(Un)Affordable: Rents Soar, But Arizona's Housing Fund Is A Fraction Of What It Once Was

By Katherine Davis-Young
Published: Monday, September 30, 2019 - 6:05am
Updated: Monday, September 30, 2019 - 11:41am

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rental units
Katherine Davis-Young/KJZZ
More than 80% of rental units being built in Phoenix are high-end, according to data from RentCafe.

Since 2014, the number of unsheltered homeless individuals in the Phoenix area has more than tripled. Phoenix’s growing shortage of affordable housing is part of the cause — but the state doesn’t have as much funding as it once had to address these issues.

The Phoenix area’s population is growing fast and all that demand means housing prices are rising fast, too. With more Arizonans struggling to afford rent, it’s pretty clear, we need more affordable housing. So, why not just build it?

→ (Un)Affordable: How Did Arizona End Up With A Housing Crisis?

"The issue of affordability has to do with the cost of production and the cost of production has to do with market forces," said Mark Stapp, a longtime developer and executive director of ASU’s real estate program.

"Imagine a business where we're making decisions today about things that won't happen for a very long time in an environment that's constantly changing, that we have little or no control over. Why would somebody want to be in that business? And that's what development is. It's taking all of those risks in being able to understand how to manage all of that uncertainty and that warrants a return."

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Building housing costs a lot of money, so without some kind of financial support or government incentives, developers will build whatever they can charge the highest rents for. And that’s exactly what’s happening. More than 80% of rental units being built in Phoenix are high-end, according to data from RentCafe.

For people who can’t afford those luxury price tags, choices are increasingly limited.

Joan Serviss is with the Arizona Housing Coalition. She says this is where state governments can provide some relief — but she sees a problem with Arizona’s approach.

"The statewide investment to address affordable housing and homelessness has been paltry. We have approximately $5 million from the state," said Serviss.

How much do other states invest compared to $5 million?

Joan Serviss
Katherine Davis-Young/KJZZ
Joan Serviss

"Five million, it's not a lot. So, for example, Massachusetts invests $400 million to address housing and homelessness," Serviss said.

Most states have some kind of housing trust fund — dedicated revenue for affordable housing that can supplement federal dollars. Indiana funds affordable housing with a tax on chewing tobacco. Massachusetts uses those fees you pay when you file government documents.

And Arizona has a way of funding affordable housing, too — or at least it’s supposed to.

In Arizona, the state housing trust fund dates back to 1988 and it’s funded by unclaimed property. If someone dies without leaving their house to anyone in a will, or a bank account goes dormant. The state used to be able to take some of that money and put it in a pot for housing.

That fund used to give the state as much as $40 million a year for repairing homes, or assisting first-time homebuyers, or creating low-income housing. But that all changed a few years ago.

"It was unfortunately capped at two and a half-million dollars during the Great Recession," said Serviss.

Since 2010, Arizona’s State Housing Trust Fund has been limited to a fraction of what it once was.

But Arizona lawmakers like Arizona state Sen. Lela Alston haven’t forgotten about this.

"We're just pricing people out of the market so they're having to move farther and farther out into the suburbs," said Alston.

Lela Alston
Katherine Davis-Young/KJZZ
Lela Alston

Alston has repeatedly proposed bills to restore housing funding, without success. Of course, Alston is a Democrat in a Republican-controlled state Senate.

"The majority members have not seen that as an important issue in their districts and they control the budgets," Alston said.

But Republicans have had a tough time making headway on this issue, too.

"We cannot wait on this another day for the state of Arizona," said Republican state Sen. Heather Carter.

Carter says it’s not that her party colleagues don’t see housing as important, but state spending balances has to balance a lot of competing priorities

"How do you go about incentivizing the market to provide affordable housing and do so in a way that doesn't break the state bank so that now you're facing financial challenges on the education side of the state budget or on the health care side of the state budget?" said Carter.

So, even in this year’s legislative session — after Phoenix saw its largest year-over-year rent increases ever — neither Alston nor Carter was able to get a hearing on a bill to restore the state housing trust fund.

But state budget negotiations lasted late into the spring, weeks beyond what was supposed to be the end of the session. And in those tense final days deciding on state spending, lawmakers agreed to put $15 million toward affordable housing.

Heather Carter
Katherine Davis-Young/KJZZ
Heather Carter

Joan Serviss’s concern is there’s now almost 10 years of lost funding to make up for, And while $15 million will help, it’s just a one-time thing. Lawmakers didn’t make any plans beyond this fiscal year.

"If we did nothing else, it would go back to its statutory cap of two and a half million dollars," said Serviss. "But of course we won't allow that, of course we're going to go back down next legislative session and make sure that this is an ongoing conversation."

State lawmakers will meet again starting in January. If the state housing trust fund is not fully restored this time around, Serviss worries Arizona will continue to see more luxury-priced rents, more homelessness and more economic consequences of a housing shortage.

This story was adapted from the original podcast series "(Un)Affordable," now available on Apple Podcasts, Spotify or wherever you get your podcasts.

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