For several decades, people were flocking to Arizona in record numbers, searching for a more affordable place to live. The increased housing demand led to skyrocketing housing prices while wages remained relatively unchanged. In 2006, the state’s housing price appreciation ranked first in the nation, having increased by 70 percent from 2000 to 2006. In response to these dramatic changes in the real estate market, housing demand came to an abrupt halt. Only one year later, the growing inventory of unsold homes and the slowdown of new construction brought a sharp decrease in housing prices. Once ranked first in the nation for housing price appreciation, Arizona now ranks fourth worst in the nation with a 37.35 percent decline since its peak period in May 2006. Today, the state consistently ranks in the top five states with the highest rates of foreclosure. In this article, we’ll take a look at affordable housing recommendations made prior to the foreclosure crisis to encourage affordability at the local level. Additionally, we will touch on strategies the state has implemented to address the existing economic downturn.

Before and After the Foreclosure Crisis

In 2006, prior to the foreclosure crisis, the Arizona Housing Commission published Arizona Incentives for Affordable Housing Task Force, a report that offered detailed recommendations and innovative strategies for local governments interested in increasing the production of affordable housing. The report outlines implementation strategies for each of the following categories: finance, barriers and incentives, education, and land planning. The task force encourages local governments to reduce housing costs by shortening the approval process, deferring development fees, increasing densities, and identifying underutilized properties to build affordable housing units. Additionally, the report recommends that municipal and county governments include affordable housing goals and strategies in their general and comprehensive plans. To assist local jurisdictions in meeting their affordable housing goals, the state allows counties to sell or lease county-owned property at below fair market value in order to provide affordable housing for low-income families. These units must remain affordable for at least 30 years. The state also allows counties to establish housing trust funds to provide additional affordable housing opportunities in their communities.

In the aftermath of the foreclosure crisis, Arizona is struggling to cope with the weakened housing market. In 2008, the state announced the creation of the Housing Arizona initiative, which was designed to reach out to struggling families facing foreclosure and homelessness. The state used $13.6 million from the State Housing Trust Fund to carryout foreclosure prevention outreach and education efforts, and to create permanent affordable housing. As part of the initiative, the state set aside $500,000 to assist local governments in applying for Neighborhood Stabilization Program (NSP) funds, which may assist in preserving affordable housing and rehabilitating neighborhoods most affected by foreclosures.

Conclusion

The 2006 housing study is Arizona’s first step toward addressing the state’s affordable housing crisis. Although the state’s housing priorities have shifted since the release of the report, housing market changes led to the adoption of the Arizona Housing initiative. While housing foreclosures continue to be a significant problem, the state has created a roadmap for local officials to adopt a viable housing plan that targets long-term affordability.

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