by Adam Baugh and Alex Hayes of Withey Morris Baugh
The past decade has brought tremendous economic growth and prosperity to Arizona and its metropolitan areas. Lured by a supportive business climate and a high-quality workforce, businesses large and small have been flocking to the desert.
This economic boom has had profound positive impacts and helped Arizona emerge from the pandemic with a strong tailwind. However, it also amplified issues around housing affordability and availability that have often been overlooked.
It goes without saying, the demand for housing is simply outpacing supply. In particular, the Phoenix area ranks first among all tracked major metropolitan areas from October 2020 to October 2021 with a year-over-year increase of 32.35% in population growth, per the S&P CoreLogic Case-Schiller U.S. National Home Price Index. According to the Arizona Department of Housing, the state is short 270,000 housing units. At some point, this supply shortage and the resulting affordability challenges will begin to hinder our economic growth.
There are a number of contributing factors to the housing shortage including supply chain constraints, permitting regulatory delays, and the influx of new residents from pricier markets. However, one common critique is the pace at which local municipalities approve, delay, and oftentimes deny new housing options. Whether it is NIMBY-ism, strategic area goals, or high application workload, it has become increasingly difficult to approve new housing at the very moment it is most needed.
In response to local delays, a bill was proposed in the Arizona State Legislature seeking to address the issue head on. Though ultimately failing to gain sufficient support for passage, Senate Bill 1117 proposed to overhaul local municipal zoning powers in an attempt to accelerate new housing development.
The bill would have created “by right housing,” dramatically changing the real estate development landscape in Arizona and forever altering the way municipalities plan the growth of their communities.
For example, SB 1117 would have prohibited all municipalities from requiring minimum lot sizes over 4,000 square feet, effectively permitting 10 residences per acre by right. In larger municipalities with populations over 25,000, the bill would have permitted new multifamily development at densities equal to the greatest ever approved in that municipality and with maximum heights of at least 60 feet by right in many zoning categories.
And the kicker: these larger municipalities would have been required to administratively approve all applications to rezone property for residential use, eliminating the requirements for public hearings and citizen participation. These changes alone would have a substantial impact on the look and feel of our communities across the state. The implications could have been profound, impacting the availability of water resources, strategic planning, and responsible growth.
We recognize the good intentions behind a pro-housing bill like SB 1117. However, in an effort to solve housing pressure, it pre-empted local control in many areas that are most critical, such as building heights, density, location, uses and more.
Much work is needed to eliminate barriers to new, diverse housing options but legislation that removes municipal oversight is a heavy hammer to swing. Though well-intentioned, SB 1117 would have eliminated a process that plays an important role in shaping our neighborhoods, towns, and communities.
For now, SB 1117 has stalled, but related legislation is still under consideration in the current legislative session. There is no denying that solutions are needed to increase the supply and availability, and in turn, affordability of housing in Arizona.