The state of housing in Phoenix: Homebuilders are catching up, but costs remain high

As the end of the year nears, The Show is taking some of the biggest issues facing Arizona — what’s happened in those arenas in the last year and what’s next for them in the new year.

Let’s zoom in on housing. From affordable housing to backyard casitas to barriers to homebuilding — housing is never far from the headlines in Arizona. And now, it’s getting even more interesting as we’re seeing the Valley’s seemingly unending population growth predicted to slow. Will homebuilders be able to catch up in 2026? And where will they build?

For that and much more, The Show spoke with Tom Simplot, former Phoenix City Council member and former director of the Arizona Department of Housing; as well as community advocate David Crummey, who sits on the board of the Arizona Research Center for Housing and Economic Solutions, or ARCHES. He has been deeply involved in the effort to build up downtown Mesa.

Full conversation

LAUREN GILGER: The big story in housing, at least from my point of view, covering it for many years, has really been affordability, supply and demand. We don’t have enough housing — that’s driven prices way up, priced a lot of people out of housing.

It seems as though we might be coming to a turning point in this, though. And I want to start with you here, Tom. Are you seeing home building getting closer to meeting that demand? Where are we on that front?

TOM SIMPLOT: I think it depends on what part of the Valley that we’re talking about. If we’re talking about the high-growth areas where we see the Taiwanese semiconductor plants going in. If we see the high growth areas, that’s where you see a lot of housing. And of course, we have to remember Phoenix is always built to the edges. And we’re going to continue to see that.

Maybe where there’s been a slowdown are the one-offs, the smaller developments, the developments within the core. And when I say the core, I mean Phoenix and the exurbs. And so maybe that’s going to slow down. But as we saw in the news today, brand new development, 1,900 acres planned ... in Goodyear.

These are not going to stop anytime soon, especially when you consider home builders have to look so far out into the horizon in order to anticipate that demand in a few years.

GILGER: Yeah. So let me turn to you then, David, because a lot of the work that you have done has been looking at trying to do the opposite, right? Like building up instead of out. Thinking about walkability and how we can create urban density in this very driving-focused city? Where are you seeing things?

Like, is this kind of an unchanged narrative like Tom is saying, like we are still pushing out to the limits?

DAVID CRUMMEY: Yeah, I mean, I think that that’s the big question is that we’ve seen such huge increases in both housing prices for purchase and to rent. I looked at the most recent ARCHES report, and we’re at 91% increase in home values since 2010.

GILGER: Ninety-one percent. Wow.

CRUMMEY: And 36% in rent. And we have seen over the last year sort of a pause in the increase, but we’re not seeing a decrease. And where the stress has come from is people who are just everyday, our core workforce not being able to afford housing or not being able to generate a new household so they can move out and start their families or their life out without roommates, without parents, without other support.

And that portion has not shifted as much. We are just not building enough affordable and workforce housing at all to be able to make that shift, especially where people want to live, to give them choice in housing and accessibility to jobs and other services.

GILGER: So still building to the edges. Tom are we ever going to see prices go down? Is that a thing that happens?

Tom Simplot

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SIMPLOT: It does happen. And the most recent one, of course, was 2008 with the crash. Before that, we had the savings and loan debacle in the 1990s. We have these cataclysmic events that force the market to adjust. And I would suggest that the argument is just the reverse happened with COVID and the pandemic.

All of a sudden it shifted the marketplace throughout the country. And now we realize just how far behind we had fallen since the surge in housing leading up to the 2008 crash.

GILGER: Yeah, yeah. OK, so we’re also seeing this kind of longtime narrative about Phoenix shift right now, which I think is fascinating on a lot of fronts, but housing is certainly one of them. I think for as long as I can remember in the Valley, we’ve talked about this massive booming growth.

Like we are this fastest-growing metropolis in the country, and it seems as if that growth is slowing. Tom, do you think that gives developers a chance to catch up in terms of home building?

SIMPLOT: I sure hope so. ... Having worked for the Home Builders Association many, many decades ago, I remember them very vividly saying that every so often it’s nice to take a breath, to be able to catch up — and catch up in a variety of ways. Catching up with regard to finding the parcels and the land on which to build further out.

Catching up with regard to finding the labor supply in order to build what is under construction today. And of course we know we’re facing that shortage right now. So yeah, I would say if it is slowing to a discernible level in the metropolitan area, I would say perhaps it’s just taking a breath or a slight pause or plateau before we then move forward again.

GILGER: What do you think that could do, David, to affordability? Like could those people who you’re talking about who can’t get into homes basically get a chance to get in if at least if the market stabilizes?

CRUMMEY: I think that it makes it easier for individuals and families to be able to find a place that they can feel like the rent’s not going to go up $200-$300 a month in the next year when they re-sign a lease. That might provide a little bit of breadth of room. But we have had such a backlog in housing development that my concern is that also with the reduction in rent, but the increase in construction costs, is that developers are not going to be building because they can’t get rents that going to be able to give them a return, except at the high end of the market.

So if developers can’t make at least a little bit of a profit to be able to make it make sense to invest millions and millions of dollars in our community — five years out, two years out — are they going to be building at the rate that we need when rents aren’t increasing? Because construction costs have gone up so much over the last, honestly, decade.

GILGER: Yeah. Tom, isn’t that where government’s supposed to come in?

SIMPLOT: Well, yeah. Right. And let’s first define affordable housing. There is a development tool called low-income housing tax credits, which has been around since 1986 at the federal level. Arizona briefly had a state low income housing tax credit. It lasted for five years. It happened to be in existence when I was at the department. It is now gone, and the Legislature refused to extend it or to expand it.

So that tool in the tool chest is gone. We’re looking at more strict limits on low-income housing tax credits from the federal level. We are looking at a lot of restrictions on “affordable housing.” And of course, as David said, it’s so imperative we have that in the spectrum of housing needs. It’s imperative.

But without these incentives from either the federal, state or local governments, developers are really going to be hard pressed to be able to make that pencil out.

GILGER: And what do you think about that, David? What does that do to the fabric of our communities?

CRUMMEY: Part of it is just that we need to invest in our own communities. For so long we have just used federal dollars or mostly used federal dollars to support our communities, that we need to look at it from a state and local level. How are we going to invest to make sure that our communities can last for the long term?

If we’re looking holistically at our community, at about health care, how are we building our community and how are we building our economy? If we can’t support people who are working at the base level of our jobs, how do we support the higher-income jobs that we know everyone wants to grow into?

SIMPLOT: David makes a really good point. I mean, that’s the whole point of the spectrum of housing needs. We need every single level, and we need more at every one of those levels. It’s kind of a waterfall effect, quite frankly. If we don’t have an open market, if we don’t figure out how to restructure the development process at our cities and towns so the neighbors don’t control and kill new developments, then we’re not going to get out of this problem. And especially in the affordable housing mix.

And by the way, just forever, decades in Phoenix, once people move into a subdivision or any neighborhood, they don’t want the next subdivision to be built, right? In their mind, that was open space and they love it. For whatever that is. So now all of a sudden if, if they’re controlling the narrative and the process and they can kill that development, that’s what’s happening.

And that’s especially what’s happening with our affordable housing throughout the entire Maricopa County ... throughout all of the cities and towns.

Nick Sanchez

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KJZZ

GILGER: This NIMBYism idea, like “No, I don’t want this here, but it’s great to have affordable housing, but not right here.” Along those lines. Let me ask you both quickly about ADUs. So much of the conversation about affordable housing and lowering housing costs in urban metro Phoenix has been about cities and then the state kind of allowing for these backyard casitas to be built to certain specs and with certain permissions.

But this has been very controversial as well, with neighborhoods saying, “I don’t want this to be allowed because I want my neighborhood to stay the way it is.” David, do you think ADUs will make a dent in affordable housing in Phoenix?

CRUMMEY: I don’t think there’s any one solution to solving the housing crisis, but having many small solutions is the only way we’re gonna go through there. And the power of granny flats, casitas is that you as a homeowner can benefit from providing housing. You can build wealth, because this is how America was originally built.

This is traditional American community building, is being able to benefit from what you can build and be able to stay in the community with people you know. And so casitas, granny flats, duplexes, fourplexes in our communities — that’s how we used to build America. And just since the 1930s, we’ve decided that we didn’t want to do that anymore.

And that was a weird experiment, and it’s time to go back to traditional American values.

GILGER: That’s interesting. Tom, what’s your take on this in terms of these backyard casitas and sort of the pushback that many neighborhoods have had on this?

SIMPLOT: Well, first, let me just say I love ADUs. I love casitas, but it’s not for everybody, and it doesn’t have to be. And I agree with David 100%. We need all sorts of tools in that tool chest. We need options. ADUs may be an option, but it is not going to solve our house housing problem at all.

It’s like the frosting on the cupcake. There just isn’t enough there. There can’t possibly be enough there to actually make a dent in how much housing we need.

GILGER: So let’s transition. I want to talk to you both about some of the more kind of quality of life issues that kind of intersect with housing: access to public transportation; the idea, the buzzword of walkability. There’s been a lot of attempts, I think, to do this in metro Phoenix in various parts, whether it’s downtown Gilbert or downtown Chandler or downtown Phoenix. And in other parts, other pockets, right?

The expansion of light rail, which has been controversial but is coming. I mean, it’s still happening. I wonder what your take on that is in terms of what’s happened in the last year or so, David. Do you think we’re getting to a place where we are doing some of those things that you’ve been advocating for for a long time?

CRUMMEY: I think we’re getting to a point where we can start talking about that in earnest. I don’t know how much we’ve changed. I mean, I think back to Jon Talton and what he was talking about in the ’90s and the ’80s. And if we’re talking about building traditional American communities where you can have time to spend with your family, you can have time to spend with your friend. And you’re not stuck in a car. You’re not spending all of your time outside of work, not being home or not being part of the community, it has to come down to building communities like we used to.

The number one killer of Americans and Arizonans is heart disease. And why is that? Is it just because we’re sitting down a lot? Why are we sitting down so much? It’s because we drive around in these luxury living rooms that are just couches. So, I think that it’s important that we as neighbors talk to other neighbors and elect our local legislators and our city council people to think about: How do we build communities that we want to live in, that we want to grow old in, that we want our kids to buy in?

Can your kids purchase in your neighborhood? Can they raise a family? Are those options even here? Where are our kids going, and where are our seniors going? I mean, that’s the other thing is that Arizona’s population is aging rapidly. The population over 65 has grown by 41% since 2010. Individuals over 65 are the fastest-growing population of people who are moving to Arizona.

If we think about that and we think about people who live here already who are on fixed income, how do they continue to live in their homes? And how do they get support from their neighbors and support from the community?

I was talking to Tami Bohannon from All Thrive365 recently, and they get thousands of calls a month. And the No. 1 reason they get from across Arizona, number one purpose for those calls is about housing: It’s about concerns about eviction. Do I need to pay for food, medication or rent? What’s going to make me survive this next month? And if we’re asking that of our seniors, and our community is getting older as well, how are we going to handle all of that in the next 10 years?

GILGER: That’s an interesting forward-looking thought there. Tom, do you have thoughts on that? Have you seen interesting ideas on that front?

SIMPLOT: I think I’m going to take your question and go to the other side of the spectrum of the housing need ... and instead talk a little bit more about the homeless and those venturing into just trying to get off the streets. And something that is happening all across the country and in Arizona — and Arizona was at the forefront, I might add — is the concept of health care and housing.

Health care is housing. And that is growing to the point where, given the changes at HUD, given the changes with the lack of funding as we move forward at the state level or local level ... I firmly believe — and I could give you anecdotal examples. But we’re going to start seeing health care companies venture more and more — tiptoeing at first — but venture more and more into being housing providers.

Because it is the health care companies who have the revenue, the income in order to reinvest into the housing side. And their insureds, who may be coming from the street — seriously mentally ill, chronically mentally ill, that sort of thing — it’s almost impossible to find housing for that demographic. And the health care companies know it.

They know they have a need to fill, and they know they have these resources that they could actually reinvest and become those housing providers. I think we’re going to see some consolidation in those two industries over the next few years.

GILGER: OK, two ends of the spectrum to end on there.