Roadblocks exist for affordable housing

Affordable housing is becoming a bigger and bigger issue to residents and politicians alike in Arizona but conflicts between state law and what local municipalities want to do is a major hurdle for increasing Arizona’s dwindling affordable housing stock, according to city officials like Tempe Vice-Mayor Lauren Kuby.

During fiscal year 2018, the Arizona Department of Housing spent $68 million in rental subsidies for low income Arizonans and invested $46 million towards aiding the homeless. However, since 2011 homelessness has seen a nearly 50 percent increase, and Arizona ranks just about in the middle of the country when it comes to affordable housing.

Renters occupy 573,000 units in Maricopa County, and more than 214,000 or 39 percent, pay more than 35 percent of their income on rent, according to U.S. Census data.

The U.S. Department of Housing and Urban Development considers anything over 30 percent to be a cost-burdened household.

The majority of those renting are also families with kids in elementary school, making up 42 percent of renters in Maricopa, according to Census data.

Additionally, funding for the Arizona Department of Housing has remained about the same from the previous year, and federal funds could start drying up.

This has many wondering what needs to be done at a state and local level to facilitate a more positive trend.

The recent news that luxury condos will be replacing the Tempe Mobile Home park has reignited discussions in Tempe on what can be done to ensure people have access to affordable housing.

On social media, some have become irate with the city of Tempe for what they feel is the city turning a blind eye to the plight of those in dire need of affordable housing.

The city sees it a bit differently.

Kuby agrees that affordable housing is an issue, but like others on the council, she is fearful of state pushback.

Specifically Kuby worries about a section of Arizona law that states cities and towns cannot impose certain land use regulations which, according to Kuby, ties their hands when it comes to forcing a developer to include workforce housing.

“We get the credit and the blame, but when you look at the legislature, they have so many opportunities to help affordable housing,” Kuby said. “I wish the legislature would remove the barriers from us to creating affordable housing options.”

The barriers Kuby is referring to is a state law passed in 2015 that says cities and towns cannot require “a residential housing unit or residential dwelling lot or parcel to be designated for sale or lease to any particular class or group of residents.”

The Southern Arizona Home Builders Association, Arizona Association of Realtors, the Arizona Multihousing Association, the Home Builders Association of Central Arizona and the Tucson Metropolitan Chamber of Commerce all lobbied in favor of the change.

Groups like the Sierra Club, the Arizona Housing Alliance, the Arizona Planning Association, the Arizona Coalition to End Homelessness and the Arizona League of Cities and Towns all lobbied against the change.

However, there are others who see it in a different light.

Home builders associations say that cities and towns like Tempe already impose certain restrictions such as building height, type of paint to be used and type of foliage that often discourages developers from building certain types of housing.

A report by the National Association of Home Builders and the National Multifamily Housing Council found that, on average, 32 percent of multifamily development costs are related to regulations imposed by cities.

Some at the state legislature have their eyes on the issue and are looking at ways to remedy it.

Rep. Lela Alston, D-Phoenix, is part of a bipartisan group of legislators who are meeting with stakeholders to discuss how to tackle affordable housing and homelessness.

“It’s spreading out into all neighborhoods,” Alston said of affordability and homelessness. “It’s going to take a lot of different people looking at this through a lot of different lenses.”

A Tale of Two Cities

The city of Minneapolis made waves last week by becoming the first city in the United States to eliminate single-family home zoning, which some have seen as a major contributor to the affordable housing crisis, as well as being a tool for discrimination.

“Large swaths of our city are exclusively zoned for single-family homes, so unless you have the ability to build a very large home on a very large lot, you can’t live in the neighborhood,” Minneapolis Mayor Jacob Frey told Slate last week.

The idea behind removing single-family home zoning means that predominantly wealthier areas of the city will now be available for triplexes, meaning more opportunity for new housing.

Minneapolis and Tempe are similar in a lot of ways.

Tempe is only 2.2 percent more expensive to live in and the median home cost for both cities is between $250,000 to $270,000. Both have minimum wages around $10 an hour and both have an average household size of 2.5.

Tempe is much smaller in population compared to Minneapolis but many of the same issues with affordable housing exist in each city.

And Tempe faces some issues that Minneapolis does not. Specifically, it is landlocked – meaning the city can’t expand its boundaries to facilitate growth – and it must contend with a state legislature that has a history of working to stymie its policies.

Tempe has faced scrutiny by the state for attempting to enact more progressive policies such as a plastic bag ban and a dark money disclosure ordinance.

Specifically, it has faced what’s called a 1487 investigation, named for the bill number that turned into a law giving any state lawmaker the authority to request the Arizona attorney general investigate whether an ordinance enacted by a city violates state law.

If the city or town is found to be in violation, the state will withhold that city’s portion of the revenue shared with all municipalities.

In Tempe’s case, it risks $57.6 million if it enacts an ordinance that violates state law.

The fear of a 1487 investigation is part of the reason Tempe is not making developers, like the ones taking over the Tempe Mobile Home Park, include affordable housing in their developments, Kuby said.

But Kuby has not given up yet and is still trying to see if the city can negotiate, especially since the developer is coming to the city for rezoning.

“I know costs are high and the area needs to be developed,” Kuby said.“But I, as a public official, can’t ignore that there used to be a strong community there.”

Kuby said she hopes the developer will meet with council members, though it hasn’t done so yet, and discuss ways to include some form of workforce or affordability to the project, given the area’s history.

She said Tempe would likely be willing to reduce costs or give certain incentives, but said that the city may not be able to do much with the state legislature most likely closely watching.

However, cities may have more control over what can and cannot be built than what Kuby says.

Fees for trees

When a developer comes to a city with a plan to build it often has to wade through a sea of permits, fees and building codes before a shovel ever breaks the dirt.

The regulatory costs associated with building often falls into a few different categories, including fees, development standards, building codes and land dedicated to public use.

A developer may have to contend with an overlapping water district, school district or, in some cases, another municipality, depending on the size of the development.

Then tack on that the process is often slow, so attorney fees have to be factored into the cost of the project.

The slow and sometimes cumbersome nature of getting the green light for a development even prompted the Obama administration in 2016 to issue a Housing Development toolkit to try and encourage more housing to be built by streamlining the process.

Their report found that, from 2006 to 2016, the number of very low-income renters paying more than half their income for rent had increased by 2.5 million, and that areas with high-cost housing tended to have restrictive zoning and land-use controls.

The theory is that the more restrictions and the more expensive it is to build, the more likely a developer will want to build something it can rent out or sell for a higher price in order to recuperate costs.

More often than not, this can also lead to gentrification, according to the report.

Tempe has a few examples of costly development permits and fees.

For example, to have a plan reviewed by the city, a developer first has to pay 65 percent of what the building permit fee would be.

For example, a 2,000-square-foot single family house at a cost of $82.08 per square foot (taken from Tempe’s Building Valuation Data sheet) would mean the building permit would be $2,306.56, including fees. A developer has to pay $1,499.26 to have the plan for that house reviewed by the city.

Then there are the other fees, like the $423 plan review status meeting fee, the $705 temporary certificate of occupancy fee, and a host of different zoning and rezoning fees.

Fees are not uniform across the Valley, either. In Glendale there is a $169 street tree permit application that does not appear to exist in Tempe.

“Seems to me to be disingenuous that cities are driving these costs up,” Kuby said in response to the assertions of home builder associations. Kuby did admit that land prices are higher in Tempe than other places but said fees and permits can often be negotiated with the city.

Joan Serviss, executive director at the Arizona Housing Coalition said the issue is less black and white than either side has portrayed.

“I think it’s one of those things that we need to challenge the assumptions all parties make,” she said, adding that the process of building and creating affordable housing can often be “convoluted.”

In particular, the process of applying to have a project be deemed an affordable housing project, in order to receive certain federal tax credits, can be arduous.

“I’m not an affordable housing developer, but I’ve seen the stack (of paperwork) that is needed for an affordable housing development to be made, it’s a nightmare,” Serviss said, adding that “affordable housing is very much a zoning issue.”

What Serviss means is that density requirements and processing fees can often be a herculean first hurdle for developers looking to create workforce or affordable housing.

That is why Serviss and others are going to the Capitol to see if certain fixes can be implemented.

Taking it to the Capitol

As cities and developers are contending with fee structures and other hurdles, Alston is attempting to tackle another issue facing Arizona’s affordable housing stock.

Arizona’s State Housing Trust Fund was created in 1988 to help low-income families with their housing needs.

The fund uses unclaimed property belonging to the state, like buildings, safe-deposit boxes and more to fund the program. But like many other dedicated funds operated by the state, the Housing Trust Fund was depleted during the Great Recession.

At its height, the program had nearly $40 million in revenue in 2007.

But when the economic downturn hit, the state needed to fill a multi-billion-dollar budget shortfall, and swept money (often multiple times over multiple years) from dedicated funds. The Housing Trust Fund was no different. Then, in 2010, the budget for the fund was capped at $2.5 million.

Alston has been pushing to get funding back up to the pre-recession levels, and is hoping a bipartisan group of legislators will make that a reality.

People like Rep. Heather Carter, R-Cave Creek, and Rep. John Allen, R-Phoenix, have been working with Alston to explore all the options. Alston is hopeful her fellow legislators will agree to the funding increase, but she has also been drafting her own bill in case the bipartisan support disappears, she said.

“I would challenge our legislators to restore the Housing Trust Fund,” Serviss said, adding that the fund is one of the most flexible in the state and can be used for more than just affordable housing.

For example, evictions have been a hot button issue lately, and the fund recently transferred money it had to start looking into an eviction prevention pilot program.

But more money is needed and that’s why Serviss and others will ask lawmakers to add a state-level affordable housing tax credit to qualifying properties, especially since incentives are about the only tool cities have to encourage affordable development.

Last session, the bill passed the House of Representatives, but like many other bills during the end of last year’s session, it was overshadowed by the #RedforEd movement, lost its momentum and failed to pass in the Senate.

Serviss hopes this year will be different.

Alston said she is looking forward to adding the complaints of developers claiming that large fees are preventing affordable projects to their discussions.

“All cities are hurting for money for a lot of different reasons, but that might be something they’d be willing to at least negotiate,” Alston said about seeing if adjusting fee structures could result in more affordable housing.

However, the group is more focused on tackling homelessness and those on the verge of homelessness.

“I think getting a pot of money to make small loans or grants to individuals who are in danger of experiencing homelessness is one idea,” Alston said.

For now, Alston and Serviss are hoping that the bipartisanship continues and that real solutions can be found before things get too dire.

“We need the state to step up their game,” Serviss said. “There needs to be more of an investment.”