demand in Arizona is starting to outpace new supply, and the affordable housing supply in particular has reached a crisis point, according to a recent report from the Arizona Multi-Housing Association. In the state, 32% of households require an affordable housing permit, and 48% of households require an affordable housing permit. To accommodate this demand, AMA says the market can support considerable new construction activity.

“This is a function of supply and demand. As more apartments are built and the state’s housing stock increases, prices naturally decrease,” Courtney LeVinus, president and CEO of the Arizona Multi-Housing Association, tells GlobeSt.com. “Unfortunately, for various reasons including increasing land prices, local land use restrictions, and costly regulations, we can’t build fast enough to meet the growing demand.”

Several markets throughout the country and on the West Coast in particular have seen issues with the supply of affordable housing, along with rising rental rates and housing costs. LeVinus says that the solution is to build more supply. “Communities around the country, including those in California, are realizing that ignoring the signs of a dwindling housing supply can have strong economic implications,” she says. “There are many reasons for these shortages that need to be addressed in order to avert crisis. For example, local land use restrictions, onerous design guidelines, discretionary review processes, and neighborhood hostility have made it much more difficult to bring new housing developments online. Add increasing land prices and labor shortages to the mix as well. All of these pieces add to the cost of housing.”

Luckily, the construction pipeline in Arizona, particularly in the Greater Phoenix market, has been robust. In Phoenix alone, there is a current pipeline of 10,000 units, a 55% year-over-year increase compared to 2017. “Leading the way was Tempe with more than 1,900 units, according to RentCafe research. Chandler was second with 1,075 units and Scottsdale was third with 1,030 units. In Downtown Phoenix, apartment projects are rising along the skyline. At the end of 2018, six apartment communities totaling 1,420 units were under construction with another 18 developments and 4,200 units on the way,” says LeVinus.

Despite the ample new construction activity, most of which has been luxury, LeVinus says the demand is strong enough to support the new supply, and it will help to drive down pricing of older apartment stock. “We believe that we are merely catching up after building virtually nothing during the Great Recession,” she explains. “Virtually every housing provider in the state agrees that we need more housing options, especially more affordable and workforce housing options.”

The development activity also has a positive economic impact. The report shows that the industry creates 22,000 jobs totaling $669 million in wages. With 37% of Arizona residents in rental housing, the apartment industry produces $3.8 million in economic output each year.