Rental Supply and Demand

This column by new city councilman Guy Phillips ran in yesterday’s Scottsdale Republic:

Forget lobby, it’s not good time for more multifamily housing

In the past two years, Scottsdale has received proposals for more than 7,500 multifamily housing units. On the surface, it looks like capitalism at work: supply and demand. With the collapse of the housing market in 2008 and subsequent foreclosures, devel­opers scrambled to provide multifamily housing for the hundreds of thousands left homeless. This provided an eco­nomic lift for construction and proved to be a boon for developers who eagerly switched from single-family to multi­family construction.

However, as supply and demand dictates, over supply reduces demand. Five years later, now that the economy is starting to rebound, those who antici­pated the recession and built first came out ahead. If you equate it to a company that goes public, the stock goes up until it reaches its apex, drops, and then finds its market level.

Those property owners who are now being entertained to rezone for the promise of heightened property values are buying when the market is already saturated. According to a recent article by CNBC Real Estate Reports, demand is abating for multifam­ily housing across the country.

In metro Phoenix there are more than 71 sub­market projects, totaling more than 23,000 units. Of that, Scottsdale ac­counts for almost 40 percent of the market. Another recent article by Apartment News states that Scottsdale has one of the highest submarket rates in the Valley, while statistics show rent­ers are looking for more affordable rental housing.

With those figures, I can’t imagine why any property owner would volun­tarily want to change his commercial or residential property to multifamily at this time. It makes me wonder what local “lobbyist” is pushing to get prop­erty owners to rezone for more apart­ments in Scottsdale, and who is really benefiting?

Equally important is the process itself. All rezonings are “lobbied” to the council members before the City Coun­cil meeting, so the votes are already decided. That’s why cries from the public about ridiculous height and den­sity rezoning applications fall on deaf ears during the council meetings. They have already made up their minds . Of course, if the zoning attorney does not get the votes needed, he simply asks for a continuance and then does a little more arm-twisting and back scratching until it is a fait accompli .

As a Scottsdale City Council mem­ber, it is my duty to be a good steward of this community, and that includes understanding the balance between good projects that will serve our city and its residents and oversupply that will erode our quality of life and high standard of living.

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