This article originally appeared in the Phoenix Business Journal.
Downtown Phoenix neighborhoods could become a bit more crowded.
Phoenix City Council voted Nov. 19 to allow duplexes, triplexes and quadplexes in single-family areas near downtown. It mirrored recent decisions by officials in Scottsdale, Tempe, Chandler, Flagstaff and others. Under state law, every municipality with more than 75,000 residents must follow suit by the end of the year.
The debate over the rezoning in Arizona’s capital city was contentious. A legion of residents from the Encanto and Willo neighborhoods, which fall under the oval-shaped, mile-diameter overlay around Phoenix’s central business district, voiced concerns at the Nov. 19 meeting and at a previous one Nov. 5, when Council delayed its vote on the issue. Historic neighborhoods deserve protection, they argued, and the potential new development puts their existence at risk.
Arizona, and the country, has a housing access and affordability problem.
The median listing in the state was $475,000 in October 2025, up from $293,000 in October 2016, according to Federal Reserve data. The median age of a first-time homeowner is now over 40 years old, a record high, according to a Nov. 4 report by the National Association of Realtors. The Common Sense Institute estimated Arizona had a shortage of over 56,000 units in the first quarter 2025.
Gov. Katie Hobbs signed a slate of laws in May 2024 aimed at increasing housing supply. Among them was HB 2721, which mandates the most populous places in the state to alter single-family residential zones in areas one mile around central business districts to allow for “middle housing” — defined by state law as buildings with two or more residential units that are compatible in scale, form and character with single-family homes — while requiring new residential development of 10 acres or more to designate 20% of its units for middle housing.
If cities don’t comply, the municipal governments risk losing some zoning power, and all single-family zones will automatically be required to allow multiplexes without any limitations.
In the short term, the change fails to fulfill either the dreams or nightmares of stakeholders, said land use attorney Adam Baugh, parter at Withey Morris Baugh, PLC. The impact on the unit scarcity in areas near downtown and neighborhoods’ historic value will be marginal, he said.
The units that will be built in these neighborhoods will not be “affordable” or function as a lifeline for those who can’t afford any housing. Rather, middle housing provides a step-up for potential homeowners to access neighborhoods they are currently unable to afford living in due to bloated prices.
When new residents move into new neighborhoods, the units they leave behind open up, which are filled by those who are able to step up; think trickle-down housing supply.
The problem, Baugh said, is that homebuilders are not clamoring to get their hands on properties in the areas that are targeted by the law.
“I’m on the tip of the spear of development,” he said. “For a year and a half since this law has been in place, I haven’t had a single person come to me, as far as developers, and goes, ‘Hey, I’m thinking about doing something in the near-downtown area.'”
Building is expensive, and it’s “kind of a funky, squishy economy” right now, Baugh said.
To develop on an infill site, which are pricey in places like Willo and Encanto, a developer has to buy a structure, probably tear down what’s on the property, and go through potentially strenuous permitting processes with the city. In the meantime, they have to cross their fingers that interest rates and construction prices don’t rise.
In addition, historic-designated neighborhoods have added protections which are guaranteed by HB 2721. Preservation offices and homeowner associations can regulate the size, review the design and put a year-long delay on construction if it fails to get their approval. The zoning overlay in Phoenix also caps middle housing construction at two stories or 30 feet.
“It seems like a whole lot of risk for a little bit of lift,” the attorney said.
However, the middle housing requirement for new developments is a boon for developers, Baugh said, who are always looking to add more units. The law removes barriers of entry, streamlines processes of getting projections to product and contributes to the goal of adding more beds and roofs, he said.
If and when projects come to fruition, middle housing may actually raise property values of an area and provide benefits that can be felt by nearby residents, though it would be understandably frustrating for those directly adjacent to development.
Willo and Encanto already have multiplexes that were built years ago. The state law aims to protect the ambiance, character of a neighborhood with new development. The rezone just makes it easier for more people — but not all people — to access and enjoy the neighborhoods, supporters argue.
“If you can appreciate how costly these products are to execute and develop, you’re attracting a premium user,” Baugh said. “The actual application often doesn’t match the fear or perception that’s presented today.”
Willo and Encanto residents refuse to let themselves be categorized as elitist.
Decades ago, the Willo and Encanto neighborhoods were undesirable, they said, and the homeowners have worked with the city to preserve its historic value in every major development, including when Phoenix added a Metro Rail stop nearby in 2008 and the I-10 tunnel in 1990.
Aaron Montaño Searles, vice president of the Willo Neighborhood Association, said he has teachers, small business owners and bartenders as neighbors who have made sacrifices to invest in where they live.
“These are not folks who are rich and wealthy,” he said at the Nov. 19 Council meeting. “They put a lot of time and effort into their homes, and they’ve bought into this neighborhood because of the community it has.”
The middle housing law opens up the door to a total destruction of what they have built, he said.
“Maybe not today, maybe not next year, maybe not even 10 years,” he said. “But eventually, when we are no longer 50% historic, we are no longer a historic district.”
Some Council members expressed sympathy for the residents, but said their hands were tied by the state.
“This all started at the Legislature when they passed a mandate,” Phoenix Mayor Kate Gallego said at the meeting. “Unequivocally, we must adopt this and implement it by January 1st.”
But, she said, a contention of the law is all but guaranteed in the next session, and it has a higher chance of survival than in previous attempts for a historic neighborhood exemption.
“There is a much broader, bipartisan support moving forward,” the mayor said.