Since the pandemic, the cost of rent in the Valley has grown and made affordable housing more difficult to attain, even as rents have tapered off from their peak. AZRE magazine sat down with Courtney LeVinus, president and CEO of the Arizona Multihousing Association (AMA), to discuss the state of the market, what’s being done at the legislature to contend with declining housing affordability and her thoughts on the future of the Phoenix.
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The following responses have been edited for length and clarity.
AZRE: Where does the multifamily market stand?
Courtney LeVinus: In the Phoenix market, we’re seeing about 92% occupancy, whereas coming out of COVID we were at nearly 98%. Rents have decreased anywhere between 2.6% and 3.6% when you consider concessions, such as when you sign a lease for a year and get a month of rent free.
AZRE: What is driving that rent decrease?
CL: Over the last several years, we finally have seen construction of new multifamily units come to the market. After the 2008 recession, nothing was being built, so we’re now back to normal levels. As a result, we’re seeing occupancy levels decrease, which results in more competitive and in some cases, less expensive rent.
But really, it’s the new construction that’s driving those numbers, and that’s why we’ve always been huge advocates for new construction. Because if we really want to address the lack of affordable housing, it’s a numbers game. We have to build more units at all price points to keep rents reasonable and attainable.
AZRE: Housing is among the top issues Valley residents are concerned about. Why do you think that’s the case?
CL: Affordability is something we’ve been talking about in the industry for many years. Historically, Arizona has always been seen as an affordable state — we’re certainly not like California or states on the East Coast. But we’ve seen affordability become a hot button issue here.
There was some polling showing that affordability is now a top three issue in the state, after inflation and immigration. When you look specifically at Republicans it’s the No. 3 issue; Democrats it’s the No. 1 issue; and among independents, it’s No. 2.
The rising cost of land, the lack of properties zoned for multifamily, and the increased time it takes to go through the entitlement and construction process all impact affordability. Everything that goes into developing and managing apartment communities has increased, just like our household budgets have increased because of inflation.
AZRE: Tell us more about the roadblocks to bringing new units to the market.
CL: There are several. From our perspective, one is the lack of multifamily-zoned land. The vast majority of it has already been built on or is in the construction pipeline. In other words, there’s a lack of planning for the density needed to accommodate our growing population.
The other major systemic issue is the not in my backyard movement [known as NIMBYs]. You can go to virtually any council hearing for a multifamily project moving through the entitlement process, and you’ll hear people say that apartments increase crime, traffic, school crowding — you name it. The NIMBY movement is very effective at moving these false narratives, and they are indeed false. There have been numerous studies that show increased density does not result in increased crime. A community of 300 apartment units versus 300 units of single-family housing get the same public safety calls on average.
As far as traffic, apartments cause less traffic than many commercial properties. There has been a fear of density in Arizona for years, and we used to be able to move further out and we didn’t build dense cores like we’re starting to see more now. But today, going through the entitlement process can take anywhere from two to four years, when it used to be a six-to-12-month ordeal, and time is money.
AZRE: Is there a reason why that entitlement process is taking so much longer?
CL: It’s a culmination of things. Inadequate staffing at certain municipalities can be an issue, but the NIMBY perspective is prevalent throughout Arizona. What ultimately happens when you have significant opposition is you have more meetings and negotiations between the neighborhoods and the developer, which slows down the process significantly.
AZRE: You mentioned before how there’s not enough land zoned for multifamily in the Valley. Does that provide an opening for NIMBYs to come in and delay things?
CL: You’re right. Because virtually everything going forward has to go through some sort of rezoning or entitlement process, NIMBYs can make that take a longer than it would otherwise.
I get where communities are coming from when they want to hold as much land as possible for potential commercial development because of the tax base that benefits the city. But it needs to be balanced with residential development, because the jobs that come from commercial properties also require housing for those workers.
Now that we’ve exhausted what land is zoned multifamily, we’re going to see that two-to-four-year process become the norm unless cities take a proactive approach to their housing needs. I think it would help cities reduce the frustration mayors and council members go through on these entitlement projects if they would zone more land upfront for multifamily instead of having a fight each and every time.
We’ve seen some jurisdictions who have decided that they need to address housing needs and zone more land for high density residential. They’ll do blocks of rezoning so they only have one major hearing as opposed to 50 individual ones, and we’re seeing that as a potential avenue to change how cities should be looking at the rezoning process.
AZRE: What sort of legislative solutions exist for this problem?
CL: When the polling started to show affordable housing as one of the top issues, it certainly got the attention of the legislature. From AMA’s perspective, there were two bills that we were advocating for.
One is House Bill 2297 which allows for the conversion of commercial buildings to multifamily. Economist Elliot Pollock recently completed a draft study and is anticipating as many as 150,000 units could be built based on what is outlined in House Bill 2297, and these projects would be built without going through a rezoning or entitlement process. It’s basically an administrative approval process with the cities, and it impacts municipalities of 150,000 residents and above. The bill says you can convert existing commercial to multifamily with some restriction protection historic neighborhoods.
There’s a requirement for affordable housing and a provision that says not more than 10% of the existing commercial buildings could be converted, and the parcel has to be between one and 20 acres. So there’s all sorts of protections built in, but basically the focus of the bill is to take underutilized or blighted commercial properties and either do a true adaptive reuse where someone uses the building envelope, or it can be demolished to build brand new multifamily.
AZRE: You mentioned that 150,000 multifamily units could be brought to market thanks to House Bill 2297. How would that help address the undersupply of affordable housing? Can you contextualize that number?
CL: This study is a few years old, but the Arizona Department of Housing released a report showing that the City of Phoenix is about 163,000 housing units short of what it needs. House Bill 2297 unlocks potential units by cutting regulatory red tape, and developers are able to go from concept to certificate of occupancy much faster, which makes these projects very appealing.
AZRE: Is there anything else readers should know regarding the legislature?
CL: The other thing I wanted to mention is Senate Bill 1162, which requires cities to do a housing needs study. They need to look at their current and anticipated population, and build in their model how many residents they’re going to need to fill the jobs in the city. Municipalities also must show many housing units they are short, what they need to build, what their average permitting is and how many houses they’re building each year. The bill also reduces the timeframe of going through the rezoning application process, meaning cities have to decide whether to approve the application within 180 days.
AZRE: How much can be done at the state level when municipalities have much of the power when it comes to planning and zoning?
CL: There’s always going to be negotiation with the cities, and the approach we’ve tried to take with addressing some of the affordability issues stem from creating consistency between cities. In some states, the legislature has taken over this issue because the cities have failed to do so. A legislator has the same constituents that a council member has, so they’re hearing the same concerns, and I think there’s been some frustration amongst legislators that municipalities have not done enough and need to step in. Another two bills also passed the legislature, namely a missing middle housing bill and a bill allowing casitas, so the legislature has really taken notice of this issue.
While it’s true that the zoning and entitlement process is and will continue to be a local issue, it has risen as a top concern for Arizona residents, and therefore legislators feel they can no longer ignore it.
In 2023, we tried to pass legislation that would speed up the zoning and entitlement process by removing some of the non-safety regulations, such as design review, and it was met with significant opposition from the League of Cities and Towns, so this last legislative session we asked them to come to the table. We had to give a little and so did they, but both House Bill 2297 and Senate Bill 1162 ended up being consensus bills.
AZRE: Housing is a sensitive issue, and there’s been reporting about rising eviction rates in the Valley. Is the media missing anything about eviction rates?
CL: This is probably the most sensitive issue on both sides — for our residents and for those who own the property. The very last thing a rental owner wants to do is evict someone because it’s a lose-lose situation.
But where we struggle with the media is they often look at eviction numbers in a silo and fail to recognize that eviction numbers in Arizona will continue to go up because we have a growing population. If you look at eviction statistics on a per capita basis, we’ve actually gone down. We’ve gone from 6.2 million people in 2008 to 7.5 million in 2023, meaning we have more housing and therefore those eviction numbers are naturally going to increase. We shouldn’t look at them on a standalone basis.
The other thing that gets lost in the media is that when a property files an eviction with the courts, that doesn’t mean someone is actually evicted. Sometimes filings get conflated with actual evictions.
AZRE: While more apartments have been built in recent years, there’s a perception that most of them fall into the luxury category. What’re your thoughts on that?
CL: A lot of the projects coming to market are luxury, and part of that is because it’s so difficult to develop workforce housing for a variety of reasons. Some we’ve talked about, such as the regulatory environment. The National Multihousing Council and the National Home Builders Association recently completed a study showing that more than 40% of the cost of housing comes from federal, state and local regulations.
For a project to work financially, many developers feel they must build luxury to make the project cash flow. Workforce and low income housing traditionally have different financing mechanisms including a variety of stacked financial provisions.
It’s just really difficult to build middle-income housing. Some of it comes from going in front of planning and zoning commissions, because that’s where we start to see the neighbors say they want the communities to have all these bells and whistles to look a certain way. For the project to get through the entitlement process, a developer will often have to reduce density, but that doesn’t mean it reduces the cost of operating the community. It’s hard to make these deals pencil. That’s why we’ve been pushing at the legislature to reduce some of these non-safety related regulations so we can get back to building starter apartments.
AZRE: Greater Phoenix is an emerging Tier 1 market with significant inbound migration and multi-billion-dollar investments from companies such as TSMC and Intel. Is a higher cost of living and decline of affordable housing a the side effect of this growth?
CL: I was born and raised here in Phoenix, and this city is very different from the one I grew up in. It’s exciting because there’s so much potential here, and that’s why people are coming here.
To a certain extent, affordable housing will continue to be an issue, but from my perspective, I think Arizona is at a very important crossroads right now. If we can implement policies to reduce regulation to encourage housing, we can continue to be a market where people want to move and have a quality of life without breaking the bank. If we fail to make some of these hard choices, we’re going down the path of California, Oregon and Washington.
But we have an opportunity to correct our path. We’re still affordable compared to other states, but it’s going to take council members and mayors who are willing to make difficult decisions when they’re hearing from residents who may not want them to go in that direction. I’m not of the opinion that housing costs are doomed to increase.
AZRE: What are some of AMA’s top priorities for 2025?
CL: The elections will influence what happens in the market from Arizona. From AMA’s perspective, we’ll continue to be laser focused on protecting property rights and reducing unnecessary barriers to new construction. We’ll also advocate for affordable housing via the extension of the state Low-Income Housing Tax Credit by urging the legislature to properly fund the Arizona Housing Trust Fund.
There are some proposals on the federal level that we’re concerned about. Recently, a national rent control measure has been talked about, and that would be catastrophic for Arizona and the nation. If
there’s one area where economists generally agree it’s that price controls don’t work. Rent control reduces the amount of new construction and further exacerbates the affordability crisis.
