Fatigue, Resistance Threaten Arizona Projects, Economy

Scottsdale and Bell Multifamily. Credit: Gensler/Snell & Wilmer

By Roland Murphy for AZBEX

Since 2017, market researchers have estimated Metro Phoenix needs 150,000 additional housing units to meet demand by 2030.

Economic and market forces have combined to make sure the Valley construction and development market has lagged behind that target every year since. In the last five years, we have never come close to the +/-15,000 units/year deliveries needed. The construction workforce lags far behind its pre-Great Recession numbers. The pandemic and its economic devastation proved to be a speedbump, but a speedbump with canyon-like repercussions.

The materials supply and labor chains were strained well before anyone ever heard of COVID. Even before 2020, it could take as long as three months for an order of sheetrock, for example, to arrive at a build site. It could take up to six months to schedule a crew to install it. Project managers and schedulers were performing a delicate dance, and those who stepped successfully were delivering benefits far beyond their salaries.

Post-COVID, the supply chain disruptions exacerbated by the pandemic will take at least another year before returning to whatever now passes for “normal”, and the inflation introduced by both the supply chain issues and federal monetary and spending policies will make construction in sufficient volumes even more difficult when or if every piece of material is available and skilled workers are lined up to put them to use.

It gets worse. Arizona’s economy has been booming in recent years, to the point the COVID-recession was far less disruptive in many sectors here than in other markets. Companies have started up or relocated here in droves, escaping the hyper-inflated costs and oppressively over-regulated environments of previously hot coastal markets, particularly California. Their workers have followed them here, making Arizona a national leader in in-migration. The state added nearly 130,000 people between July 1st, 2019 and July 1st, 2020, according to the U.S. Census Bureau. The Bureau estimates that between 2011 and 2021 the population added 760,000.

As a result, many market watchers and analysts – myself included – are saying the real likelihood of needed housing units is likely closer to 17,000 or 17,500/year, rather than the still unattainable 15,000. As a perspective check, the metro Phoenix market is on pace to deliver 11,500 units in 2021. I realize that “crisis” is an over-used term in today’s world – when everything is a crisis, nothing is a crisis – but the word is genuinely applicable when applied to housing in Arizona, particularly for metro Phoenix.

Apartment occupancy rates exceed 97%. Partly because of that saturation, Phoenix leads the nation in rent growth. In August, the market reported a 21.6% year-over-year growth rate, according to RealPage. The much-vaunted affordability that is a key draw for the Arizona economy is quickly becoming a memory because there just isn’t enough supply or inventory on the ground or in development to satisfy existing demand, much less expected increases.

New and Growing Threats

In addition to the economic forces stacked up against creating sufficient housing supply, a pair of cultural issues have become a growing threat to our ability to add inventory: Development fatigue and organized resistance.

It is basic human nature that a high volume of change triggers a resistance reflex. Even when it is not ideal, the status quo is known. It is safe. Regardless of where one lives in Arizona, but particularly if one lives in metro Phoenix, the entire built landscape is changing. DATABEX, the BEX Companies’ construction database, lists 569 projects actively under construction around the state as of November 28th. For reference, DATABEX only tracks projects with valuations of $5M or greater. That means many smaller, but equally disruptive to the status quo, projects are also taking place.

A burgeoning population and ever-expanding development pipeline are tiring. One focus of the mental health industry for decades has been a set of conditions known as “change fatigue”, “decision fatigue” and “Adjustment Disorder.” In short, being subjected to major changes in one’s daily life and environment, and having to adapt to or accept those changes, can diminish one’s ability to function. Much of the science focuses on young adults, but the pandemic has made adapting to stressful situations, daily perceptions of threat and how to respond to them a nearly universal issue across age groups and demographics.

People take comfort from consistency, and the physical environment is something the human brain does not expect to change significantly. When that open field someone sees every day is suddenly – by their reckoning, at least – churned up and cluttered with trucks and heavy equipment to put up a new 300-unit apartment complex, that’s disruptive. When someone can see, for example, five or more such developments in a ten-mile round trip – such as I can during my morning bike ride around my neighborhood – it can create a sense that too much is happening too fast.

When that happens, many people instinctively want to slow things down. When it comes to development, there is a process whereby they can, or at least where they can try to. Most projects carry with them some form of government approval process, and resident notification/public participation is usually a component.

While hard numbers are not available from municipal sources, development officials and project planners have universally noted an increase in public opposition to proposed projects in recent years.

An imprecise but telling example can be found in the pages of AZBEX and entries in DATABEX. Since residential and hotel projects are far and away the most likely to encounter opposition, let’s start there. Between January 1st, 2020 and October 5th, 2021 we added 524 residential- and hotel-based projects to DATABEX. As much as we would have liked to, by no stretch of the imagination has AZBEX written original or picked up outside articles on all of those.

We did, however, publish a total of 491 articles dealing with apartments/condos or hotels/resorts/casinos in that time, according to a quick search of our document storage and management system.

We have also run 152 articles where “neighborhood opposition”, non-lovingly known as NIMBY, was a component. That 31% number is undoubtedly low. Not every article, particularly in outlets other than this one, is going to mention when neighbors oppose a project. There’s also the fact that, as much as we wish circumstances were otherwise, only a fraction of proposed projects get reported on in the first place.

In my own experiences, I review multiple project proposals a week. In reading city planning staff reports, mentions of neighborhood resident opposition are so commonplace that when a report says no statements of objection have been received, it is a jarring surprise.

When I returned to AZBEX recently, I had a lovely “get reacquainted” phone chat with Phoenix Community and Economic Development Director Christine Mackay. Development opposition was one of the topics we discussed. Mackay’s take was it is understandable that people are fatigued given the massive scale of growth, development, population influx and other changes around the Valley in recent years, particularly since that change can appear to be accelerating, rather than evening out. Her view is that one of the responsibilities of economic development officials and project developers is to show residents how the benefit of a given effort outweighs the change impacts.

The Nature of the Complaints

While there is an entire laundry list of topics residents complain about when opposing a proposed project, there are some common themes:

  • Density. The nearly universal objection is that a planned project will bring in too many people for an area to accommodate.
  • Traffic. No matter where a project is planned, residents regularly identify existing traffic as too heavy already and worry a new development will make it worse, even to the point of being unlivable.
  • Crime. There is an existing, and disproven, stereotype that apartments and dense developments increase crime in an area. This is usually a failure to understand – or a deliberate misrepresentation of – the data. Say, for example, an area has a population of 1,000 and experiences one crime per month. The monthly crime rate is 1/1,000. If the population doubles, it stands to reason there would now be two crimes committed. While the number of crimes has doubled, the rate, and the risk of any one resident experiencing a crime, remains exactly the same. Opponents, however, would incorrectly state crime had doubled.
  • Infrastructure overload. The new development will place too much burden on the area’s existing water/wastewater/electrical or other infrastructure. This one is usually a sign of unfamiliarity with how infrastructure actually works, since denser uses, like apartments, make wildly more efficient use of infrastructure than single-family properties.
  • Neighborhood character. This is the real and underlying worry for most opponents. They fear putting in an apartment complex, condo development, Build-to-Rent, hotel or mixed-use property will negatively impact the area they call home. The threat is the greatest trigger for Adjustment Disorder as it applies to development, and it is the battle flag opponents rally around. Interestingly, it does not particularly matter if the neighborhood in question is declining and if the proposed development would be a revitalizing force that would help arrest the slide, as is the case of the proposed Greenbelt 88/Lucky Plaza proposal in south Scottsdale (AZBEX, November 23rd). Any change is bad change in the minds of some residents.

Many years ago, I was talking with an apartment developer who gave me the following insight on neighborhood character as a factor in opposition: One-acre-plus residents oppose one-acre lots. One-acre residents oppose quarter-acre lots. Quarter-acre owners oppose duplex condos. Duplex condos oppose market rate apartments. Market rate apartments oppose affordable housing, and everyone opposes trailer parks.

Mitigating Concerns and Managing Opposition

The public participation component in a project’s review and approval process is supposed to be a vehicle for developers and their representatives to explain to residents what their project is trying to put in place and how it will benefit the community. They, in turn, get to hear residents’ concerns and, theoretically, explain why there are no risks or otherwise alleviate the fear.

In many, if not most, cases, developers and planners will take the concerns and suggestions offered up by residents during neighborhood meetings or email exchanges and modify their initial proposals to better fit the surrounding area. After all, no one knows an area like the people who live and work there, and responsible developers are not looking to force a square peg project into a round hole neighborhood.

In our phone conversation, Christine Mackay praised these types of back-and-forth exchanges as essential to positive growth. She also added a willingness on the parts of both residents and developers to honestly and respectfully discuss matters of mutual concern is a vital part of the public process and the most honest and effective way to deal with opposition. She kept an optimistic tone that reason and civil dialogue can diffuse most conflict.

Another proponent of reasoned exchange is Nick Wood, one of the Valley’s leading land use attorneys and a partner at Snell & Wilmer. Wood has championed countless development projects – many of them with varying degrees of controversy – through the public approval process. His most recent success involves the development of a 14-story luxury apartment complex at the SWC of Scottsdale Road and Frank Lloyd Wright Boulevard. In Phoenix, directly across the street from the Frank Lloyd Wright-designed spire that serves as a landmark for the area. (AZBEX, October 15th)

In advocating for the development, Wood drew upon existing corridor-based standards put in place by the City of Phoenix and by Scottsdale for its Airpark region. He meticulously explained how the corridor met the needs and infrastructure of the existing area, and he worked with the developer for months on an outreach effort to educate nearby residents.

As a result, when the project came before Phoenix’s Paradise Valley Village Planning Committee in October, the request passed by an 11-4 vote. No residents spoke against the project during the hearing, and 169 statements of support had been put on record.

I spoke with Wood about development fatigue and opposition in October. His take is that most opposition can be addressed and resolved by a combination of active outreach and community engagement combined with the use of planning standards for new developments. Wood is a vocal advocate for municipal standards that establish what types are projects are suited to given criteria. He notes most cities have planning scenarios in place already, but that few of them are actually used as intended.

Phoenix, for example, has 15 Village Planning Areas. The Phoenix General Plan recommends development, “Locate land uses with the greatest height and most intense uses within village cores, centers and corridors based on village character, land use needs and transportation system capacity.” Wood pointed out that, generally speaking, such land use planning has only occurred in the Central City and Camelback East villages.

When a city has standards in place, and when a developer plans projects in accordance with those standards, Wood feels it is easier to justify projects to both residents and city officials, even if the project is a departure from what has gone before.

The downside is, if cities do not follow structured plans, and if fatigue gets too entrenched and causes opposition to swell, valuable developments that can revitalize failing areas and bring project-by-project relief to the demand pressures threatening to cripple growth and derail economic prosperity can be strangled on the vine.

In the second half of this report we will take a look at what may be the single greatest threat to project development and reasonable issue debate: The resident opposition group.

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