Kathleen Black is facing a 50% rent increase on the older three-bedroom central Scottsdale apartment she shares with her four kids and father.
“My apartment’s management is upping my rent by $800 a month,” said Black, who moved from Goodyear to Scottsdale in 2020 after a divorce so her children could go to school with their cousins.
“That will take almost 100% of my income, and my father is on a fixed income,” she said. “Our apartment isn’t that nice.”
Metro Phoenix tenants struggled with some of the biggest rent increases in the U.S. during 2021. But 2022 is turning out to be an even worse year as a growing number of landlords raise rents by more than double last year’s increases.
Many Phoenix-area tenants can’t afford the rent hikes and are afraid they won’t find another place to live
Some renters must downsize and share bedrooms with children or their parents. Others are considering moving away from metro Phoenix to somewhere more affordable.
Rents shot up almost 30% in the Phoenix area last year, more than double the U.S. increase.
Early projections are for rents to climb almost another 20% in 2022.
But this year’s increases for tenants could be even higher based on the very low 3% vacancy for Valley apartments, the area’s growing population driving up competition, big investors paying record prices for rentals, and 50% jumps in rent increases on recent lease renewals
A normal vacancy rate for Phoenix-area apartments is about 6%, which means that percentage of rentals are empty. Now fewer than half of the apartments usually available for renters are vacant.
Metro Phoenix’s income-rent gap
New apartments are going up across metro Phoenix, which should ease some of the extreme housing shortage. But most of the new rental homes are high-end and won’t help people who make the region’s median income or less.
The Valley’s income-rent disparity was a problem before last year’s big jump.
Metro Phoenix rents soared almost 80% between 2016 and 2021, according to the real estate brokerage Colliers. The area’s median household income only climbed 22% during the five years, according to the Federal Reserve.
“Valley rents are among the fastest growing in the nation, and wages aren’t growing that fast,” said Mark Stapp, growth expert and director of the Master of Real Estate Development program at Arizona State University. “We have a problem.”
$800 a month rent hike
Black’s monthly apartment payment climbed to $2,430, which is almost 100% of her monthly income.
She works full time for Tuft & Needle. She likes her job but knows she can’t get a pay raise to cover her rent hike.
Black and her family are in one of Scottsdale more affordable complexes, and demand is rising the fastest for those rentals.
The median rent in Scottsdale is about $2,000, up 29% from last year, according to the Maricopa Association of Government’s housing data. The median includes all sizes of apartments.
“I would move back to the West Valley, but apartments there cost as much as the one we are in,” she said. “I can’t believe it’s gotten this expensive to rent. I don’t know what we are going to do.”
Who can afford Phoenix area rents?
Metro Phoenix is facing the worst housing shortage in its history.
Valley renters are competing with 20 others for vacant apartments now, and the typical rental is only empty for 25 days, according to RentCafe.
Another 270,000, mostly affordable rentals, are needed statewide, according to the Arizona Housing Department. Demand for most of those homes are from people living in the Valley.
A home is considered affordable for renters if they are paying 30% or less of their incomes for their monthly payment and utilities.
“Anyone paying more than 40 to 50% of their income is severely cost-burdened,” said Cindy Stotler, deputy director of the Arizona Department of Housing. “Any one big unexpected bill, such as a car repair, can cause someone to lose their home.”
Arizona retirees on fixed income typically bring in about $16,000 a year, and that means they can afford $415 a month in rent, according to the state housing agency.
Service-industry workers making minimum wage earn about $27,000 a year. They can afford $690 in rent.
Single parents with two children earn on average $56,000 a year, which means they can afford $1,420 a month for rent.
A family of four making the Valley’s median household income of about $80,000 can afford $1,975 a month in rent.
The median rent for a one-bedroom apartment in metro Phoenix hit $1,221 in February, according to national researcher ApartmentList. The typical rent on a two-bedroom is about $1,500.
Many essential workers can’t afford rent in most parts of metro Phoenix, according to economist Elliott Pollack’s new housing study of the area’s 11 biggest cities.
Teachers and construction workers making around $50,000 a year, can only afford to rent one-bedroom apartments in Phoenix and Glendale.
Firefighters earning the typical salary of $57,000 can only afford two-bedroom apartments in Phoenix.
About 31% of Maricopa County residents are paying more than 30% of their incomes for homes and are considered “cost burdened,” according to MAG. Of those, almost 15% are spending more than 50% of their incomes on a place to live.
Can’t afford her daughter’s bedroom
Erin Smith rents a two-bedroom apartment in Gilbert that she shares with her 7-year-old daughter. But she might have to move to a one-bedroom rental soon.
Smith recently got notice if she renews her lease, the rent will jump 54% to $1,750 a month. That’s $600 more a month than she’s currently paying.
“I am a single mom with a good job who is about to lose her home,” said the orthodontic treatment coordinator. “I am watching my friends and loved ones here about to lose their homes, too.”
The typical rent for a two-bedroom apartment in Gilbert is $1,840, up 25% from a year ago, according to ApartmentList.
“We moved here from Florida so I could take a job that paid more,” Smith said. “This is the first time my daughter has had her own room, and it’s heartbreaking that I might have to take that away from her and move to a bad neighborhood.”
She has mounted a letter-writing campaign to politicians and Arizona regulators trying to draw attention the rent crisis.
“I asked my landlord if they were raising their employees’ wages by $600 a month to afford their rents,” Smith said. “I didn’t get an answer.”
Her complex was purchased by a Delaware LLC led by real estate investor Zev Hendeles for $238 million at the end of 2021. The older apartments last sold for $13.2 million in 1993.
More people, not enough homes
Rents are rising faster in metro Phoenix because the area is growing faster.
Real estate firm Redfin’s research shows Phoenix gained 85,000 new residents last year, more than any other U.S. city.
Many of the people moving to the Valley are coming from San Francisco, Los Angeles, Chicago and New York, where rents are higher.
A lot of people working remotely during the pandemic and making salaries based on living costs in those cities see the apartment rents in the Valley as deals, apartment analysts say.
The Valley’s growth is drawing developers to build more luxury complexes and encouraging big investors backed by mostly Wall Street money to pay top dollar for more-affordable apartments.
Sales of Phoenix area apartments skyrocketed 151% last year from 2020, according to Colliers. Investor spent a record $13.8 billion on Valley rental complexes.
Investors are paying top dollar because they can charge higher rents, even though more than 8,000 new apartments were built Valleywide last year.
But the newly constructed apartments are mostly luxury complexes.
Only about 1,100 were affordable or workforce apartments with below market rents, ApartmentList reports.
Another 13,000 apartments are expected to be built this year, said Thomas Brophy, research director at Colliers.
But big roadblocks to building the much-needed affordable rentals include not-in-my-backyard-ism, zoning issues and political backlash. These hurdles shut the door on at least 30 apartment projects across metro Phoenix during the past year.
Help for renters?
Metro Phoenix’s rent hikes and growing NIMBYism fights over developments has some housing advocates talking about rent controls.
But that phrase is fighting words for many Arizona landlords because it limits what they can charge tenants.
Rent controls give tenants more stability so they can plan for measured increases in their monthly housing payments, according to an affordable housing analysis from Arizona State University’s Morrison Institute of Public Policy.
But Morrison also found rent control policies in San Francisco led to more landlords converting rentals to for-sale homes, and that drives down the supply for tenants.
In Arizona, state statutes and the Private Property Rights Protection Act are legal barriers to rent control.
It would take the Republican-led Legislature, which includes many landlords, to change the law.
Smith, who is facing an almost 55% rent hike on her Gilbert apartment, wrote to Arizona’s U.S. Rep. Andy Biggs, R-Ariz., asking what can be done to keep rents affordable.
“It is best to meet the demand of consumers through the free-market while limiting unnecessary regulations that drive up costs. This combination creates a competitive market which produces jobs, stimulates the economy, and provides the most affordable options for prospective home buyers,” was his response
Amy Davidson is on disability and receives housing assistance to pay the rent on her west Phoenix one-bedroom apartment, but she’s concerned rising rents will still mean she has to move.
Her housing aid covers her rent so she doesn’t spend more than 30% of her income for it. In 2015, when she moved in, her rent was $715, and now a new owner of her complex is raising it to $1,220 this year.
“I am worried my housing aid won’t be enough to cover the increase. Most of my family is in the Valley,” Davidson said. “I don’t want to live anywhere else. But I am worried my family will be redistributed all over the country because we can no longer afford to live here.”
Other possible solutions Morrison proposed for Arizona’s rent crisis include government subsidized rents, a tax credit to offset rents or an incentive program to reduce utilities or property taxes for landlords who don’t hike rents.
A program in Minneapolis reduces the tax rate for landlords by 40% for 10 years if rent is kept affordable.
“I don’t know what the solution is, but we need to do something, because this housing crisis will have devastating consequences,” said Black, the renter facing a 50% rent increase. “People are going to be forced to find subsidized housing and go on food stamps.
Sarah Morrell is working two jobs to pay for her north Scottsdale apartment, where the rent climbed $450 to $1,650 during the past year.
She’s using more than 60% of her income to pay for her apartment.
“People think Phoenix is much more affordable than it is now,” she said. “I lived in Chicago before moving here a few years ago. I only paid $1,000 rent there.”
Morrell said she’s thinking about moving away from metro Phoenix.
“I know rents are not great anywhere now, but incomes are low in the Phoenix area,” she said. “We need to rethink what house poor means.”