Housing Shortage Threatens Arizona’s Economic Gains

June 30, 2023

By Pat Nolan |

Last year, Arizona was the most popular state for people to relocate to. Those new arrivals helped boost our economy and put the state’s budget in the black. That’s the good news. But the bad news is that the state is falling behind in building homes to meet the needs of current families as well as newcomers.

Some may say that is just fine because they liked the Grand Canyon State before those people moved here. But they likely haven’t considered the consequences when the government restricts new housing.

The demand for housing goes up as families have children, residents get pay raises, and workers bring their skills and talents to our state. We celebrate these events, and to make sure it continues, we must allow the supply of housing to meet this increased demand.

When governments restrict the supply of new housing, it reduces the choices available to buyers, which drives up the cost of their new homes. It is the buyers who bear the cost of these restrictive policies. This year Arizona has a shortfall of 270,000 housing units, and that deficit in housing will continue for years to come.

This shortage of housing is quickly putting our state beyond the reach of many qualified young workers. If businesses can’t attract capable workers, the owners will think long and hard before moving their business here or expanding their current operations. And that’s bad news for all Arizonans because businesses pay the lion’s share of our taxes. Without a healthy economy, the state budget will slide into deficits again. And that means cutbacks for schools and roads.

If Arizona is to remain prosperous, we must be attractive and affordable for new businesses and new residents. As The Wall Street Journal wrote, “The shortfall of affordable housing hurts America’s businesses and the broader economy by preventing workers from living in areas with economic opportunities but high housing costs. Employers are forced to operate below their potential because they can’t attract or retain workers.”

Local land use restrictions bear most of the blame for the housing shortage. In many areas, it is hard or impossible to add a casita for an aging parent or young renter. Local regulations often prohibit empty nesters from renting a single bedroom to a senior. And cities often dictate design elements such as floor plans, styles, and materials for homes. Such restrictions do not protect public safety or health. They merely impose the preferences of politicians and bureaucrats and limit the choices for property owners.

Navigating through the planning bureaucracy is difficult and there are frequent delays. Not long ago, it took about six months to complete the planning process. Now, it often drags on for a year or more. The clerks handling the applications do not have to pay the price for those delays. It is the new buyer who bears the added costs. But these huge added costs are not obvious to home buyers.

One way to inform consumers would be to have a sticker price for each home, much like we see when buying a car. The sticker would list the actual costs of the land and construction. Then, the sticker would lay out the costs of the myriad government requirements, then list the multiple fees for the city, the county, and all special districts, and finally the costs for connections for electricity, gas, sewer, etc. The sticker would make it clear how much the land and construction actually cost, and what was added on by government regulations and processing.

The Legislature had the opportunity to deal with the shortage this year but dropped the ball. Speaker Ben Toma’s HB 2536 proposed allowing property owners to build casitas attached to or in the backyard of their home, and would have allowed owners to rent a single bedroom to seniors. The bill would have also prevented cities from dictating design elements and aesthetics. Arizonans should have the right to choose the style and layout of their homes, and not have their aesthetics dictated by the bureaucracy.

After passing the House unanimously, the Senate killed it under pressure from local politicians. Those politicos want to protect their monopoly on housing decisions, even if their decisions cause young families and seniors to be priced out of their city. I was surprised that ten Senate Republicans voted against this important bill: Bennett, Borrelli, Carroll, Hoffman, Kavanagh, Kern, Kerr, Mesnard, Rogers, and Wadsack.

They claim they voted to kill the bill to protect the prerogatives of local government. While I agree that most decisions are better left up to officials closest to the people, I strongly dispute that local governments have unfettered power to ignore the rights of their residents. Local governments do not have the authority to dictate the color and floor plan for new homes. That goes far beyond the proper scope of their duties and interferes with the basic rights of property owners.

I am particularly troubled that several members of the Freedom Caucus helped kill this bill. I don’t understand how they can believe that their votes to allow local politicians to excessively interfere with the rights of property owners doesn’t infringe on our basic rights. The members of the Freedom Caucus would do well to re-read Alexis de Tocqueville’s warning about the terrible impact imposed on the people by bureaucratic rules:

“It covers the surface of society with a network of small, complicated rules, minute and uniform, through which the most original minds and the most energetic characters cannot penetrate, to rise above the crowd. The will of man is not shattered, but softened, bent, guided; men are seldom forced by it to act, but they are constantly restrained from acting: such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, extinguishes, and stupefies a people, till each nation is reduced to be nothing better than a flock of timid and industrious animals, of which the government is the shepherd.”

It is the duty of our state representatives to forestall efforts to make us sheep under the care of government bureaucrats. Our legislators are not elected by local governments; they are elected directly by the people. They should not think of themselves as protectors of local governments’ prerogatives; rather, they should be vigilant guardians of our freedoms no matter which level of the government tries to violate them. I would remind our legislators that our Constitution does not begin with the words “We the state and local governments” but “We the people.”

Pat Nolan is the Director Emeritus of the Nolan Center for Justice at the American Conservative Union Foundation. He and his wife live in Prescott.

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