Sep 8, 2022 - Real Estate

Phoenix needs more houses and apartments to keep up with demand

Data: Redfin; Table: Thomas Oide/Axios

For almost all of Phoenix's history, our housing prices were below the national average, winning us a reputation of affordability.

  • That's not the case anymore, and it hasn't been since 2019.

Driving the news: Our affordability problem is simply a matter of supply and demand.

  • We have more people wanting to live here than we have housing units.

Why it matters: As more people move to the Valley, housing costs will continue to rise if supply doesn't catch up quickly.

  • This will mostly impact medium- and low-wage residents — service workers, teachers and first responders — who can't afford the rising costs.

Catch up fast: Home and apartment building all but stopped after the 2008 housing crash, according to Colliers researcher Thomas Brophy.

  • It restarted in 2016, then lulled again the next two years.
  • Meanwhile, more people started moving here.
  • By the time building started up in earnest in about 2019, the region was already playing catch-up.

State of play: We're building a lot right now. Phoenix consistently ranks in the top 10 markets in the country for single-family and apartment permits.

  • Brophy estimates the region will issue 50,200 housing permits by the end of the year.

Yes, but: It's still not enough, and it's not even close to our peak building year.

  • In 2005, metro Phoenix issued 68,400 permits, Brophy says.

What he's saying: "We basically had a decade of under-building. That's a lot to overcome."

What's the hold up? Labor shortages and supply chain issues.

  • Brophy says homebuilders are also competing for labor against major commercial projects under construction in the Valley, including the Taiwan Semiconductor Manufacturing Co.
  • Inflation and interest rate increases may lead to slower building as developers rethink some of their investments, he said.

The other side: The Arizona Multihousing Association and other business groups are pushing for revamped zoning laws that could speed up building.

  • Many multifamily projects have been killed through the zoning process by neighbors who don't want apartments near their homes.
  • The group pushed a bill earlier this year to create a "by right" zoning process that would have allowed housing projects on agricultural, commercial and residential land.
  • But it was killed after pushback from cities.
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