Arizona Starter Homes Act advances, but without the changes cities and towns wanted

An attempt by Arizona's cities and towns to force their own plan to address the state's affordable housing shortage through the Legislature failed to gain traction in the Arizona House of Representatives.

The House Commerce Committee voted 5-4 to approve Republican Sen. Shawnna Bolick’s Starter Homes Act, the latest version of legislation vetoed by Gov. Katie Hobbs last year that would cut municipal red tape in an attempt to increase the supply of affordable housing across the state.

Senate Bill 1229, if signed into law, would require cities to allow housing lots as small as 3,000 square feet and limit municipalities’ power to reject housing proposals for certain reasons, such as the aesthetic design of the house.

Supporters say that would increase the supply of housing by allowing developers to more quickly build smaller homes that don’t include costly extras.

“We gain 200 people a day in this state,” Rep. Justin Wilmeth (R-Phoenix) said. “The big reason the cost of housing is so high is that there’s no supply anymore.”

Arizona was ranked in the top 10 for housing construction nationally in 2023. However, according to an Arizona State University study published last year, the state is short 270,000 housing units.

But detractors argued there is no guarantee that Bolick’s bill would actually lead to more affordable housing, pointing out that legislation includes no guarantees that houses built using the new rules would cost less than the current market rate or be sold to first-time homebuyers.

Without those protections, they argue, developers will be free to sell these new homes for any price or to investors, who could use them as short-term rental properties.

“This bill unfortunately imposes a one size fits all approach and has no enforcement mechanism to pass along savings to home buyers or to renters, further incentivizing unchecked market based housing products,” said Queen Creek Mayor Julia Wheatley, who sits on the Arizona League of Cities and Towns’ executive committee.

Bolick and other supporters said they are open to making additional changes to the bill before it reaches a final vote in the Arizona House of Representatives. However, she made it clear that any attempts to attach price controls to the measure will be a non-starter.

“We’re not doing price controls,” Bolick said. “That’s a bill we killed over in the Senate a few months ago, so we are not going to even venture to talk about something like that.”

Rep. Janeen Connolly (R-Tempe) initially sought to amend the bill to insert new legislation backed by the Arizona League of Cities and Towns, an organization that represents municipalities across the state.

That so-called “striker amendment” would have provided incentives to developers who dedicate at least 30% of the homes in a new development to starter homes. Under the bill, those starter homes would have to be “owner-occupied” for 15 years, meaning they couldn’t be sold to investors who rent out the properties for that period of time.

“We can build starter homes that enhance neighborhoods rather than diminish them, giving first time home home buyers a genuine investment that grows in value, not a burden that depreciates over time,” Connolly said.

The amendment would have also applied to any city or town with more than 30,000 residents. Bolick’s bill, however, only applies to cities or towns with populations over 70,000.

However, Connolly withdrew her amendment before it could be brought to a vote.

The new Starter Homes Act already passed the Arizona Senate on a 16-13 vote with bipartisan support and one Democrat, Rep. Cesar Aguilar (D-Phoenix), voted for the measure in the House Commerce Committee.

However, it is still not known whether Hobbs will sign this version of the bill. She is backing a proposal that would include some aspects of the plan put forward by Connolly, like lowering the population threshold to 30,000 and other restrictions, like requiring a portion of homes to be sold to people who actually plan to live there, not investors.