Governor and lawmakers eye affordable housing amid state’s rapid growth

Arizona Gov. Katie Hobbs, D, has prioritized increasing affordable housing as the state continues to grow as one of her administration’s goals. 

For Hobbs, it is critical that non-profit organizations and local communities continue to be involved in efforts to make housing affordable. 

Hobbs supports increasing low-interest financing access and legislation that encourages developers to build affordable housing through the use of tax credits. 

Despite the split government with Republicans controlling the Legislature, Hobbs hopes that a bipartisan agreement can be reached on such an important challenge facing the state. According to last year’s estimates by the Arizona Department of Housing, 270,000 units would need to be built to meet current demand.

“This is an area that is ripe to work together and find common ground. There were some interesting bipartisan proposals put forth last year,” Hobbs told Channel 15.

During her State of the State address on January 9, Hobbs laid out some of her first moves to tackle affordable housing. 

First, she announced that the Interagency and Community Council on Homelessness and Housing will be making a comeback. Second, Hobbs promised to contribute $150 million to the Housing Trust Fund (HTF), a fund controlled by the Arizona Department of Housing that helps the state efficiently use federal housing funds. Money from HTF can be used for housing development as well as homeless shelters and other housing services. If implemented, this would be a vast increase to the $60 million allocated to HTF by the legislature last year.

During her governorship, Hobbs intends to use all resources available to increase access to affordable housing, saying, “We need to build, build, build, but we also need to focus on affordability. That’s going to require an investment in the federal government, state government, local government and the business community.”

Hobbs’ urgency comes as Arizonans are increasingly becoming priced out of housing options, with prices experiencing big spikes over the past 10 years. According to a study, the Phoenix-Mesa-Scottsdale metro area has seen the second largest price increase in the United States between 2011 and 2021, with prices increasing by an eye-popping 260%. In 2011, the average price in the area was $115,500. By the end of 2021, that number had climbed all the way to $415,400. In the same time period, average home prices also more than doubled in the Tucson area as well. 

According to data from online real estate site RedFin, average home prices in Phoenix did not crack $300k until mid 2020. By the middle of last year, prices had ballooned all the way to around $460k, before settling back to $400k at the end of the year as interest rates went up and inflation continued to rise. 

Legislative proposals

Lawmakers have their own ideas. An amended version of SB 1117 by state Sen. Steve Kaiser, R-Phoenix, would reform most zoning laws and would require cities to allow denser developments.

The bill passed the Senate Commerce Committee 5-2 and has backing from the Arizona Association of Realtors, the Arizona chapter of NAIOP, the Arizona Multihousing Association and other business groups.

Cities, including the League of Arizona Cities and Towns, are strongly opposed. 

Other proposals so far this legislative session are less marketed oriented. Several Democrats have introduced bills to impose various forms of rent control. The Arizona Chamber of Commerce & Industry and Republicans in the Legislature remain staunchly opposed to such efforts. Rent control remains banned in Arizona for private properties.

Following the implementation of rent control measures in San Francisco, rents went up by 5% and the rental housing supply market shrunk 15% as landlords rushed to sell their properties.

A threat to economic growth

During a presentation to the Gilbert Town Council, economist Elliot Pollack explained how the shortage threatens the growth that Arizona has seen over the past few years. 

“Supply has not kept pace with demand and our success as a community in attracting jobs and people has not been matched by a sufficient increase in the housing supply for those new employees and a continued shortage of housing is going to drive up costs and threaten economic development efforts,” he said. 

Gov. Hobbs at a recent event that highlighted innovations in affordable housing agreed that a constrained housing supply could crimp Arizona’s economic growth, saying the business community needs “a workforce to hire as the cost of living here in Arizona threatens to hold back retaining or attracting the talent that they need.”