Phoenix has a real estate crisis. Ignoring will cost us all

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The conversation takes place on the sidelines at soccer games. In the classrooms of Arizona State University. Among friends and relatives who are increasingly desperate to find affordable housing. Between parents and their millennial children who have well-paying jobs. In heartbreaking stories of evictions and evictions appearing in this very newspaper.

Arizona’s housing shortage and unprecedented cost increases have collided, hurting many Arizona residents of all ages and incomes. COVID-19 turned on the faucet for net population growth in Maricopa County, with 86,820 new residents, more than any other U.S. county. It is clear that the solution lies at the local level, with the rapid approval of more quality homes across the price spectrum and throughout the Valley.

It is really that easy.

We saw the real estate crisis coming 2 years ago

But before we dive into the solution, we must first understand how Arizona got into this crisis that I and many of my peers in the real estate industry sadly saw looming at least two years ago.

In recent years, some elected officials and staffers in Valley cities have become increasingly hostile to housing projects — particularly multi-family projects built for renters.

Angry neighbors spread fear and untruths that more housing projects will bring crime and depreciation. Adding to the situation is an alarming number of cases of elected officials and planning staff in many cities and throughout metro Phoenix being downright unwelcome to prospective apartment dwellers.

Mayor:Tempe is not affordable for everyone. We are working to change that

It’s important to note that there are housing-friendly cities like Phoenix, Tempe, and Goodyear that have taken a more affordable approach and approved a number of quality projects — but they can’t solve the housing crisis on their own.

These cities chose to spend their time productively to ensure these diverse housing projects incorporate the design elements that make our cities exciting places to live and work.

If we don’t increase supply, it’s all downhill from here

Last year my colleagues and I sounded the alarm. We assembled a coalition of Arizona business leaders to talk about housing and called ourselves Home Arizona.

We are committed to a shared responsibility to pass on to future generations the opportunity we have inherited—particularly to live and thrive in the communities where many of us grew up and raised our families.

Our first task was to commission renowned economist Elliott D. Pollack to assess the landscape and confirm whether our fears were consistent with the empirical data.

The problem was even worse than we thought.

In fact, Pollack said, “I’ve been doing this job since 1969, and this is the worst imbalance between housing supply and demand I’ve ever seen. We are on the precipice of a very serious problem.

This will impact our ability to attract and retain top employers, attract and retain top talent, maintain and improve the quality of life for our residents, and grow the customer base for our small businesses. We just have to increase supply or it’s all downhill from here.”

There are bottlenecks at all prices, apartment types

Here are the facts according to Pollack:

  • In the 2000s, 486,000 housing units were built in Arizona to accommodate our growing population. In the 2010s, that number plummeted to 240,000 units, even though Greater Phoenix attracts about 90,000 new residents each year.
  • The current shortage affects all types of housing, all price levels and all income brackets. It is particularly problematic for tenants. The Phoenix metro area is now short of 15,000 homes to accommodate current residents and expected growth this year alone. Arizona’s vacancy rate is at its lowest this century (4.7%), meaning tenants are competing for a shortage of available units.
  • There are more adults (18-29 years old) living with one parent (46%) today than at any time in American history without a single exception – after the Great Depression.
  • Arizona prices are rising at a rate we’ve never seen before. Rents are around 30% higher today than they were a year ago. That’s economics 101 – tightening supply and increasing demand lead to higher costs.
  • In real dollars, the average rent in Greater Phoenix in 2017 was $1,034. Today it’s $1,537. It’s projected to be $2,475 five years from now if cities continue to turn down housing projects and this widespread shortage continues.

Which brings me to our solution.

Some cities get it. Others should follow their example

City leaders in Phoenix, Tempe and Goodyear have been thoughtful in their land use decisions. They recognize the connection between housing and their goals of economic development and job creation.

Landing a new employer like Amazon or Nike is a boon, and these cities recognize that a key consideration in business relocation and expansion is housing.

Other cities must follow their example.

And all cities must carefully consider how they can improve processes and reduce bureaucracy.

The simple data show that net population growth will not slow. And while developers aren’t creating demand for housing, they try to respond and still face various political, planning, and construction cost deadlocks that compound the problem.

8 ways to increase our housing supply

Over the next few months, Home Arizona will be meeting with local leaders and asking them to adopt policies that increase housing supply. Options include:

  1. Ensure cities do not discriminate against tenants through zoning, moratoria or policies.
  2. Reducing the time it takes to zone a property without impacting the contributions of everyone involved.
  3. Reducing the time to approval of properties without compromising health and safety issues.
  4. Reducing the time for inspections without compromising health and safety.
  5. Combatting affordable housing and housing discrimination.
  6. Create a benchmark study that measures the number of units each city has in its overall plan and the number of units it would need to zone and permit each year to meet future needs.
  7. Understand that density along transport corridors is a positive solution.
  8. Creation of a housing advocate in cities to push for additional units.

Some of these solutions were discussed at the state level, and a bill was introduced that would eliminate local zoning control. We oppose government intervention and are confident that, with bold leadership, cities are up to the task of solving this housing crisis.

During my lifelong career in Arizona real estate, there was a general belief that Arizona would remain accessible and attractive to new businesses and residents. Without resolving this housing imbalance, we can no longer expect abundance to continue.

We need more living space. We need it now. And cities are best placed to do this.

Michael Lieb co-founded Home Arizona, a pro-housing coalition of Arizona’s top economists, business leaders, policy experts and developers. He has worked in residential and commercial development throughout Metro Phoenix. Visit www.HomeArizona.com for more information.

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