Vacant strip malls, barely occupied office buildings and abandoned businesses — we’ve all spotted them, whether in our neighborhoods, on our drives to work, or in parts of town in need of revitalization. They’re hard to miss.
What if these dead zones could become alive again, creating high-quality and affordable places for Arizona families and individuals to call home, while generating economic activity at the same time?
That’s the goal of a new law championed by the Arizona Multihousing Association and signed by Gov. Katie Hobbs, with support from affordable housing advocates, municipal leaders and lawmakers from both sides of the aisle. Hobbs plans to celebrate the new law with a signing event on August 15th.
‘Every tool helps’
Starting in 2025, the newly passed House Bill 2297 will cut red tape constricting development in these struggling areas, paving the way for an estimated 150,263 apartment units to be built in the Phoenix and Tucson metro areas.
With Arizona an estimated 270,000 homes short of the population’s current needs, according to the state housing department, the new law is more important than ever.
“I don’t think there is one silver bullet” to solving Arizona’s housing shortage, said Jason Barclay Morris of Withey Morris Baugh PLC, a Phoenix real-estate law firm, but “every tool we have helps.”
Billions in economic impact
Under the new law, up to 10% of vacant and underutilized commercial, office, retail and mixed-use properties can be converted to residential either through adaptive reuse or demolition and redevelopment. The legislation only applies to the largest Arizona cities and exempts the redevelopment projects from the expensive and lengthy rezoning process.
The projects are required to adhere to the voter-approved density levels in cities’ general plans and to set aside at least 10% of housing units for renters with low to moderate incomes (80-120% of area median income). In addition, the law is limited to cities with at least 150,000 residents, meaning Chandler, Gilbert, Glendale, Mesa, Peoria, Phoenix, Scottsdale, Surprise, Tempe and Tucson are currently in play.
A study commissioned by the Arizona Multihousing Association estimates the economic impact of the projects could top $61 billion. More than 375,000 direct and indirect jobs could be created, the study by Elliott D. Pollack & Company found. An additional $4 billion tax revenue could be generated to support state government, cities and school districts.
Examples to replicate
Two projects exemplify the potential for developers to breathe new life into previously declining or underused commercial spaces.
The first is High Street Residential’s 190-unit apartment community called The Astor at Osborn, which inspired the new law and was built in conjunction with a new Sprouts grocery, restaurants and retail shops.
Boasting a resort-style pool, gaming area, yoga lawn, fitness room and dog spa, as well as close access to a light rail station and Phoenix Community College, the apartment community and adjacent commercial development have become a lively, sought-after destination.
But it wasn’t always that way.
The corner at 7th Avenue and Osborn Road was originally developed in the 1950s, anchored by a Bashas’ that became the local grocer’s oldest continuously operating store. But by 2017, the shopping center had almost no tenants, and the giant empty parking lot had become an eyesore.
Now the redeveloped property is bustling with activity, generating yearly tax revenue of nearly $420,000, with $66,000 going to the City of Phoenix last year and over $350,000 to school districts. Its full cash valuation has soared from $600,000 before renovation to more than $57 million today, which helps raise neighboring property values as well.
The apartments and surrounding commercial site “have done incredibly well, because bringing retail to a site where you have multifamily is a great mix,” said Paul Tuchin, Phoenix market leader and principal at High Street Residential. “You have 250 to 300 residents living nearby who are able to walk out their front door and shop and eat and get groceries. … It’s reshaping that area.”
Although finding the right site takes time, Tuchin said, the property developer is on the hunt for more and has several under consideration.
With more than 1,600 acres of underused or abandoned commercial spaces in Phoenix alone, there are plenty of opportunities.
“We’d love to do it again. We’d love to recreate this same environment,” Tuchin said. “These mixed-use environments really benefit the neighborhoods they anchor and give people a really enjoyable place to live in.”
‘An acre of unused space’
The second example is a 60-unit luxury apartment community envisioned to replace a parking garage that has been sitting empty next to Biltmore Fashion Park, one of the most desirable locations for dining, shopping, working and living.
“It’s an acre of unused space in one of the most interesting, vibrant corridors we have in the Valley,” said Barclay Morris, the zoning attorney for the project. “Turning it into something really beneficial from something not being utilized at all — that’s a huge win.”
The rezoning process has been complicated, introducing months of delays for the developer and compromises on height and density, Barclay Morris said.
After 25 years in the business, Barclay Morris said he believes delays have been getting worse.
He estimates HB 2297 could save developers at least six to 12 months of review time, a significant advantage.
The new law won’t solve every challenge, Barclay Morris said. “There’s a lot of moving parts. It’s a little bit of a Rubik’s cube.”
But he commends the advocates who worked on the legislation.
“Every one of these (measures) is chipping away at the bureaucracy,” he said.
