Arizona apartment rates climb at fastest rate in the nation
Arizona is currently one of the hottest destinations for relocators, and the apartment housing industry is facing the subsequent pressures of that.
In 2016, Arizona had the fifth-highest number of net in-migrants in the nation. That is, over 24,000 more people moved into the state than out of the state that year. But of course, as these out-of-state citizens settle into the Grand Canyon state, they need housing, and that has put strains on apartments.
According to a study by RentCafé, Arizona’s apartment rates grew at the fastest rate in the nation during the first half of this year. Rents rose 5.8 percent between January and July – well above the national average increase of 3.2 percent.
“We’re having a huge number of residents moving into Phoenix from other states — we had over 80,000 [people] move into Maricopa County alone — so that’s one factor,” Arizona Multihousing Association CEO Courtney LeVinus said. “The other factor is that we’re seeing people getting married later in life, so they’re staying in apartments longer. But we’re also seeing baby boomers moving back into apartments because they want a mobile lifestyle as well. Those are some of the factors occurring — over the past couple years, there’s been an apartment building boom.”
According to a report by economic consulting firm Elliott D. Pollack & Co., the number of permits has been increasing since 2012 and demand has grown steadily each year. In fact, in 2016 and 2017, more than 10,000 apartment units were permitted each year. As of 2016, apartments represent 48 percent of renter households.
But the growing demand is being met with equal supply efforts, and that translates to direct economic impact for the state. The University of Arizona anticipates over 9,000 apartment units to be built every year between 2018 and 2030, which is projected to generate $1.1 billion in construction activity and over 14,000 jobs each year.
Notwithstanding the growing demand and rising rents, Arizona still has some of the most affordable apartment rates in the nation. Phoenix has an average rent of $1,084, which falls well below the national average rate of $1,465.
Yet, even still, the state must tackle this problem sooner rather than later if it hopes to keep these relates below the national average, LeVinus said.
“The takeaway is this: we have such a low inventory that it’s really important for elected officials and the cities and towns and the state to recognize that we need to focus on building more rental housing units on all affordability levels – affordable housing, workforce housing, and luxury housing – to meet the demand that’s out there,” LeVinus said. “We’re definitely approaching an affordable housing crisis – I think that there are many people that say we’re already there, and I don’t know if I necessarily agree with that, but we are at a critical juncture in that we need to address the housing shortage now before it reaches a point that we can never meet that demand. So we’re at a critical crossroads.”
A report by Elliot D. Pollack Company highlights the reduction of regulations and incentivization of affordable apartment rates as two potential solutions to the growing demand for apartments. By removing barriers for and incentivizing the development of new multi-family housing facilities, the state can avoid housing crises that have befallen cities like San Francisco or Chicago, LeVinus said.
“The most important thing is that rental housing is such an important part of the residential housing in Arizona in general and I think that sometimes rental housing is left out of the equation and everybody is after the dream of owning a home,” LeVinus said. “But in Arizona and the United States, we’re really changing our thoughts on that and not everybody wants to be a homeowner and not everybody wants the maintenance and the responsibility of a home. More and more individuals want a mobile lifestyle where they can move to another state for a job or a career, and I think we need to recognize that rental housing is a key component of the housing mix in Arizona.”
This story was originally published at Chamber Business News.