The booming market for Scottsdale homes and apartments is compounding an existing housing affordability crisis in the city.
Over the past two years, the median sales price for a Scottsdale home jumped 27 percent to $745,000. Even historically-affordable 85257 in southern Scottsdale saw prices jump 32 percent to over $454,000 during that time.
Meanwhile the apartment rental market also saw median rents rise 8.6 percent over the past year citywide, according to Apartment List. Scottsdale currently has the highest median rent for a two-bedroom in the Valley at $1,640.
The lack of affordable housing stock is pricing out seniors on a fixed income and working-class people who staff much of the service-industry jobs that support the city’s tourism industry.
“Scottsdale has become increasingly unaffordable to many of the workers who support the community and insufficient housing for workers puts at risk the economic sustainability of our local community,” said Greg Bestgen, the city’s Human Services Director.
Joanna Carr, research and policy director for the Arizona Housing Coalition, said cities must address the issue.
“Cities really need to be more proactive in making sure that people have a place to call home and an affordable place to call home…certainly, the creation of segregated low-income neighborhoods is a byproduct really of housing inaffordability as is rising homelessness and increased evictions,” she said.
At a recent discussion on next year’s budget, City Council briefly discussed the issue and how it could fund potential solutions.
But Councilwoman Linda Milhaven suggested that discussion was premature because the city has not even defined what type of affordable housing it wants to create.
“We need a more robust conversation about what that means, because there is affordable housing, which is workforce housing…and then there is the homeless problem, which part of what we did with the (pandemic relief) money.”
Scottsdale has dedicated funding to address its increasing homeless population in recent years.
Scottsdale’s annual Point-in-Time count – part of a larger single-day national survey of people living on the street – found the number of homeless people contacted in the city increased from 50 in 2017 to 102 people in 2020.
Bestgen cautioned that count is just a “glimpse” of the problem.
He said Phoenix Rescue Mission, a non-profit contracted by the city to provide services to homeless individuals, contacted 189 people living on the street in Scottsdale this year.
Carr said the increase in federal funding in response to the pandemic has offered cities an opportunity to address homelessness or people at risk of losing housing.
“We have a real opportunity to use the funds that are coming in for housing and homelessness to bring more units online or to create strategies to preserve existing affordable housing,” she said.
According to the city, at least $3 million of the city’s $29.6-million CARES Act allocation was reserved for the city’s most vulnerable citizens.
The city’s Vista del Camino Community Center has provided $2.7 million in rent and mortgage assistance since last March, a significant increase over the $230,000 it provides in a typical year.
The city also used a combination of federal funds to set up a temporary shelter for the homeless at the Rodeway Inn in southern Scottsdale.
The shelter closed in February after providing temporary housing for 41 people, including 24 over the age of 55 and 41 with disabilities.
The city paid non-profit Community Bridges $178,576 from its CARES Act allocation to run the shelter and used over $500,000 from federal community development block grant funds to cover rent for the property.
Bestgen said the city is looking for additional CDBG funds to reopen the hotel during summer.
The city is also exploring longer-term solutions.
In February, Mayor David Ortega asked city staff to explore options to purchase a property to provide housing for homeless people.
The city also used CARES Act funds to launch Scottsdale Works, which provides part-time employment for homeless individuals.
The program pays five participants minimum wage for five hours of work three days a week with the city’s Brick-by-Brick program, which produces earthen bricks that can later be used for city projects or housing for the homeless.
Bestgen said the city plans to use those bricks to build affordable housing in Scottsdale, though those plans are still in the early stages.
“We have been approached by an outside party and are partnering on plans to build our first tiny house as part of a regional pilot program if all things work out,” he said.
But as Milhaven pointed out, addressing homelessness is only a piece of the puzzle.
There is also the problem surrounding the lack of affordable workforce housing in the city, an issue Scottsdale has done little to address in the past two decades.
Carr said building new affordable housing doesn’t have to be the only solution.
Cities can also leverage Section 8 vouchers and other subsidies to help residents afford housing, though even with subsidies, it is becoming increasingly difficult to find landlords willing to participate in the programs, she said.
With rising rental rates citywide, landlords can likely find tenants on their own that will pay more than the maximum price allowed under the voucher program.
In February, Bestgen said the city currently offers 735 housing choice vouchers.
As of January, there were 1,130 families on the voucher program waiting list with an approximate wait time 3-4 years, according to the Scottsdale Housing Agency annual plan.
Carr said cities in Arizona that are looking to provide more affordable housing for residents are hamstrung by the state’s ban on inclusionary zoning, or zoning that requires a portion of new construction to be dedicated to affordable housing.
She said Arizona is one of only three states that bans cities from implementing inclusionary zoning.
“It’s a real challenge, because then the cities have to incentivize developers to include affordable units, and why would they if they don’t have to?” Carr said.
According to the Urban Institute, developers have a number of disincentives to build affordable housing, including rising land, construction and labor costs and limited availability of federal and state grants to offset the costs.
Still, Carr said there are other incentives cities can provide. That includes zoning exceptions to increase density or heights or lower parking requirements.
“With density, there’s lower land cost and you leverage more profit, and so ideally we’d want to see them able to spread the costs around and provide more affordable housing,” Carr said.
Currently, the Scottsdale City Code allows Council to approve exceptions for height, density, parking and other development requirements in some areas of the city in exchange for a host of public benefits, including a commitment to build affordable housing.
But, so far, developers have more often opted to provide other benefits like public open space or cultural improvements such as public art.
The Miller, a proposed Toll Brothers apartment project near downtown Scottsdale, would be the first development in Scottsdale to receive bonuses in exchange for offering below market-rate workforce housing if it is approved by Council later this year.
The developer said it hopes the project inspires others to take on similar models.
The Miller on its own won’t make a significant dent in the affordable housing issue.
A representative for Toll Brothers told the Progress the developer anticipates reserving 9 percent of the complex – or only 13 units – for affordable housing.
In Scottsdale, dozens of projects have received bonus density and height exceptions in recent years but the city has never made the bonuses contingent on building affordable housing.
Of the 15 multifamily apartment or condo projects approved by City Council in 2019 and 2020, 11 were explicitly described as “luxury” or “high-end” in marketing materials or plans submitted to the city.
Those luxury complexes accounted for 77 percent of the over 4,700 multifamily units approved by Council during that time.
AUTHOR: Wayne Schutsky, Progress Managing Editor