Good intentions could create housing affordability problems

By Mike Sunnucks | Rose Law Group Reporter

Some well-intended public policies may end up hurting affordable and entry-level housing in the Phoenix Region.

That concern came up this morning at a Valley Partnership forum in Phoenix on the regional residential real estate market.

Cities and other municipalities are requiring more open space, a wider variety of home designs and elevations and want better architecture and designs from home builders and apartment developers.

Those are aimed at improving the architectural and community character of new subdivisions and multifamily complexes.

Cities have also been looking at development impact fees and how to balance new growth and population gains with government services and public infrastructure.

More open space means fewer units get built. More required amenities and a great diversity of designs and architecture increase costs along with municipal increases in the impact fees.

Jim Belfiore, president of Belfiore Real Estate Consulting, said those dynamics along the higher construction labor and materials costs can increase prices for builders and those costs can get baked into what buyers end up paying.

Those higher prices could challenge housing affordability, Belfiore said.

“We’re pricing people out of the market,” Belfiore said.

That is concern for single-family home sales in the West Valley, Pinal County and other entry level submarkets where buyers are looking in the $250,000 range and higher prices might mean they can’t afford to buy.

Belfiore sees the same upward price pressures on apartments where rents have increase across the region and new multifamily developments are in higher price ranges.

Belfiore said he is getting calls from social service and housing groups concerns about the lack of affordable housing. Belfiore said one group told him as many as 168,000 Valley residents face troubles in finding affordable places to live.

The issue also hits at one of Phoenix’s economic advantages. The region has long touted its cheaper costs (including labor and housing) compared to California, Seattle and even Denver and Austin, which have seen increased real estate and other costs as they have grown their technology and higher-wage job sectors.

That competitive advantage for Arizona could get lost if housing in metro Phoenix follows upward price trajectories seen in other big cities.

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September 2019