Rising prices, shortage of affordable homes deepen housing squeeze
Demand in the Phoenix area has stayed strong despite the pandemic
Metro Phoenix home prices hit another record in February and likely shattered that one in March. Rents are climbing to record levels, too.
The Phoenix area’s rapidly rising housing costs just landed it on a national list of the least affordable places in the U.S. to live.
Other new research shows Arizona now ranks behind only Oregon, California and Nevada for the biggest shortage of available and affordable housing for extremely low-income residents.
And yet it’s the state’s relatively affordable housing prices for the West that are helping fuel the growth that is leading to rising housing costs.
Incomes aren’t increasing at the same pace as home prices and rents, so Arizona has a growing housing affordability problem.
Since 2015, the annual household income in the Phoenix area has increased a little more than 13%, to $68,000 from $60,000, according to the Federal Reserve.
Metro Phoenix home prices have shot up 65%, and rents are up more than 40% since 2015.
“Our current market conditions are a direct re
sult of extremely low supply, steady demand and historically low interest rates,” said housing analyst Tom Ruff, with the Arizona Regional Multiple Listing Service’s Information Market. “With both ownership and rental costs far outpacing wage growth, the conversation on housing affordability deepens.”
Rising costs for buyers, renters
Metro Phoenix’s median home price hit $350,000 in February and is expected to jump to $360,000 in March based on pending sales of condominiums and single-family homes, according to ARMLS.
The average Phoenix area apartment rent climbed almost 6% during the past year, according to Apartment List. But some cities saw rents shoot up more.
Rents in Surprise jumped 12% and climbed 9% in Gilbert.
Demand for housing in the Phoenix area has stayed strong despite the pandemic. Arizona’s many new residents, particularly from higher-priced housing areas on the West and East coasts, can afford to pay more and are pushing up housing costs.
The number of homes for sale in metro Phoenix is down 44% from last year, while sales are up more than 5%. That explains the bidding wars for homes, and houses selling before they are even listed.
The Valley’s rental occupancy rate continues to hover around a strong 95%, even though tens of thousands of new apartments have gone up during the past few years.
Housing squeeze
Rapidly rising housing costs landed Phoenix on the Urban Land Institute’s list of the least affordable areas in the U.S.
San Diego tops the list, and the Valley is at No. 22 on the ranking of 24 cities.
The analysis compares how many homeowners are “severely cost burdened” and how many homes and apartments are available for people making low or above-average incomes.
Another new study shows there are only 26 affordable and available rental homes for every 100 households with extremely low incomes in Arizona.
The state has a shortage of more than 136,000 affordable homes, according to the National Low Income Housing Coalition.
“The good news is that we have the tools to address this housing shortage, we just need the political and community will,” said Joan Serviss, executive director of the Arizona Housing Coalition.
“Locally, our state lawmakers must also take action to restore the state investment to the housing trust fund and enact new tools like a state affordable housing tax.”
Most of the state’s housing trust fund, which is funded by the sale of unclaimed property in Arizona, was diverted to the state’s general fund during the Great Recession.
Housing advocates want the fund restored. Since 2012, the trust fund had been capped at $2.5 million, except in 2019, when it received a one-time allocation of $15 million that was spent within months.
She said a proposed tax credit that has been introduced in the Arizona Legislature could lead to more than “6,000 desperately needed new and affordable housing units” a year.
The legislation calls for a state tax credit for at least 50% of the cost of affordable housing projects to spur more construction.
That’s a start on Arizona’s growing affordable housing problem.