PHOENIX — With housing prices rising, home supply inventory remaining low, and more people moving to the state, housing officials say Arizona needs more than 200,000 apartments.
The Arizona Department of Housing estimates that the state will need 250,000 more homes and apartments to meet current demand.
The lack of housing supply can lead to all kinds of issues, including the huge spike in prices we’ve been seeing lately.
BUILD-TO-RENT HOUSING COMMUNITIES
With that lack of supply, there’s a new trend taking shape in Arizona in the form of build-to-rent properties. They are exactly how they sound — single family homes with the purpose of being built to rent, not own.
“It’s actually a fairly new form of residential real estate that really didn’t exist five or six years ago,” said Randy Grudzinski with Empire Development Group.
Grudzinski describes the homes as tiny cottages that can be one to three bedrooms with smart features, usually a small backyard, modern updates, with amenities that include pools, fitness centers, and more.
“Probably the most popular form of rental living out there right now,” he said.
According to Land Advisors Organization, a large land broker in Phoenix, there are 52 active build-to-rent communities in the Valley with 165 potential or planned locations to come.
A representative with the company tells us that most of these projects are considered “horizontal apartments” as the housing units have four walls all to yourself, with rental rates "on par with traditional apartments."
These new units can be seen in Phoenix, including off of Olive just past 51st Avenue.
The Village at Olive Marketplace will have 204 units on 18 acres — some of the units are completed, with 45% of them already being leased in September.
“We are very pleased at how quickly the homes are leasing and to see individuals and families move in,” says Shelby Duplessis, president of land development for Empire Group. “It’s a tribute to the thought we put into our location selection, design, and the quality of our construction.”
The Villages vary from around 700-square feet to nearly 1,300-square feet, ranging in price from $1,500 for a one bedroom to $2,400 for a three bedroom.
Most of the communities already completed or in the works are on the west side of Phoenix.
The build-to-rent concept is becoming popular among millennials and empty nesters, as Grudzinski said these can be a substitute to starter homes.
“The whole idea of buying a home, that starter home that we're all familiar with, has just become so unattainable to the average young couple getting started out there or even just singles in that group,” Grudzinski said.
PUSH FOR HOMEOWNERS, NOT RENTERS
However, home ownership advocates like Patricia Garcia Duarte with the non-profit Trellis say there needs to be more homeowners, not renters, in Arizona.
Garcia Duarte says the call for more home ownership would help low- to middle-income families by building wealth.
“I think we need to pause and think, do we really want a nation of renters or do we want a nation of homeowners that can build wealth over time,” Garcia Duarte says.
Trellis has been tracking the price of rental and home prices and they worry about how high they are for Arizona families. Garcia Duarte referenced a recent report by Redfin that found in the second quarter in Phoenix, nearly one in four homes were bought by investors.
“It creates this chain of displacing, moving people out that the residents have made [into] communities for so many years become threatened,” she said.
RENTAL COSTS IN PHOENIX
A report this past summer from ApartmentList.com states, “Phoenix rents have increased 3.7% over the past month, and have increased sharply by 20% in comparison to the same time last year.”
According to Rent Cafe the average size for an apartment in Phoenix is just over 800-square feet.
Take a look at average rental prices in Phoenix, according to Rent Cafe:
- Tucson: $1,115
- Mesa: $1,383
- Phoenix: $1,408
- Buckeye: $1,539
- Peoria: $1,559
- Chandler: $1,739
- Tempe: $1,750
- Scottsdale: $1,914
Susan Richards, a part-time writer, has hit a dead end when it comes to looking for a home, as the down payment needed is too high.
Richards has an apartment lease that will be up in three months, but she doesn’t want to continue living in an apartment.
“There’s a lot of people that are just like me, out of luck. I don’t know which way you go,” Richards said.
As for these build-to-rent trends, Land Advisors Organizations tells ABC15 there are around 550 communities across the nation with the highest concentration in Arizona, Ohio and Texas.
Arizona State University real estate professor Mark Stapp says there really are no cons to the build-to-rent model as it adds diversity to the housing inventory.
“Supply is tight, it’s hard to add new units; we need as much product being built, that is going to take the pressure off this constantly upward, moving price angle to rent and sales prices,” Stapp says.