Arizona’s Affordable Housing Crisis: How Proposed Legislation Could Lead to Progress

By Sarah Kerr. 

Today, Americans are increasingly concerned about the cost of housing. One poll found that 54% of renters who want to buy a home believe they will never be able to. This concern is especially prevalent among young adults, with some believing that “[t]he American dream is dead.” The shortage of affordable housing is also one of the leading causes of homelessness. Therefore, all Arizona residents should be concerned about the state’s shortage of affordable housing.

Arizona’s Affordable Housing Crisis

Affordable housing refers to the affordability of all housing types, including single-family and rental homes. Affordable housing costs less than 30% of household income.

Although many states face affordable housing shortages, Arizona’s affordable housing crisis is one of the worst in the nation. According to the National Low Income Housing Coalition’s (“NLIHC”) The Gap report, Arizona is one of six states with the most severe shortage of affordable rental homes for extremely low-income renters. Extremely low-income renter households have incomes “at or below [] the federal poverty guideline or 30% of the area median income.” In Arizona, there are only 24 affordable rental homes for every 100 “extremely low-income renter households.” 

Causes of Arizona’s Affordable Housing Shortage

Numerous factors contribute to Arizona’s affordable housing crisis. First, the cost of buying or renting a home or apartment has skyrocketed. Rent prices in Arizona “increased by 72% from 2010 to 2022 and “the median sale price of homes increased by 57%” from 2019 to 2023. 

Second, Arizonans’ wages have not sufficiently increased to keep up with these raised housing costs. For a minimum wage worker in Arizona to buy a two-bedroom home, they would need to work 86 hours a week or have over two income sources. 

Third, as mentioned above, there is not enough affordable housing available for extremely low-income households. 

Fourth, Arizona’s population has grown faster than the number of housing units built. From 2012 to 2022, the increase in Arizona households has been higher than the increase in housing units. In 2012, there was a 22.1% increase in households but only an 11.9% increase in housing units. 

Fifth, interest rates are higher. As of June 2024, interest rates were “at their highest point in the last ten years.” 

And finally, Arizona’s laws prevented the adoption of affordable housing policies. For example, Arizona prohibits rent control policies, mandatory inclusionary zoning, and tax increment financing (“TIF”), which have all been shown to help increase the availability of affordable housing. 

Rent control policies set a strict limit on how much landlords can charge for rent. New York City, for example, utilizes rent control policies. In Arizona, municipalities are preempted from enacting rent control policies.

Mandatory inclusionary zoning is a policy that “requires or incentivizes developers” to make a portion of new or redeveloped housing units “affordable [for] low- to moderate-income” residents. Only seven states, including Arizona, currently prohibit cities and towns from enacting mandatory inclusionary zoning. 

Lastly, TIF is a tool  municipalities use to encourage redevelopment of a specific area by placing it under a TIF district. A portion of the property taxes collected from the district are used to “subsidize development and construction within the district.” Arizona is the only state that prohibits TIF.

How Arizona Is Working to Solve the Problem

Despite Arizona’s laws preventing the adoption of many affordable housing policies, proposed legislation may help combat the affordable housing crisis. For example, HB 2595 was introduced on January 27, 2025, and it attempts to override the state’s prohibition of inclusionary zoning. If passed, the bill would allow cities and towns to require new multi-family housing constructions (with at least 20 units) to designate up to 20% of new units “as ‘attainable residential housing’ for up to 20 years.” 

“Attainable residential housing” refers to units priced for households with incomes less than 120% of the median family income where the development is built. Cities or towns that impose these requirements must also offer developers incentives, like expedited permitting processes, to mitigate the economic effects. Alternatively, cities and towns can require developers to contribute to state, county, or municipal housing funds to get building permits. If the Legislature passes HB 2595, it would remove a large barrier to cities and towns that want to implement affordable housing policies.

Another bill currently being considered by the Arizona legislature is HB 2191, the Yes, In God’s Backyard (“YIGBY”) initiative. This bill would create new zoning provisions that permit faith-based institutions to build single and multi-family housing on their property if they reserve 40% of the units for low-income households for 55 years. Although the construction of this housing would still be subject to certain requirements, the bill would remove burdensome regulatory barriers and promote the construction of more affordable housing. The Arizona Housing Coalition and multiple faith-based groups in the state strongly support this bill.

Finally, the state’s Affordable Housing Tax Credit program and the Arizona Department of Housing (“ADOH”) are up for renewal this year. Both are critical to helping combat Arizona’s affordable housing crisis. For example, Arizona’s Affordable Housing Tax Credit program, which is modeled after the federal program, has created 1,5000 affordable housing units since the program began in 2021. Additionally, ADOH effectively distributes federal and local funds across the state to develop more affordable housing. In 2024, ADOH provided housing developers, nonprofits, and municipal programs with over one billion dollars in financial support. 

HB 2660 would extend and modify the Affordable Housing Tax Credit program. Some of these modifications include increasing the amount of money allocated in tax credits annually from four million dollars to ten million dollars for 2026 through 2030 and permitting ADOH to determine the tax credit amount “based on the economic feasibility of each qualified project.” SB 1357 would extend the sunset of ADOH from July 1, 2025, to July 1, 2029. 

These are just some of the bills pending before the Arizona legislature that, if passed, could help Arizona address its shortage of affordable housing units. Increasing affordable housing should be a top priority for Arizona since the state’s population is rising, and a lack of affordable housing is a leading cause of homelessness.