The economic reality behind the politics of multihousing development in Arizona

Not The Stereotypical Demographic

For many years now, we have been seeing people choose multifamily products for the convenience and the amenities — not simply because they are saving up to buy a home”

--- Courtney LeVinus

Subscriber Exclusive

Scottsdale City Council opens door to look at temporary housing

By Terrance Thornton
Twitter: @ININEWSMAN

When Jordan and Lyric Dodd sat down last year and realized they had paid more than $20,000 in rent, it was that moment the couple realized homeownership was in their future.

“I believe our total amount of offers in was 16 and that was in Mesa, Apache Junction, Tempe, Casa Grande, Florence and one that starts with an, ‘M.’ Maricopa, yeah that was it. And, we were offering up to $30,000 more than asking price and still getting regularly outbid.”

For millions of young Americans, and perhaps thousands here in the Valley of the Sun, homeownership can feel like an unattainable goal, real estate experts contend.

“I definitely, feel like we are outliers,” said 21-year-old Lyric Dodd, who with her husband Jordan, are now homeowners hailing from Florence.

“The majority of the people we know are still living at home or living in an apartment — we are not following the same path as our peers.”

The Florence couple are a carbon copy of who are considered “Generation Z,” which is a moniker created to, according to web-based real estate platform Homie, identify anyone between the ages of 18-24, a key demographic of the emerging gigabyte economy.

A key attribute of the 21st-century economy? Web-based commerce.

Jordan and Lyric say they knew nothing of what it meant to buy a home, but understood plainly they were losing money hand over fist to make the rent.

“We didn’t know anything about buying a home or where to start, really. Michael, our real estate agent at Homie, really had to walk us through the process,” Lyric said of the initial process. “Everything that we were able to accomplish was because of it being set up online.”

One emerging trend in the pursuit for young adults seeking their first taste of homeownership is oftentimes new professionals are priced out of the metropolitan area and forced to compromise.

“In our case, if we have to drive a bit for our commute to work, so be it, if it means we get to buy our first home,” Lyric said.

The great divide

From corner to corner of the Phoenix area, the rudimentary law of supply and demand continues to dominate both the single-family and multihousing real estate markets, which is forcing prices upward daily, experts report.

“The market dictates demand. For several years now, we have seen a consistent increase in rent levels,” said Courney LeVinus, president and CEO at the Arizona Multihousing Association.

“That speaks to the need for more rental homes, And every economic marker that we are aware of shows that the Valley is severely under-supplied in housing options. Given that Maricopa County consistently outpaces the rest of the country in growth, it’s clear that the demand wont be easing anytime soon.”

The demand for certain types of housing is strong with the Phoenix area, LeVinus reports.

“From our perspective, there is strong demand for more multifamily homes,” she said speaking to the focus of her expertise.

“For many individuals and families, renting is a lifestyle choice. They want to live near the action, they don’t want to worry about yard maintenance and they prefer the many amenities and conveniences that these products provide. The demand for multifamily development seems to be growing stronger by the day as the Valley attracts more new residents and new businesses.”

But these opportunities, LeVinus contends, are being squandered by petty politics and fear of a change in the political perspective of housing stock.

“It has been well reported that rents are on the rise Valleywide. That’s a simple function of supply and demand,” she said.

“Maricopa County continues to be the fastest-growing county in the U.S., meaning housing demand will continue to surge. Arizona also continues to attract large employers into the region and those employers bring or hire professionals who need a place to live. In virtually every corner of the Valley, new multifamily development is on the rise.”

The misnomer of who a renter is continues to dominate the mental landscape of elected leaders in municipalities across the Valley, LeVinus points out.

“For many years now, we have been seeing people choose multifamily products for the convenience and the amenities — not simply because they are saving up to buy a home,” LeVinus said. “People want to live within walking distance of shopping and nightlife. They want to live close to work and in neighborhoods where they rarely if ever have to drive. We are seeing a significant shift of older renters or ‘empty-nesters’ who want to downsize. They love the convenience that multifamily living presents.”

A political battleground has emerged in city council chambers across Arizona, and often local figureheads are happy to expel their stance on proposed changes to the housing stock dynamic and what that could mean for the future of their respective communities.

“As mayor, I will absolutely not subsidize development,” said Scottsdale Mayor David Ortega, an architect by trade and outspoken critic of dense development within municipal bounds as an elected leader.

“As we know, apartments lack a front and back yard, lack open space, and although many provide substantial amenities; the fact is renters stay only two to four years. This is a similar stay to someone attending Arizona State University.”

“In my opinion, the overriding reason apartments want to overrun Scottsdale is largely due to our world-class amenities including our parks, shopping, entertainment and of course the trails a part of the McDowell Sonoran Preserve,” he said. “We also have world-class public safety, reputation and, yes, job opportunities. Apartment companies build and rent, which is what they know best. As mayor and city council, it is our duty to protect against the adverse consequences of overbuilding — because that creates congestion and burdens on municipal government operations.”

“Finally, in speaking with the multifamily lobbyists, I do not shut the door to finding a reasonable balance. As to affordable housing, our council for the first time placed funds in our city budget which has prompted serious inquiries for solving mixed housing solutions,” he said of local effort to support lower-income residents.

“The worst outcome of apartment builders is that they have been systematically replacing commercial C-1, C-2 properties especially on Scottsdale and Hayden Roads, with walls of bedrooms. So many apartments are contrary to the general plan 2001 and contrary to the general plan 2035.”

No matter the political perspectives of the day, LeVinus points out, the marketplace depicts what the development community does — that’s just business, it’s not personal.

“In Arizona, more than 1 million rental units are currently occupied. Multifamily developments house everyone from students to retirees and huge swaths of the state’s workforce. Every vibrant economy needs a healthy supply of housing options meeting all income scales,” she explained. “If the state’s housing supply dries up, so too will the opportunities to attract new jobs to the state.”

A diverse, evolving marketplace

Comparatively speaking, the city of Mesa, opposed to Scottsdale, operates on a different playing field virtue of its economic state of affairs, according to Mayor John Giles.

“Mesa is a growing city, and the arrival of new business, jobs and residents brings a mix of housing needs," he explained. "Multifamily housing plays an important role in the ecosystem of any community—there is a need for all levels of housing to meet the needs of employers with a diverse workforce, and to provide residents with a variety of options."

The city of Mesa has about twice the population, creating a much more diverse need for multfamily housing, Mayor Giles contends.

“In Mesa, we have multifamily housing development activity and proposed projects throughout the city,” he said of the metropolitan community of about 500,000 full-time residents.

“For some, it’s a permanent housing solution, and for others it’s a step along the way. Multifamily provides options for college graduates, who are just getting started, retirees who are downsizing and for those who prefer the convenience of a maintenance-free lifestyle.”

But make no mistake, Mayor Giles reminds, multifamily has a home a part of coveted economic development projects.

Housing developments like Eastmark and Cadence at Gateway, along with other existing and forthcoming housing developments, will serve East Mesa and the incoming Facebook data center, among other development announcements from the last 24 months,” he said.

“In downtown Mesa, this type of housing serves a need for the unique blend of urban, academic and entrepreneurial momentum. With the new ASU @ Mesa City Center facilities coming online soon and many new restaurants and retailers, live-work options are emerging.”

From the view of Mesa’s figurehead, multifamily development is serving a vacated part of east Mesa in dire need of revitalization.

“In the Fiesta District, with Mesa Community College and the expanding Banner Desert Medical Center, multifamily housing is taking shape in property that has been vacant for years,” he pointed out. “And in east Mesa, we’re optimistic that the healthy mix of housing coming online will accommodate significant economic growth.”

For East Valley-based real estate agent Michael Herrera, the most successful young professionals in the homebuying game are those moving from other metropolitan markets.

Hererra oversees a team of seven buyer agents for the web-based real estate platform, Homie.

“We are seeing a lot of young clients come to the area and affording some pretty nice homes, but they are seeing a regular up-tick in prices,” he said. “Primarily, our younger clients are buying when they can afford it, Gilbert, Chandler, central Phoenix and Tempe. That is where they want to be, which I think also speaks to the technology sector emerging in the East Valley.

There are no buyers immune from the law of supply and demand throughout the metropolitan area.

“I think everyone is having those issues but that is because of a lack of inventory, and not every buyer out there is the same,” Herrera said. “We are diligent, and my team is focused on the speed of the offer in today’s market.”
Herrera also points a growing trend: The realization costs are very close between renting and buying.

“I educate them that the money they are paying is the landlord’s mortgage,” he said recalling a client who explained a $5,000 deposit was due to get into a lease at an apartment.

“For the same amount of money, this person could buy a home. Real estate is the No. 1 investment, that is why everyone does it. It is a just as consistent investment, it always goes up.”But from an industry perspective, multihousing development is a keystone to the American economy, more than many might think, LeVinus says.

“Multifamily homes provide customers who create revenue for the small business we so enjoy — restaurants, boutiques, salons and aesthetics businesses,” she said. “When you add in the jobs created by multifamily communities and the construction revenue-building these communities creates, you begin to see why rental housing is a huge economic engine for the state.”

Business is as business does, LeVinus explains.

“Developers have an uncanny ability to respond to what the market desires and dictates. The high quality and award-winning products that you see going up across the Valley reflect the desires of folks who want to live in Mesa, Chandler and Scottsdale,” she said.

“It’s simply a renter who places a premium on the convenience and flexibility renting provides. They want the ability to ‘lock and leave,’ picking up at a moment’s notice to travel and not fret about things like yard and home maintenance projects. It can also be people who don’t want to deal with the burden of a mortgage."

--- Steve Levinus