Even with homebuilding in the Phoenix area projected to hit its highest levels in nearly a decade-and-a-half, and multifamily building hovering near records, the Valley’s nearly insatiable demand continues to send prices and rents soaring out of reach for many potential residents.
Key to the rising cost equation are shortages in construction materials and skilled labor, which push out delivery times and raise prices.
The Biden Administration has set a goal of spending $300B to increase the national affordable housing supply by more than two million units.
Affordable housing is just one of a broad array of social spending goals the administration and Congressional Democrats want to address under a $3.5T spending package. Negotiations are ongoing.
In an announcement last week, the administration said the Department of Housing and Urban Development, the Treasury Department and the Federal Housing Finance Agency would implement an initial, interim plan to provide construction grants and incentives for 100,000 affordable homes over the next three years.
Under the current proposal, the administration will limit the number of new homes purchased by investors and expand purchasing windows for individuals and nonprofit groups. In addition, HUD and Treasury will bring back a program that shares risk with state housing agencies to reduce risks in funding less expensive homes. Lastly, FHFA will increase quotas for homes supported by affordable housing tax credits.
In the Phoenix area, home construction this year is expected to reach 35,000 houses, and 26,300 have been sold year-to-date. Buyer demand remains so high, however, home prices are up nearly 29 percent over last year, reaching a record median price of $450K last month.
On the multifamily side, 32,700 apartments are in development Valley-wide. Only 11,000 are on pace to complete this year, and the materials and labor shortages could reduce the number even more. Meanwhile, average rents here have increased 15 percent in the last year, while vacancy rates are the lowest they have been since the 1970s.
The Valley’s ongoing population and in-migration explosion, expected to remain at approximately 90,000 people annually for the rest of the decade, adds to both the supply problem and the price increases.
In 2005, the pace of new home construction was nearly double today’s rate. Unfortunately, another boom to meet the pent-up demand is unlikely, as the Great Recession drove out more than 200,000 construction jobs in the Phoenix area. (Source 1) (Source 2)