By Matthew Holloway |
Arizona’s affordable housing shortage is primarily the result of years of underbuilding after the Great Recession, not the rise of short-term rental (STR) platforms like Airbnb, according to a new report from the Common Sense Institute.
The report, titled “Home Prices, the Great Recession, and the Sharing Economy: Evidence from Arizona and Airbnb,” found that Arizona homebuilders sharply reduced construction following the 2008 housing crash and never returned to pre-recession levels, even as population growth resumed. Permit activity in Arizona fell from nearly 90,000 annual authorizations in 2005 to just 12,600 in 2010. By 2019, the state was still authorizing only about 45,000 new housing units per year, roughly half its pre-recession pace.
According to CSI, Arizona built roughly 38,000 fewer housing units per year between 2008 and 2023 than would have been needed to keep pace with long-term historical trends. Researchers concluded that this persistent gap in construction created a housing deficit that continues to drive up prices across the state.
While Airbnb and similar platforms have drawn criticism for reducing housing supply, the report found that short-term rentals account for only a small share of Arizona’s housing stock and are concentrated in tourism-heavy markets rather than spread evenly across the state. According to the Arizona Association of Realtors, CSI found “no observable statistical relationship” between the growth of short-term rentals and rising home prices across most Arizona communities.
The institute stated that under a new analysis examining “the underlying causes of Arizona’s housing shortage and the role of the short-term rental market,” it found “no consistent statistical relationship between short-term rental growth and home price appreciation across Arizona communities.”
CSI further observed that short-term rentals represent less than 2% of Arizona’s 3.3 million housing units and that, statewide over ten years, “there is no — and sometimes even a negative — relationship between home price increases and the concentration of STRs.”
The report notes that Arizona’s housing market never fully recovered from the collapse of the mid-2000s housing boom. Phoenix-area home values fell by more than 50 percent during the recession, foreclosures surged, and builders dramatically slowed new construction. Although Arizona’s economy and population later rebounded, homebuilding lagged far behind demand.
CSI estimated that as of the second quarter of 2025, Arizona faced an immediate housing shortage of roughly 52,800 units statewide. Using a broader, long-term measure, the organization estimated that the state’s housing supply was short by more than 121,000 units at the time. Maricopa County alone is projected to have a deficit of more than 34,700 homes.
Housing affordability remains a major issue for Arizona families. CSI estimates the average home in Arizona now costs more than $426,000, approximately $53,000 more than it would have if home prices had continued along their pre-pandemic trend. The organization estimates Arizona households now need an annual income of about $95,800 to afford the average home under conventional mortgage guidelines, or roughly 92% of the state’s average household income.
“Arizona’s housing challenge is fundamentally a supply issue,” Glenn Farley, Director of Policy and Research at Common Sense Institute, said in a statement. “Homebuilding slowed dramatically after the Great Recession and has struggled to catch back up, even as Arizona continued adding people and jobs. The data consistently show that when housing production falls behind demand, whether because of permitting constraints, construction slowdowns, or long-term underbuilding, prices rise. Expanding housing supply will be essential to improving affordability across the state.”
Matthew Holloway is a senior reporter for AZ Free News. Follow him on X for his latest stories, or email tips to Matthew@azfreenews.com.
