Arizona’s multifamily industry has been one of the most robust the past few years, even during the pandemic.
While there is still plenty of runway as 2023 nears, there are some headwinds that could slow down the momentum. They include a lack of housing supply and a lack of affordable housing.
“You can’t go a day without hearing about the housing supply and the lack of it,” said Jake Hinman, government affairs consultant for the Arizona Multihousing Association and moderator for a panel at the AMA’s recent 2022 Perspectives & Projections event at the Sheraton Downtown Phoenix.
The panel discussed the Housing Supply Study Committee, which was formed to review data on the scope of housing supply and access and to compile an overview of ways to address Arizona’s housing shortage and to mitigate its causes. Hinman is on the committee.
“Maricopa County is the fastest growing in the county. Everyone wants to come here,” said panelist and Tempe Mayor Corey Woods. “The challenge is that some people want to grow by only building single-family homes. In Tempe, for instance, we can’t build out. We have to build up. All our communities need to contribute to building housing for our future workforce.”
Panelist Cindy Navarrete Stotler, Deputy Director of the Arizona Department of Housing, said there needs to be a change in the conversation. “Let’s make density cool again. We need to bring that back,” she said.
Arizona’s multifamily industry has been in the news a lot lately, from the number of apartment units needed to satisfy a growing population in Arizona to the eviction moratorium and subsequent issues the pandemic presented two years ago.
“The climate in Arizona is very difficult to navigate,” said David Leibowitz of public relations firm Leibowitz Solo, whose panel examined the shifting narrative in the media when it comes to the apartment industry. “We have worked with media the past years on the eviction issue and housing shortage. What has changed? The pandemic changed. The topic of evictions was only related to the moratorium. Now we’ve added another topic, the housing supply crisis.”
Other speakers included Mark Paratore, Vice President of Business Development for the Greater Phoenix Economic Council (GPEC), who told attendees that 2021 was a record breaker in the Valley with 10,859 new jobs. That translated into 55 new businesses, $635 million in payroll 214 domestic prospects, and 58 international prospects.
“Arizona has an increase in earnings thanks in part to high-growth innovation jobs,” he said. “Aerospace, manufacturing, and healthcare continue to lead the way.”
On the topic of national housing, affordability continues to be an issue, said Kimberly Bynum, Senior Vice President-Advisory at Meyers Research. Rent increases are making affordability more difficult. And now occupancies are coming down.
“Where is the pipeline now?” she asked. “We get kind of nervous. But we’re data people.”
Bynum’s things to watch: operating expenses, renewals, stabilized concessions, and lease-up concessions.
Jay Lybik, National Director of Multifamily Analytics at CoStar, said the Arizona housing outlook is a tale of two markets, and the change is not just happening in Phoenix. Sunbelt markets are feeling some pain as well. Record supply is beginning to overtake Phoenix rental demand.
“We are seeing some moderation,” Lybik said. “Last year was a fantastic year, with record absorption and a 5.8 vacancy percentage. There will be some issues this year, likely a reverse of 12 months ago. It has to do mainly with questions about the economy.”
Trends in Tucson show strong rent growth because of the demographic and people moving there. Tucson, Lybik said, recovered jobs after the pandemic much faster than the rest of the state. Construction activity is brisk along the I-10 freeway and around the University of Arizona. The rent growth in Flagstaff, he added, is more balanced.
The Arizona Multihousing Association is the statewide trade association for the apartment industry, representing more than 2,300 members in legislative, legal and regulatory matters. The mission of the Arizona Multihousing Association is to unite multifamily housing leaders in one trusted voice for Arizona’s rental community.