Arizona Needs a Comprehensive Approach to Affordable Housing (video)

For years, Arizona has been one of the worst states in the country for affordable housing.

A recent research survey, published in March 2021, ranked Tucson #1 in the world for worst change in property affordability, with Phoenix coming in #7. The survey by Online Mortgage Advisors reported on housing affordability in 200 US cities over the past five years. It shows that “house prices have quickly become unaffordable for workers making average wages for their specific city,” according to a report by KOLD TV.

In the five years that I have been in the Legislature, affordable housing has been a hot topic which generated a lot of talk and a fair number of Democratic bills but not much Legislation that made it to the finish line. (Heaven forbid that any meaningful Democratic legislation would be signed into law — regardless of how much it would help the people of Arizona.) Unfortunately, little has been done to raise stingy benefits for the poor and the unemployed OR to tackle homelessness, housing affordability, or evictions. One positive step by the Legislature was restoration of partial funding to the Housing Trust Fund. (Also worth noting: thank goodness the voters raised the minimum wage in 2016, or Arizona residents’ income to housing ratio cost would be even worse.)

In the five years the Legislature has been talking about housing, affordability has gotten significantly worse in the state’s two major cities. The video below discusses two bad bills from the past that have contributed to Phoenix and Tucson becoming less affordable. These bills should be repealed. It also includes four current housing-related bills in the Legislature.

What we need is a comprehensive approach to housing affordability and its relationship to low wages, poverty, deregulation and the gig economy. Housing is not a stand-alone issue; it is one of the social determinants of health, along with financial security and food security. Instead of a mish-mash of random bills, we need look broadly and creatively at housing — including ending preemption of local control. Otherwise, we’re just pretending to do our jobs by grandstanding and looking busy.

Bad Legislation Created Current Problems

Bad legislation — particularly preemption bills — have contributed greatly to our current housing affordability problems.

SB1072 (from 2015) prohibited cities from dictating what percentage of a development had to be low-income or affordable. I have lived in Tucson for 40 years, and I remember many city council members talking about new developments and what percentage would be used for affordable or low-income housing. I didn’t really realize the Legislature had made that city planning option illegal, until I joined the Legislature.

SB1487 (from 2016) is the Father of All Preemption bills — worst in the country. This is the bad bill that says if one Legislator doesn’t like what a city or county is doing that Legislator can file a complaint with the Attorney General, initiate an investigation, and potentially take money away from the city unless they stop what they’re doing “wrong”. Legislators from other cities stopped Tucson’s gun buy-back and Bisbee’s plastic bag ban with 1487 challenges. SB1487 doubles down on bad bills like 1072 because it includes the threat of costly court cases and significant revenue loss.

SB1350 (from 2016) preempts cities from regulating short-term rentals. The bill states: “A city or town may not restrict the use of or regulate vacation rentals or short-term rentals based on their classification, use or occupancy.” SB1350 was a strike-everything bill proposed by then State Senator and now Congresswoman Debbie Lesko. It passed the House five years ago this week on May 5. On Cinco de Mayo 2021 in debate, I used 1350 as the perfect example of a bad bill that needed deliberation in the sunshine. Instead, it was pushed through as a striker, didn’t go through the committee process, didn’t have any public testimony, was rammed through the Legislature by an ALEC stalwart, and has created housing problems across the state. For several years in a row, Legislators on both sides of the aisle have proposed bills to mitigate the neighborhood devastation caused by short-term rentals and party houses. Short-term rentals are completely unregulated in Arizona, and we are paying a heavy price.

SB1072, SB1487, and SB1350 squelch innovation by cities, foster housing speculation, and contribute to a glut of luxury apartments, the overabundance of unregulated short-term rentals, and the shortage of affordable housing. All three should be repealed, and SB1350 should be replaced with meaningful regulation to protect neighorhoods. Bring back local control.

We need innovative thinking and ideas; this doesn’t happen when the state has control. Rio Nuevo is a perfect example of state control that has not served the city well.

In 2018, the Arizona Legislature granted a 10-year extension of the Rio Nuevo (RN) Tax Increment Financing District. Rio Nuevo. Initially controlled by the City of Tucson, RN has been under the jurisdiction of the Legislature for the past 10 years. During that timeframe, RN has been doling out tax breaks to build expensive hotels and mixed use office/retail/living spaces in the downtown area and will continue thanks to the Legislature’s largesse. This high-end development plus the city’s multiple GPLETs tax deals have contributed to gentrification and exorbitant rents in the new apartment buildings.

Current Housing Bills in 55th Legislature

I’d like to say that the Arizona Legislature is working on a comprehensive plan to tackle housing affordability statewide, but we’re not. Number one on my list is still fully funding the Housing Trust Fund (HB2244) to $40 million per year and restoring the dedicated funding. It had a steady stream of income until Republicans started sweeping it after the Wall Street crash (~2010). It wasn’t until recent years that some funding was restored — thanks to Democrats (now 29 strong) pushing back on unnecessary housing austerity, imposed by Republicans. The conversion of the old Holidome to housing and transition services for the homeless was funded by $2.5 million from the Housing Trust Fund, after the Democrats fought for restoration. Additional funds for the Housing Trust Fund is in the budget buzz. (Write to your Legislators about restoring funding.)

Here are a few other housing-related bills that are in this video.

SB1409, which passed the House recently, dictates that cities must look at impacts on housing affordability when changing zoning or ordinances. The Tucsonans who are bird-dogging the City Council on the GPLETs and on expansion of the Central Business District may find 1409 useful. For the record, I voted against 1409 because I think it would be difficult to comply with 1409 without first repealing SB1072, SB1487, and SB1350 (above). Progress in affordable housing and compliance with 1409 would be more doable if the state lifted the yoke of preemption and gave the cities more tools to create affordable and low-income housing and to innovate. What if the Legislature had to consider the impact of its decisions on housing affordability or other social determinants of health and report back to the people?

SB1076, which passed the House last week, changes the property tax valuation on LIHTC affordable housing complexes to income-based. As I have reported in the past, some affordable or low-income housing complexes may have only a small percentage of the units that are actually affordable or low-income. With SB1076, complexes that are 90 percent affordable or low-income units would pay less in property tax than complexes that have smaller percentages set aside for affordable or low-income units. This would allow developers to buy land in more expensive Zip Codes because their property tax would be based upon the income from the property. In the Frontline Documentary on the federal Low Income Housing Tax Credit (LIHTC) program, they discussed the problem of “Zip Code as destiny” and the challenge to build affordable housing in multiple areas — not just impoverished areas where land is cheap. (Fully funding public education across all schools would help alleviate the “Zip Code as destiny” problem.)

HB2562 creates a state-based tax credit like the federal Low Income Housing Tax Credit (LIHTC). I have voted against this in the past due to the enormous cost of the tax credits, which are cumulative and automatically increase each year. The state has money now, but we also have millions of dollars in underfunded programs and Republicans who want to cut taxes by $1 billion this year. At its high point, a state LIHTC program could cost us $50-100 million in tax credits per year at year 10. I recently watched the Frontline investigation Poverty, Politics and Profit about the federal LIHTC program. This documentary highlights corruption and lack of audits and accountability in LIHC program. It cemented by resolve against duplicating the federal LIHTC at the state level. There are other strategies that we should try first, as noted above and in previous videos (see below).

It is obvious that the state government has contributed to the affordable housing crisis with years of bad policy. It’s time for change. Budget negotiations are happening now … behind closed doors. There are things we can ask for, and now is the time. For example …

• Repealing the bad bills listed above and allowing cities to innovate on housing,
• Fully funding the Housing Trust Fund (HB2244),
• Raising the monthly stipend and extending Temporary Assistance to Needy Families (TANF, HB2252 and HB2253) to five years,
• Bringing transparency to rental agreements (HB2573),
• Raising unemployment insurance,
• Providing pre- and post-natal care to low-income Moms and babies (HB2574).

These steps would go along way toward easing financial burdens on Arizonans and helping them afford housing. The financial security that comes with better wages and regular, full-time work alludes many Arizonans. Ninety percent of the jobs Governor Doug Ducey brags about were created in Metro Phoenix. That is unacceptable. We deserve a government that looks at vitality, quality of life, and affordability across the state — not just in one county.

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