Experts Say Housing Affordability is a Key Valley Issue

By Corina Vanek | Phoenix Business Journal

Housing affordability, the fate of office work and the demand for industrial space in Phoenix were among the themes covered during the IREM CCIM Economic Forecast held January 14.

Robert Hicks, executive vice president for Portico Property Group, said the Valley is expected to see another 22,000 apartment units come into the market in 2022, following a year of double-digit rent growth and an average of 4 to 5% vacancy, illustrating the need for housing.

Rent growth in Phoenix is outpacing the cost of construction, leaving a long runway for new development, said Jay Ramos, vice president for Leon Capital Group.

However, the process to get a new development approved has gotten longer, Ramos said, adding that there sometimes appears to be a “disconnect” between municipalities’ perceptions of the need for housing and the true need. As neighborhoods and residents have organized more on social media and have pushed back on developers at the city level, the process for rezonings has slowed, he said.

With the low vacancy and high rent growth in the Valley, the multifamily real estate market has become a “feeding frenzy” for investors, Bill Hahn, executive vice president for NorthMarq said. Prices for single-family build-for-rent projects have nearly doubled in the past two years, he said.

The multifamily experts all raised costs, both from inflation and rising housing costs as a concern in 2022. Shannon Hersker, director at Walker & Dunlop, said some lending agencies have increased their affordability requirement to address increasing costs.

When asked about the possibility of rent control being implemented in the Valley, Hicks said it has been put into place in many other cities where it historically would not have been expected, and “more than likely” would be proposed in some form in the Valley. However, he said rents will likely taper off this year from their explosive growth over the past few years.

Read More (subscriber content)