As the COVID-19 public health crisis continues, an estimated 8.2 million Americans are behind on their rents and mortgages while protections against evictions during the pandemic are nearing an end.
But when those renters search for a new place to stay, will there be anything available or affordable to rent?
According to multiple reports, the Phoenix-area real estate market — while among the most robust nationally — is woefully inadequate to address the needs of lower-income residents. That problem has played out in the West Valley, as across the region rent growth during the past decade have far outpaced wage growth.
Surprise Mayor Skip Hall spoke to Daily Independent about the problem as he sees it and said he’s optimistic officials can help improve the situation.
“You know, it’s not a crisis yet. But I see it in the future,” Mayor Hall said. “We’re not delivering enough affordable product.”
He said he is less concerned right now about the residential real estate market, since many buyers in that realm are coming into the process already homeowners and transferring equity into their new purchases. While there may be a shortage of available houses to buy, that is a problem across the Valley and the nation as well.
But for those just starting out, the lack of affordable alternatives provides few options, especially in Surprise, Mayor Hall explained.
“In Surprise, we’re behind on multifamily housing. We don’t have enough multifamily,” he suggested. “And meanwhile, the rental rates are high and they’re being driven by lack of supply. So, we need to really keep looking at how we can build more affordable housing in general, and I guess I’m more focused on the for-rent side.”
Mayor Hall said city officials have been in early talks with a developer, who hopes to build a new multifamily development near Cotton Lane and Waddell Road.
The complex as envisioned would include 600 total units: 400 for families housed in three-story apartment buildings; and another 200 units targeting seniors, which would include four-story structures. Each community would come with its own package of amenities for its residents.
And those residents would pay rents based on income levels in the area, not on actual market value. But the program is not Section 8 or government-paid assistance, Mayor Hall emphasized.
“It’s supportive rental. In other words, it isn’t the full-market rent that people would pay,” he said. “They would pay a reduced amount for rent, and the developer gets a tax credit to offset that.”
Talks are ongoing and the details are yet emerging — but the model as he understood it would establish rents based on 70% of the local median income, which might see rents there start around $1,100 per month.
While more affordable than much of what may be available in the area now, it would still be aimed at those with a household income of around $40,000 annually, not at those below the poverty line, Mayor Hall said.
In Phoenix last year, city officials announced the launch of the Housing Phoenix Plan, the culmination of an effort begun in 2019 that sought to develop a comprehensive needs assessment and offer substantive policy recommendations.
At the city’s website, officials cited federal data highlighting how difficult it can be for many full-time workers to afford their own place to live.
“According to Housing and Urban Development’s Fair Market Rents, in Arizona the cost of a two-bedroom apartment is $1,097. To afford this level of rent, as well as utilities, a household would need to earn $43,892 annually, or an hourly wage of $21.10 — more than nine dollars above Arizona’s minimum wage,” officials stated.
Among other policy plans, Phoenix officials said their main goal is to create or preserve 50,000 houses by 2030 to address the shortage of single-family homes, which is seen by many experts as a key driver of nation-leading rent increases across the Phoenix market during the past decade.
However, their plans could amount to a drop in a bucket based on current need.
According to a report from the National Low Income Housing Coalition and the Arizona Housing Coalition, the Phoenix market now has only 47,620 affordable rental homes — but there are 182,652 “extremely-low” renter households needing accommodation. That amounts to an estimated 26 available units for every 100 households in need, the report concluded.
It’s not just the Phoenix market that needs more affordable housing — lack of workforce affordable housing is a national problem, according to myriad reports.
The nonprofit research group Urban Institute last month published a white paper on the topic entitled, “Preserving and Expanding Supply of Affordable Rental Housing,” in which researchers detailed the extent of the problem.
They said it’s too complicated a problem to just throw money at — rather, more investment must be paired with meaningful policy reforms to seed fertile ground for new and affordable housing developments.
“Our patchwork system for preserving and expanding the affordable rental housing supply is inefficient. Improving it will take more capital and accelerated production facilitated by reforming policies and practices … Capital and reforms in policies and practices should not be seen as substitutes but rather as complements that — when leveraged together — work best to maintain and expand the affordable housing stock,” according to the April 21 report.
The Urban Institute’s researchers argue affordable housing developments that take advantage of the Fed’s Low-Income Housing Tax Credit Reform program actually perform as well as their “traditional” market-value competitors.
“Many lenders assume that affordable rental housing is a high-risk investment, which justifies higher interest rates and other less favorable financing terms than market-rate properties. But this is not necessarily the case … Based on the actual risk profile of affordable rental housing, private lenders could provide more favorable financial terms. Evidence indicates that affordable rental housing properties financed with LIHTC have low default rates compared with conventionally financed multifamily properties, even during economic downturns,” the report states.
They also recommended incentives for lenders to allow for greater flexibility and foster more development of affordable housing projects.
Mayor Hall said while there aren’t enough rentals now in Surprise — houses or apartments, affordable or otherwise — he is optimistic new developments are coming.
City officials are currently working with developers in various stages on projects that could later add another 5,000 multifamily units to the city, he said.
“They’re in the entitlement process. They’re in the permit process. They’re not built,” Mayor Hall said. “So, that’s going to be in the future. But, they’ve got to build them and that’s going to take awhile.”