Infrastructure and impact fees. Rising land and construction costs. Labor shortage and immigration issues. Municipality rules and regulations.
Although the Great Recession is in America’s rearview mirror, it is now facing a new type of housing crisis – one of affordability. With the above-mentioned factors each playing a role, a major trend has emerged that is producing an affordability crunch across the income spectrum.
Needed are ambitious, adoptable and innovative solutions. Each were discussed at ULI Arizona’s October Main Program at the Arizona Heritage Center at Papago Park in Tempe, “Priced Out: Reframing Housing Affordability Solutions.”
“Communities should grow for the benefit of every individual,” said, keynote speaker Mike Kingsella, Executive Director of Washington, D.C.-based Up for Growth Coalition. “But there has to be a policy tradeoff. Look at San Francisco. It is not increasing capacity, and that is leading to expensive environment.
“At the other end of the spectrum is Las Vegas. It is expanding and embracing neighborhood growth. Phoenix falls in between the spectrum; the tipping point of community growth. Its increasing population of renters looking for housing is cost burdened. Rents are increasing faster than income,” Kingsella said.
In 2000, Kingsella said, a one-bedroom apartment in Phoenix went for $553 a month. In 2018, that same apartment rented for $876 a month. Scottsdale is more severe, he added. In 2000 a 1-bedroom apartment was $731 a month; in 2018 it was $1,214 a month.
“A significant swath of Arizona, and Maricopa County in particular, find themselves cost burdened. A lack of supply and lower incomes are hurting the region,” he said.
>> Long run affordability requires sustained production of housing units;
>> Building units at lower costs, in transit accessible, high opportunity neighborhoods are key to improving equity in the region;
>> Leveraging existing infrastructure through accessible growth is fiscally sustainable for local governments.
Kingsella joined the panel moderated by Mark Stapp, Executive Director, Master of Real Estate Development Program, W.P. Carey School of Business, Arizona State University. The panel comprised were Tom Belshe, Director, League of Arizona Cities and Towns; Suzanne Pfister, President and CEO, Vitalyst Health Foundation; Justin Stewart, CEO, Synergy Construction and Greg Vogel, CEO, Land Advisors Organization.
Stapp posed the question: “What is the affordability problem in Phoenix?”
“The jobs to housing unit ratio is something to keep an eye on,” Kingsella said. “When Toyota leaves the Inland Empire (in California) for Texas, it’s because their employees can’t afford to live there.”
“Even though the economy is roaring, there are a lot of people in Arizona earning a low wage,” Pfister said. “The numbers show we still have people in need of housing among the working poor.”
Pfister added that it’s healthcare organizations, insurance companies and hospitals getting into the affordable housing space. She said there are 20,000 luxury apartments in the Valley with rents that are $1,700 a month.
“There is a huge gap of affordability,” she said. “Hospitals and healthcare organizations are starting to figure that out. They are getting innovative in affordable housing. Groups are asking, ‘what excess land do you have? Could we work with a developer to build affordable housing and mixed-use.’”
How can you be cost effective bringing affordable housing to the market?
“You start with the most cost-effective building possible,” Stewart said. “The goal is to keep costs down through efficiencies. There is land to build workforce housing. A fundamental issue is with how development is done. You have to begin with maximizing every square inch of the property.”
Is it a supply problem?
“It’s brewing,” Vogel said. “Years leading up to the boom, housing was affordable because of over-supply. There was vacant housing that was affordable. Now the cost of capital, labor and construction are bigger macro issues. But we’re deemed still affordable. We need to get the defense mechanism up.”
How do we get the cities and towns in Arizona to be part of it?
“We are seeing some development going on in the fringes,” Belshe said. “It’s the mindset with citizens and the planning we do. We get away from the general plan and feel pressured to move things out and not talk about it.
“We need to find a way to come up with better infrastructure financing. We have smart people in this room. We need to find a way to finance these things.”
Does a developer have the responsibility to build affordable housing?
“We have a market failure,” Kingsella said. “We’re seeing years of the highest housing demand and can only provide for a fraction of those homes. Now we can’t catch up.”