As the Valley’s population continues to grow, the region is seeing significant increases in housing demand, but the supply of affordable housing is decreasing. As housing costs increase faster than income, many residents are struggling. The Maricopa Association of Governments Economic Development Committee (MAG EDC) recently convened a group of experts to discuss the need for affordable housing solutions. Economic Development, Economy and Growth, General News, Quality of Life As housing costs soar, economic development leaders seek ways to create affordable housing Economic Development, Affordable Housing, EDC As the Valley’s population continues to grow, the region is seeing significant increases in housing demand, but the supply of affordable housing is decreasing. As housing costs increase faster than income, many residents are struggling. The Maricopa Association of Governments Economic Development Committee (MAG EDC) recently convened a group of experts to discuss the need for affordable housing solutions. “The market is moving along smoothly, but there are a lot of differences between today and the previous boom,” said Jim Belfiore, founder and president of Belfiore Real Estate Consulting. “The major difference is there is a lack of supply in the marketplace.” Not only a lack of supply, but with millennials, empty nesters, and middle income Americans jumping back into the market, vacancy rates are low for both rental and for-sale housing. Gone are the days of homes being owned by flippers or sitting empty for long periods of time. “If you drive around a new home community, you’re going to see curtains in the windows. People are purchasing them, and they’re living in them,” Belfiore said. “With land and labor costs rising at a double-digit percentage rate in recent years, ‘affordable’ housing is difficult to tackle,” said Belfiore. Contributing to the rise in home prices is that construction costs have increased and it is more difficult to find skilled workers. “When the housing bubble burst, that labor left here, and it has not come back,” said Belfiore. “Today’s issue is supply, and that is going to put tremendous pressure on housing prices in the near future. We’ve seen what happens in other markets with increases in homelessness when housing costs rise. We all should be concerned. We are encouraging our builder clients and our developer clients to figure out ways to bring affordable product to the market.” The Urban Land Institute (ULI) is a global nonprofit research organization focused on “creating and sustaining thriving communities worldwide.” ULI Arizona recently received a grant that is helping fund research on housing affordability. Kristen Busby, director of ULI Arizona, says the lack of affordable housing can have damaging effects on individuals. “Health is not what just happens in the doctor’s office,” Busby told the EDC. “Housing and transportation and job opportunities in the world around us extremely affect each person’s health. Our zip code is more important to our health than our genetic code. Children born in neighboring zip codes can have decades of difference in life expectancy,” she said. Under the grant, ULI Arizona created a Task Force for Health, Equity and Housing Solutions. The task force will solicit best practices around affordable housing. It has selected the city of Tempe as a case study for its unique approach to solving housing affordability. For example, the city created an affiliate nonprofit housing authority. The authority buys townhouses, homes and apartment complexes and permanently converts them to affordable rental housing. “We will always have a base number of units—albeit not enough—but there will always be a base number of affordable units so we know we will have some affordable housing,” said Tempe Housing and Revitalization Manager LeVon Lamy. The profits earned from the rentals are put into buying more housing, as well as for providing incentives for developers to build and create more affordable housing. Lamy also expressed concern that the lack of affordable housing is leading to an increase in homelessness throughout the region. But he added that affordable housing is also needed for those in the workforce. “When you have an area median income of $70,000 for a family of four, and you’re a brand new teacher making $35,000 to $40,000 a year, the ability to afford your apartment gets really difficult really quickly,” said Lamy. Because housing affordability impacts workforce availability, Tempe also looked at the issue from an economic development standpoint. “We thought, if we can’t attract more businesses to come here because they can’t get employees, then we need to find a way to help the Tempe workforce to live in our city,” said Tempe’s Economic Development Program Manager Maria Laughner. “These are our teachers, bank tellers, car mechanics, store clerks, construction workers and police officers. If they can’t afford to live in the city where they work or near the city where they work, that means they have to drive. It is a serious economic issue when you have to deal with cars every day jamming up the roads and creating a lot of traffic and the stress that comes with that. Just the impact on infrastructure alone is big.” While Tempe can’t require developers to create affordable housing, it can ask them to complete an affordable housing impact statement stating what housing is being removed, what housing is being added, and the price points for both. This helps the city track what is happening in the market and then find ways to incentivize developers. ULI hopes that learning about successful programs like those in Tempe will help them create a robust toolkit of affordable housing solutions. “There is no silver bullet strategy, which is why we are studying with a lot of partners,” said Busby. “We’ve been talking about challenges a long time. We want to have conversations around solutions,” she said. # # # Published January 28, 2020