A listener asked KJZZ’s reporting project Q&AZ, why rent in Arizona is so high? One reason is a supply and demand imbalance.
Arizonans have felt the housing crisis in the last few years since the pandemic.
Data latest from the Maricopa Association of Governments released last fall shows that apartment units for rent for less than $1,000 a month have dropped dramatically since 2010 — from over 90% in late 2010 to only 10% as of early 2022. In 2010, 20% of apartments in the metro Phoenix area were $500 or less. Now there are almost none available in that price range.
Like most things, rent prices are affected by several factors. One of the obvious factors is supply and demand.
“People who are moving to the state tend to generate an increase in the demand for housing,” said George Hammond, an economist at the University of Arizona’s Eller College of Management. “Net migration into the state is typically a big force driving overall population growth in Arizona.”
The state has grown by 11.9% from 2010 to 2020, according to the U.S. Census Bureau. Now Arizona hosts more than 7.1 million people, up from about 6.3 million in the 2010 census.
People mostly from more expensive states moved to Arizona because of the lower housing prices. With more people moving to Arizona, demand for housing has increased. However, the state can’t meet the demand.
The supply for housing has been behind by hundreds of thousands of units, according to Mark Stapp, a professor of real estate at the W. P. Carey School of Business.
“That’s a tremendous number of units that we have to make up,” Stapp said. “When you puddle these other constraints on making up that inventory, the chances of getting us to the point where prices will drop, I don’t think are even remotely possible.”
Because of inflation caused by interest rates and supply chain issues along with laborers availability. These factors add on to the increased cost of building a house or apartment which in turn affect price.
Apartments and houses have been and continue to be built to meet the rising demand. Arizona planned to build about 15,988 apartments by 2022, according to RentCafe, a housing data market site. However, adding to high prices for housing is lack of variability.
The pandemic has left some people rethinking their living arrangements, like roommates, or housing, Hammond said.
“People, even if they had a single-family home, that home probably wasn’t particularly well set up for, you know, one or two people working from home most or a significant portion of the time. So, people wanted houses that were a bit bigger, that might have two home offices in them,” Hammond said.
A diverse housing market would help increase supply for a diverse market, Stapp said. Stapp added that Arizona has zoning that invites single-family homes and apartments more than alternative housing such as townhouses or triplexes.
“The fact that we’re a relatively young metropolitan area, we have a lot of vacant land left. Making the right decisions about how to be a desirable urban place is available to us,” Stapp said.
Since 2017, Arizona’s median rent surpassed the national median rent, according to the Department of Numbers. On July 1, 2023, Arizona’s median rent for a studio apartment was about $1,163 at the low end and about $2,600 for a 4-bedroom apartment on the high end, according to Zumper. In July of 2021, a studio apartment’s median cost was about $990 and a 4-bedrooms apartment’s median cost was about $2,303.
“Income in Arizona is not keeping pace with rising house prices and rent,” Hammond said.
Arizona’s median household income in 2023 is about $61,529, according to World Population Review. A decrease from Arizona’s median household income of about $70,821 in 2021, according to Economic Research.
However, the median price of studio apartments in Arizona has had a downward trend since its highest point in February 2023 at $1,344, according to Zumper. Hammond agreed that in the last financial quarter, prices in Phoenix and Tucson have been going down, and he thinks it has helped a little.
“I think it’s going to be a while before housing and affordability get back to where it was before the pandemic,” Hammond said.
