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Regional Report: Housing affordability

As Maricopa County’s growth continues, the topic of housing affordability has come to the forefront.

Four local industry leaders joined our Regional Report last week to discuss projections and how Greater Phoenix can remain proactive as the population increases at a faster rate than housing.

Panelists included:

Diana Yazzie Devine, President/CEO, Native American Connections

Maurice Jones, President/CEO, Local Initiatives Support Corporation (LISC)

Jean Kalbacher, CEO, UnitedHealthcare Community Plan of Arizona

Tina Tamboer, Senior Housing Analyst, The Cromford Report

The differences between 2008 and 2020

To better project where today’s housing market is headed, one has to go back to the 2008 housing bubble.

“We are starting to see some scenarios that remind us of the past,” said The Cromford Report senior housing analyst Tina Tamboer. “Let’s talk about that. How the market is different, affordability is bigger deal and how some of the solutions we choose will hopefully not repeat some of the mistakes of the past.”

In the mid-2000s, housing growth increased by 34%, exceeding the population growth of 28%, which in turn created a glut of housing. There was false demand as buyers purchased homes as investments, not as residencies to live in. As housing prices skyrocketed, rent prices did not follow suit; instead, those started to decrease.

While housing growth was roughly 20% greater than that of population growth from 2000-2010, this past decade has flipped that. The population increased by 18%, twice as much as the housing growth of 9%.

As the demand surpasses supply, prices have increased. Prices have risen about 9% per square foot on 1,500 to 2,000 square-foot homes since May, which is typical for an annual appreciation rate, not a five-month period.

Rent prices are following suit. These are actually increasing at a sharper trajectory than purchasing prices, which is promising compared to the 2008 crash. That leads the Cromford Report to believe that this isn’t a bubble in the same sense as 2008, for there is real demand on the homes in the region.

“This go-around, we really do have true housing needs and we are having a massive influx of demand since the pandemic that is beyond what we were already experiencing,” Tamboer said.

She said the affordability level is normal at this time but keeping it that way is a concern. Entering the fourth quarter of 2020 and heading into 2021, the migration of people into Greater Phoenix could create more demand when there’s already a gap between growth in housing and population.

“Creating that gap is putting a squeeze on the inventory that we have and it’s squeezing out some people who cannot accommodate the level of appreciation that we’re seeing,” Tamboer said.

Affordable housing in Greater Phoenix

Housing affordability in the U.S. isn’t a new issue, but it has been exasperated during the COVID-19 pandemic, particularly in the Native American community in Arizona. Only 4.5% of Arizonans are Native American, but 11% of coronavirus deaths come from tribal communities. In Maricopa County, Native Americans make up 2.4% of the population but 7% of the homeless population.

Native America Connections has created programs around the region to help address these needs. Its 25-bed HomeBase youth shelter aims to get 18- to 24-year-olds off the street in less than 48 hours. Its Saguaro Ki apartment complex assists homeless youth and charges 30% of their salary once they start working, Native American Connections president and CEO Diana Yazzie Devine said.

“We really want to make sure they receive a safe place to live,” she said. “Giving them the skills to be next generation of tenants and renters because we don’t want them to be who we’re seeing as chronic homeless in our community.”

The organization has also invested in motels during the pandemic to create bridge housing, primarily for homeless seniors who were high-risk for complications. Since July, about 40 seniors have moved from these motels into permanent housing. Devine thinks this strategy can continue even after COVID-19 subsides.

“It’s really important that we focus on seniors,” she said. “Seniors and people with disabilities that are on fixed income, like social security assistance, they cannot afford rents in Phoenix right now.”

Native American Connections has also opened a project in downtown Phoenix called Urban Living on 2nd Ave. In that area, rent is around $1,800 to $2,000 per month. At Urban Living, affordable units start at $500 per month.

“It’s a very simple equation for affordability,” Devine said. “Phoenix alone has determined that they have about a 160,000-unit gap of affordable housing just within the city.”

From 2014-2019, the number of homeless people in Maricopa County shelters increased by 5%. The number of unsheltered homeless people grew by 22%.

Home Matters is a national group that works to influence public policy in the affordable housing sphere. The Arizona chapter is focused on a goal of providing the possibility of a safe home for all over the next 10 years.

A comfortable, consistent place to live provides more than just a home. Residents are able to recharge and focus better on work. Stability at home helps children at school, and access to healthy food and public transportation allows the people to stay healthy. These effects have a direct impact on the economy.

“When you spend a lot of your money on housing, and housing continues to be more expensive, there is less money left to reinvest in the economy,” Kalbacher said. “Our push is to have affordable housing and therefore there will be more to invest in the economy and job growth.”

UnitedHealthcare Community Plan of Arizona and its CEO Jean Kalbacher are part of the launch of the Arizona chapter of Home Matters.

This organization hopes to raise $100 million to help target different regions around the state to create housing and influence public policy. It has different focuses to ensure the people become part of the area and are not just given a home and then left to fend for themselves.

“It’s not just about, let’s build a housing community, or an apartment community, and leave it. We want to make sure that that development is connected to the community. That there’s … collaboration between the housing developer and the community and how they have access to … health, and housing, and school, and food access,” Kalbacher said. “It’s really a deliberate connection to the community.”

Home Matters last week received its first award of $1.2 million, which will go toward projects in Phoenix, Tucson and Flagstaff.

Proactively adjusting to avoid mistakes in future growth

One of the investors of Native American Connections is LISC, which has put about $100 million into the organization’s projects, said LISC president and CEO Maurice Jones.

This organization works in metro areas and rural counties around the United States. Active in all 50 states, LISC has seen how housing affordability affects every market.

From this organization’s studies and observations, the country is struggling to address the needs of not only the lower class, but the middle.

“Tina was mentioning this gap in housing. Well, if you really broke that gap down by your production of high-end housing versus your production of affordable and middle-income housing, you’d see an even bigger gap. And that is a real key theme we’re seeing around the country,” Jones said.

“The country actually has done a good job producing high-end, multi-family housing. We have done a poor job at producing housing that’s affordable across the income spectrum. From 30% of area median income to 150% — that’s the piece, and going back to the economic pieces that were talked about earlier, if you’re going to be able to really increase those middle-skilled job opportunities, you’ve got to have housing for those middle-skills producers, those middle-skills workers, to afford to live in. That is the American dilemma right now.”

The U.S. Census Bureau showed that Maricopa County was the fastest-growing county in the country in 2017, 2018 and 2019, and as growth continues, leaders need to understand pitfalls of other markets who are now facing major housing affordability crises.

“We’re discussing these things now so that we can hopefully not have the same mistakes as some of our other big cities,” Tamboer said.

If you’re a business is looking to expand or relocate, contact the GPEC team online, via email (info@gpec.org) or give us a call at 602-256-7700.