Unpacking the Truth Behind Arizona’s Soaring Rental Costs

As housing costs in Arizona reach unprecedented heights, the state Legislature’s repeal of the residential rental tax offers some relief to renters. The change, implemented on New Year’s Day, comes amidst a staggering 72% surge in rent prices attributed to a significant housing shortage exceeding 65,000 units, as noted by Arizona State University. Instead of tackling the underlying issues, Attorney General Kris Mayes has opted to cast blame on landlords through a new legal strategy.

Mayes has initiated a lawsuit against multiple Arizona landlords, claiming they utilized a rent management software, RealPage, to establish an apartment cartel responsible for driving rents up by 30% in the last two years. According to Mayes, this cartel allegedly withholds vacant units from the market to command higher rents.

However, this assertion raises significant questions. Rental vacancy rates have hovered around 10% since 1986, but a collapse in new home construction following the 2008 financial crisis has resulted in vacancies remaining well below that average for over a decade. The dynamics of the rental market dictate that rent increases correlate with low vacancy rates, and current statistics confirm a shortage in available units, driving rents upward.

Critics argue that Mayes’ theory fails to align with economic principles regarding vacancy rates and real estate markets. For instance, if a cartel were operational, members would intentionally limit production, akin to a bagel cartel baking fewer bagels to control prices. In contrast, evidence suggests that landlords are actively engaged in building new apartments rather than restricting availability.

Moreover, the recent rejection of the Sonoran Landings project in Chandler exemplifies the hurdles developers face when attempting to meet housing demands. This initially proposed 518-unit project aimed to provide lower rents through federal subsidies but faced fierce opposition from local residents. Alterations to the plan, including a reduction to 272 units designated for seniors and veterans, proved insufficient to quell dissent.

Ultimately, even after receiving zoning approval, the inability to secure necessary city utilities led the developer to abandon the project, highlighting a significant impediment to housing expansion. Intriguingly, the entities that actively opposed the construction—Maricopa County and the city of Chandler—do not appear as defendants in Mayes’ lawsuit.

When questioned about the potential for lowered rents with an increase in apartment availability, Mayes dismissed the notion as “bunk.” This raises concerns about whether she is genuinely confused about market dynamics or inadvertently shielding those whose actions contribute to the housing crisis.

As the situation develops, residents and stakeholders alike are left grappling with the consequences of escalating rents and the complex ramifications of political accountability in Arizona’s real estate landscape.