Thursday, September 1, 2022 / by Juan Grimaldo
Urban Land Institute study: Phoenix is falling behind on housing
A study published recently by the Urban Land Institute found that underproduction of housing is the primary cause of the nation’s housing woes, and that developers could be preparing to decrease their production in the face of potential economic downturn.
The Washington D.C.-based nonprofit, which focuses on real estate and land use, released its 2022 Home Attainability Index last week. The study, which analyzes data from over 100 metro areas, including the Phoenix metro, determined which cities are popular relocation destinations and whether they can handle the growth.
Research showed there is a shortage of 3.79 million homes across the country, with 169 regions experiencing underproduction as of 2019.
“Over the past decade, household growth was strongest in the magnet and niche cohorts. These regions also saw inventory grow the most during this time. … It will be important for these regions to take concerted action to ensure that markets can absorb the additional demand and that acute affordability challenges to not migrate with the new households,” the report states. “Certain markets have already fallen behind this curve: Denver, Nashville and Phoenix rank among the least affordable homeownership markets in this dataset.”
Magnet cities saw the number of households grow by 11.2% between 2010 and 2020, while housing inventory only grew by 10.3%.
Families 'severely cost-burdened'
The study found that 7.5% of families earning between $35,000 and $50,000 were "severely cost-burdened.” The city is classified as a "magnet" – “a migration destination for both people and companies, growing more quickly than the national average in terms of population and jobs.”
The study found that on average, 64.5% of households in a magnet city own a home, but only 23.37% of homes are affordable to a four-person family earning 80% of the area median income (AMI).
For renters, magnet cities like Phoenix are quickly becoming infeasible – 35.4% of households rent in a magnet city, and 79.3% of two-bedroom units are affordable for a four-person family earning 80% AMI. It’s estimated it would take around 30 months to save for a rental unit (first and last month’s rent and security deposit) for a four-person family earning 50% AMI.
“Few available units of any kind, even modest rentals, exist that are affordable to many low-wage workers in most regions. High cost burdens leave less residual income. In the current high-inflation environment, many households will face heightened economic insecurity, particularly when these factors are combined with high energy costs,” the report states. “Left unchecked, these factors could raise the risk of homelessness for many households.”
The report concluded that many growing regions haven’t demonstrated they can produce the necessary amount of housing, of the right kind and in the right places to keep their markets from falling victim to the same affordability issues that have come to define more established markets.
In a separate report by real estate website RealtyHop, Phoenix ranked as the 25th least affordable city out of 100 studied. The report found that Phoenician households are spending on average 43.68% of their annual income on homeownership in August, which was a 0.21% drop from the previous month.
That report found that 63% of the cities it analyzed experienced...
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Written by Ian Bradley – Reporter, Nashville Business Journal.