AZ Central – The Arizona Republic
How to solve Arizona’s housing shortage, which has reached crisis levels
Jenn Daniels and Sean Bowie – January 23, 2023
As you read this, 300 Americans have just decided to move to our beautiful state. And it keeps happening every day.
Quality of life, low cost of living, climate, low regulatory environment and a simplified tax structure continues to draw people and businesses to Arizona.
Yet keeping up housing supply with this population growth has been challenging. While numbers vary, the Common Sense Institute Arizona estimates a shortage of about 100,000 housing units.
Barriers to development at the local level, bureaucracy within state agencies and preemptive state laws have limited the building of more housing units at a pace that keeps up with our growing population. Often unnecessary, burdensome rules and regulations have delayed project start times and increased costs for developers and homebuilders.
These costs ultimately get passed on to the buyer.
It’ll take steady, deliberate policy to solve this
Simply put, Arizona has a housing crisis – we need more housing, and we need it now. To be clear, there is no fast and easy button that will make the housing shortage go away. The solution is steady, intentional, deliberate policy and collaboration between all levels of government and the private sector.
We are of different political parties, but we have come together to find solutions to the challenges before us. After careful study of the data, dozens of stakeholder interviews and analysis of policy from other states, we have developed a menu of bipartisan solutions as part of a report for the nonpartisan Common Sense Institute Arizona (CSI).
We believe this can be a roadmap for state and local policymakers.
1. Expedite zoning and approval processes
Current processes for obtaining municipal approval to develop a piece of property vary from city to city. The process is burdensome, costly and takes far longer than is practical for builders.
The consistency achieved by establishing a universal, streamlined process for all Arizona cities will enable for a more objective approach. The development of a uniform process at the state level should be collaborative in nature among cities and consider cities of all sizes. Builders and developers would go through the same process regardless of the jurisdiction and get more houses to market more quickly.
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In essence, the ideal process to go from empty lot to home for sale would be the same in every municipality. By creating a uniform process, a homebuilder in Surprise would follow the same steps, checklist and timeline as a homebuilder in Chandler or Yuma.
2. Let state Housing department grade cities
Once the state has designed and implemented statutory guidelines around streamlined entitlement, review and permitting processes for residential development, the Department of Housing would review and monitor local processes and grade municipalities using objective standards like how long, expensive and onerous an entitlement and permitting process was.
In reviewing the onerousness of this process, the department would compare the cities performance relative both to other cities and towns in Arizona, and national benchmarks and standards.
Top-performing jurisdictions would have greater opportunity to use the novel tools, and receive some of the new state funding, recommended elsewhere in our report – we believe that when a city knows better, they also want to do better. Having true benchmarks and measurable data that can be tracked and shared openly is the best indicator.
3. Develop statewide zoning definitions
Zoning definitions vary from city to city. Identifying logical and predictable zoning definitions at the state level allows for comparison of zoning between municipalities, transparency in the process, and clarity for developers. Additionally, defining new or innovative types of housing, diversifying the types of housing within a municipality, and providing a cohesive way to update municipal codes will benefit cities, regions and developers.
Housing opportunity zones – which use a percentage of existing tax revenue within a municipality to help fund development – can improve the supply of housing where the market alone is unable to meet demand.
4. Form local ‘Housing Opportunity Zones’
For instance, in Arizona, we utilize a manufacturing Transaction Privilege Tax incentive, wherein we divert state sales-tax dollars to cities to support manufacturing project infrastructure costs, so developers don’t have to front those costs. This played a large role in TSMC’s development of their new $12 billion fabrication plant expanded here in our state.
Likewise, housing opportunity zones would likely be most popular in areas that are ripe for development where there are already significant resources being invested in bringing more housing supply onto the market. Like all policies of this nature, it should have a sunset date and be reviewed by the Legislature.
Developers who construct housing and meet accountability benchmarks could retain a proportion of local sales or property taxes otherwise owed on the project, as a way to compensate for costs associated with building and selling the affordable units. A city or town could also use the monies to reimburse itself for capital costs associated with providing public infrastructure that supports these projects.
5. Help cities fund more affordable housing
The state should encourage cities to create their own affordable housing funding. One way to do this is to create a statewide grant program that incentivizes cities to create dedicated funds that would go towards more affordable housing development.
The city of Tempe has been a leader in this regard, creating its Hometown for All program in 2021. Fifty percent of several development permitting fees paid to the city go into the fund and help finance land acquisition and redevelopment within city borders.
Our full report outlines a total of 19 solutions. These aren’t Republican ideas or Democratic ideas. These are Arizona ideas.
It’s important for everyone address this critical issue together. The success of our state depends on remaining an attractive and affordable place for new businesses and new residents. Together, we can ensure Arizona stays that way.
Jenn Daniels, a Republican, is former mayor of Gilbert and Sean Bowie, a Democrat, is a former Arizona state lawmaker. They served as housing fellows at Common Sense Institute Arizona.