A Proposal for an
Arizona Workforce Housing Impact Fund
The State of Housing in Arizona
Arizona used to be one of the most affordable places in the United States to live because of its abundance of attainable housing stock However, in just over a decade, Arizona has gone from one of the most affordable places in the country to one of the most unattainable due to lack of supply and the rapid rise in housing costs. Over that same time, significant job growth has occurred as our economy has diversified and new manufacturing opportunities have continued to emerge. The demand for housing has outstripped housing production. This problem was exacerbated during the pandemic due to supply chain issues, labor shortages and the impact of short-term rentals on the housing market, problems that are ongoing.
Data provided by the Maricopa Association of Governments, below, shows how the housing industry changed after the 2008 recession. This chart illustrates the total number of homes built in Maricopa County each year since 2000. In the early 2000s, an average of 40,000 per year were built, with a peak of 48,000 in 2005. After the recession, the number of units built dropped to 6,634 in 2011, and it has been increasing since then, reaching just over 31,000 units in 2022. From 2000 to 2010, 389,400 units were built. The total number of units built dropped by about 35% in the past 12 years (2011-2022), with only 254,300 units built.
Apartment construction has a similar pattern. After a low of 230 units built in 2011, the number of apartment completions recovered and increased to about 7,000 each year since 2015. The number of apartments being built in the past two decades stayed fairly constant: 63,100 from 2000 to 2010, and 60,800 from 2011 to 2021. In 2022, there was a significant increase from the previous two decades to 10,150 apartment completions. With the reduction in total completions over the last decade, the share of apartment units built has increased by 10 percentage points since 2000.
The state is clearly in need of more affordable units, as well, with estimates ranging from 40,000 to more than 270,000 affordable units needed to meet the demand. From 2017 to 2022, the Phoenix Metropolitan Area saw a 93% increase in the median sale price that has priced out larger portions of working Arizona residents. The data provided by The Information Market below shows the significant decrease in affordable apartment units, with units under $1,000 having dropped from over 90% in 2010 to only 7% in 2022.
https://azmag.gov/Programs/Maps-and-Data/Land-Use-and-Housing/Housing-Data-Explorer
https://azbigmedia.com/real-estate/heres-the-salary-needed-to-buy-a-home-in-phoenix
https://worldpopulationreview.com/state-rankings/median-household-income-by-state
https://www.phoenix.gov/humanservicessite/Documents/FY22-23%20AMI%20Guidelines%20-%20FSCs%206.6.22.pdf
https://azmag.gov/Programs/Maps-and-Data/Land-Use-and-Housing/Housing-Data-Explorer
https://www.nahb.org/-/media/05E9E223D0514B56B56F798CAA9EBB34.ashx
Resources
As part of the initial exploration for the GPL fund, the Housing Committee is recommending that GPL work with the Raza Development Fund.
Raza Development Fund (RDF): Founded in 1999, this organization is the country’s largest and longest-serving Latino civil rights and advocacy organization. It advances economic opportunity, social mobility and racial justice. The main areas of investment are education, affordable housing, health care, specialty finance and small business. Headquartered in Phoenix, RDF has invested over a billion dollars in 38 states and leveraged over $6 billion in its investment areas. RDF provides a large range of financing options and takes an active role in technical assistance for each of its partners.
Learn more at: https://razafund.org/phx
Fund Administrator
The goal is to raise about $50 million to help accelerate the development of workforce housing around the metro Phoenix area.
Along with this new fund, other collaborative efforts are underway to leverage co-location opportunities that could reduce the cost of land acquisition. Co-location for workforce housing could include building apartment units on existing school, government, business and/or church properties. This concept allows not only for the optimization of space on existing properties but also siting additional workforce housing units near resources that contribute to an employee’s success, such as easy access to public transportation, health care and other supportive services.
AMI Income Limits for a Family of Four
Concept: A Greater Phoenix Leadership Impact Fund
Greater Phoenix Leadership (GPL) decided to explore what other public-private housing funds look like throughout the country to determine possible best practices for a business fund in Arizona. Under this new model, businesses and foundations could reallocate some of their existing bond funds (yielding between 1% and 2%) to provide a direct loan contribution to an Arizona Workforce Housing Impact Fund and sign an agreement to commit the investment for at least 7 to 10 years. GPL would then partner with an organization to administer the fund and provide gap financing loaned out at a 5% rate. The overall goal is to reinvest the funds as loans are paid back and support new projects. GPL hopes to invest in projects contributing to workforce housing targeting 80%-120% of area median income (AMI) or $70,650-$106,560. This population is also commonly referred to as the “missing middle” because they earn too much to qualify for government-assisted housing yet cannot afford market rents.
In their 2022 study, Visual Capitalist determined that Arizona households must earn a salary of $86,300 a year to buy an affordable home. The World Population Review calculated the median household salary in Arizona to be $61,529. According to data from the National Association of Home Builders, 74% of Arizona households are priced out of a median priced home. The Maricopa Association of Governments determined that across the Phoenix Metropolitan Area, 518,000 households are cost burdened, and 230,000 households are severely cost burdened, spending more than 50% of their income on housing.
The housing shortage has begun to seriously impact employers, and they face workforce recruitment challenges at all income levels. The need to address workforce housing is crucial. The private sector constructs most of the housing, but it can also play a role in the development of new methods to financing housing in Arizona.
How the Private Sector Might Help Further
