middle. housing

This article originally appeared in the Phoenix Business Journal.

Phoenix adopts middle housing ordinance under state law

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.

Land use attorney: Impact could be marginal

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.

Middle housing could raise property values

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.

This story originally appeared on Fox10 Phoenix.

PHOENIX – A city assessment shows the City of Phoenix has a shortage of about 59,000 housing units, but efforts to solve that are at odds with some residents, as people in the historic Willo neighborhood are asking for an exemption from HB 2721.

The backstory:

HB 2721, which was passed by state legislators in 2024, is set to take effect on Jan. 1, 2026. The law requires towns and cities with at least 75,000 residents to allow ‘middle housing’ such as duplexes, triplexes, fourplexes and townhomes to be built in neighborhoods traditionally zoned for single-family homes.

“It’s notoriously known in Arizona that we are undersupplied in housing,” said attorney Adam Baugh.

Baugh said the change is needed to keep up with housing demand.

“It’s the only way I know to create housing supply rapidly and keep our rents affordable so people can grow up here and return and live here,” said Baugh.

Local perspective:

The historic Willo neighborhood is located near Downtown Phoenix. Driving down the streets of the neighborhood can feel like going back in time.

“We have everything from Tudor-style homes to bungalows to — there’s a Georgian revival next door to me,” said resident Opal Wagner.

“They’re honestly an amazing part of our city’s heritage,” said Helana Ruter, the Historic Preservation Officer for the City of Phoenix. “Having those places that reflect our past is extremely important.”

People living in the historic Willo district are worried the new law will take away what they’ve worked hard to preserve.

“We believe it will incentivize teardowns of historic homes, because it gives entitlements of up to a fourplex,” said Wagner. “We already live in an area of Phoenix that is the most densely populated area of the city, so we’ve already welcomed a lot of density into our area.”

The residents involved are asking for an exemption for historic districts from the new law as a wa to protect them from what they believe will be an unintentional consequence of the new law.

“We understand the need for more housing in Arizona, certainly,” Wagner said. “We can build the future of Arizona without destroying Arizona’s past and demolishing it.”

The other side:

Baugh said he doesn’t think the historic neighborhoods will be affected as much as people in the Willo neighborhood fear, simply because there is so much red tape around tearing down a historic home and building something in its place. He added there aren’t that many lots there big enough to accommodate middle housing.

Baugh went on to say without new legislation like HB 2721, he fears many will be priced out of living in Arizona.