Study: 97% of Scottsdale homes either taken or unaffordable
Researchers presented a rosy outlook for Scottsdale’s affordable housing situation at last week’s city council meeting. They identified a “surplus” of moderately-priced apartments, for example, and found that Scottsdale had relatively more units available for newcomers than similar cities such as Tempe and Pasadena, California.
But a closer look at the city-commissioned report shows those positive findings were far from solid and obscured the fact that Scottsdale has nearly run out of all available housing, let alone units that would be affordable for middle-class residents.
The city has only between 2,600 and 7,600 housing units available, after vacation homes, short-term rentals and other unavailable “vacant” homes are taken out of the equation. That’s less than 5% of the city’s total 139,000 units — a vacancy rate that’s lower than the eight other cities in the report and potentially one of the lowest in the United States.
The situation is even worse for those who make less than $93,000. Just half of Scottsdale’s available units would be affordable on that salary given the cost breakdown of the city’s occupied homes, meaning that at least 97% of Scottsdale’s housing stock is neither available nor affordable for middle-income earners.
The revelation has stoked fears among some officials that the city will be unable to attract workers, businesses and new families − something that could force Scottsdale to raise taxes to keep itself afloat.
It’s not just newcomers whose earnings can’t pass muster in Scottsdale’s out-of-whack housing market, either.
“(A quarter) of the people who own homes in Scottsdale could not afford to buy their homes today,” Councilmember Linda Milhaven said about the study, which was conducted by a national consultant firm called Design Matrix Group.
The research ultimately highlights Scottsdale’s ongoing shift from an upscale tourism town to an ultra-exclusive community where only the very wealthy can afford to live.
The trend has virtually eliminated young families and workers from the city’s housing market, which won’t bode well for the city’s public financing strategy if it continues. Scottsdale
has long depended on business taxes to fund a wide range of expensive public amenities while keeping property taxes dirt cheap.
A dearth of middle-class housing likely means fewer economic development opportunities, which could force Scottsdale to start raising taxes or making major cuts to city spending.
“When you cut off economic development, young folks, families with young children and workforce talent, you are going to have to either increase taxes or decrease services,” Councilmember Tammy Caputi said. “(If) you push all of that away then we’re going to have to change the way the city generates revenue. We’re going to pay for everything somehow.”
Caputi and Milhaven are the only two pro-development officials on Scottsdale’s seven-member city Council, and the later will be replaced by limited-development candidate Barry Graham in January.
Millhaven’s departure and the council’s longstanding preference to “preserve Scottsdale’s character” by keeping as much open space as possible makes it unlikely the city will tackle its housing problem by ramping-up development.
Instead, city leaders are counting on baby boomers selling their houses, plus the construction of new homes that have already been approved but are sitting in the city’s “development pipeline.”
The number of units in that pipeline totaled 11,200 in the summer, and some officials worry that approving more projects now could set the stage for overdevelopment down the line.
“If we don’t take into account the pipeline when we’re approving apartments, then you create an opposite and equally bad problem where you have too many units,” Councilmember Solange Whitehead said. “And there are a lot of real estate economists out there saying we’re going to have a big oversupply of houses because once the baby boomers sell their houses, that’s a lot of houses.”
Scottsdale has approved “thousands and thousands” of older homes, according to Whitehead, who suspects that many of the city’s elderly homeowners will move out of their houses in favor of those smaller homes. That scenario could solve the housing shortage and affordability issues if it comes to pass because a spike in supply within the local market would likely drive-down costs. But the mass exodus of older homeowners is just speculation at this point.
The same is largely true with the planned projects in Scottsdale’s development pipeline. The Arizona Republic reported in July that just 20% of the planned units were actually under construction, meaning it’s possible that the vast majority of those projects won’t be finished anytime soon.
“The rest of them are all just planned. Those are just working through the zoning process (or) the design process,” said Danny Court, who analyzed the pipeline as part of an earlier housing study commissioned by the pro-development group Home Arizona. “Just because they’re in the pipeline doesn’t mean that they are going to be coming online any time soon. They could take years.”
The big question is whether Scottsdale officials are counting their proverbial chickens before they hatch. Their hands-off approach may be more than enough to return balance to the housing market, but it could also prolong the problem for years if their predictions are off. The city council has prioritized maintaining Scottsdale’s open spaces and unobstructed mountain views, which residents seem to support, given that they elected Graham by a landslide in both August’s primary and this month’s general election.
It’s not simply a surface-level desire. The city’s tourism economy depends on those features and approving a large number of tall apartment buildings would tarnish Scottsdale’s image, turning it into just another Valley city, instead of the nationally-known destination that it is today.
But the city’s character is also liable to change if the housing situation isn’t remedied. In reality, residents and officials have to choose what type of change they want because it’s unlikely that preservation is actually an option.
“We can’t lose sight that our city is a tourism-based city. We have to build and approve zoning in a way that does not fundamentally change our character and our really bread and butter, which is (being) a luxury destination,” Whitehead said.
A quarter of Scottsdale’s current homeowners couldn’t afford to purchase a house in the city today, for example. That means the city’s already upper-class socioeconomic makeup will shift even further towards the wealthier end of the spectrum over the next few generations, likely pricing-out the children of today’s residents.
According to the Home Arizona study, Scottsdale is already the least affordable city in the Phoenix metro area for essential workers. The city depends on these workers to attract the same businesses that fill city coffers with tax dollars. Residents would have to make up those lost dollars if business choose to go somewhere else in the Valley where they might find a more viable workforce, according to Caputi who said the only other option would be to cut down on city services. The latter scenario could impact everything from street maintenance, to policing to code enforcement, the department that is responsible for keeping the city’s neighborhoods clean and orderly.
“The reason Scottsdale is so successful is because we have this beautiful trifecta of high property values, low property taxes, and incredibly high amenities,” Caputi said. “It only works if we keep moving forward with good, healthy economic development.”