Joanna Sagar is a 33-year-old college graduate who had to find a roommate because she couldn't afford to rent near her Phoenix job.

Dan Chellberg, 33, tripled his commute time from 15 minutes to 45 minutes as the trade-off to buy a new home.

They're two of the many residents feeling the squeeze as metro Phoenix is in danger of losing its title as the most affordable big city in the West to buy or rent a home.

The region faces a growing gap between what people earn and what they pay for housing.

The rising cost to live in the Valley isn’t just an affordable housing problem for people making minimum wage or living on fixed incomes. Middle-class earners feel the squeeze too.

Rents climbed at a near record pace last year, following several years of hefty increases. The result is nearly half of Phoenix-area renters are paying more than they can afford for housing.

When it comes to buying a home, comparing incomes to home prices is a key method to track affordability. Metro Phoenix has almost always been more affordable than the U.S. average, but that is about to change as incomes have not kept pace with rising home prices.

The only other time the Valley was less affordable than the national average was when housing prices shot up 50% in two years during the boom in 2005 and 2006.

The tight spot facing Phoenix-area residents comes as the median home price has climbed more than 44% since 2013, while the median household income has only increased by 12%.

As housing prices rise faster than income, Phoenix's residents face challenges The gap between what Phoenix-area residents earn and what they pay for housing is growing and putting the squeeze on many. Sean Logan, The Republic | azcentral.com

“The truth is our kids can’t afford a home in Phoenix now,” said Mo Stein, a housing advocate and past chair of Phoenix Community Alliance. “I have employees who make $50,000 to $60,000, but they have so much student-loan debt, they can’t afford to buy.”

If the middle class can’t afford to buy or rent, more people compete for the Valley’s dwindling supply of affordable homes and apartments. Then, lower-income earners struggling to rent the most affordable housing get squeezed out, so homelessness climbs.

Stein, who is also a regional director of HKS Architects, said too often when people talk about affordable housing, they mistakenly start with homelessness — which is complex to solve.

“If we start with housing affordability then we can help a lot more people and ensure fewer become homeless," he said.

MORE: How Phoenix's home prices and income levels compare to other U.S. cities

It's time for leaders to talk about it

Metro Phoenix leaders must talk about affordable housing amid the rapid growth in home prices, said Mark Stapp, growth expert and director of the Master of Real Estate Development program at ASU's W.P. Carey School of Business.

“It’s a cop out to not address it for the many people dealing with it,” he said.

The consequence of doing nothing, he said, is that growth could stall as people who move here for jobs can’t afford decent housing.

Arizona State University Master of Real Estate Development Director Mark Stapp poses for a portrait on Feb. 25, 2019, at Arizona State University in Tempe. Sean Logan/The Republic

The warning cries extend beyond housing advocates and people trying to afford to rent or buy homes.

Others concerned by the growing gap in affordable housing are:

company executives who need to attract employees.

government officials who look to attract companies and create livable communities.

developers who want to fill apartments and homes.

"Companies have shifted their focus to employees," said Chris Camacho, chief executive of the Greater Phoenix Economic Council.

Businesses want to move or expand where their employees can find housing they can afford, he said. The Valley draws many companies from California because workers in that state can earn six figures and still find themselves unable to afford a home without a two-hour commute.

"We have always done well with housing affordability in attracting jobs," Camacho said. "But costs are rising, and we can't take that lightly."

Tempe City Councilman Kolby Granville, who has helped spearhead efforts to maintain affordable housing in the city, said three years ago he would have said providing affordable housing was important because it leads to job growth.





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But as Tempe has attracted more companies, Granville said he believes it has aggravated the housing problem as housing stock has remained relatively the same in the land-locked community, which pushes prices up and squeezes more people out.

He said incentives to provide affordable housing must be part of incentives to attract companies.

"At its core, the reason that you have affordable housing, workforce housing and diverse housing, is so that a diversity of people know and interact with each other," Granville said. "You want someone who works for minimum wage living near where they work and living near people who may be making six figures. That commingling environment creates greater empathy, understanding and culture."

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Runaway rents keep going up

Renting used to be the more thrifty housing option, but the Valley has seen near double-digit rent increases in the past five years.

The average monthly rent in Phoenix was about $800 in 2014, compared with almost $1,100 today, according to research firm RealPage.

Rising rents have left 46% of Phoenix-area renters paying more than 30% of their incomes for housing, according to a national study from the Joint Center for Housing Studies at Harvard.

Paying more than a third of one's income for housing is considered the tipping point to burdensome. It can leave people strapped to cover food, transportation, healthcare and other basic living costs.

Area rents aren’t showing signs of slowing.

The average rent in metro Phoenix climbed 8.1% during the past year — more than any other U.S. city — according to RealPage.

Sagar, the renter now living with a roommate, moved to Phoenix a few years ago. She had to quickly find a place to live after an unexpected divorce.

She moved into a one-bedroom Phoenix apartment that cost $1,300 per month and ate through her savings in six months.

“I was spending over half of my income on rent and racking up student-loan debt to pay my bills and expenses," said Sagar, who worked as a case manager at a Valley nonprofit at the time.

She had owned a house in the United Kingdom with her husband, had a “decent job” and saved for retirement before selling the home and using those profits to move to Phoenix.

“My previously sensible money management skills went out of the window,” said Sagar, who is now a research and policy coordinator for the Arizona Housing Coalition. “It wasn't until the day I checked my bank balance to see my total worth of 43 cents that I got the reality check I needed."

She tried to get out of her lease but would have been charged $2,500, so she “sucked it up.”

As soon as her lease ended, she moved in with a roommate and cut her rent in half.

Sagar is now saving to buy a home near her job in central Phoenix. She plans on having a roommate to help her afford the house, and to help others.

“I know what it’s like to struggle and stress about paying for a place to live,” she said. “If I can help one person not feel that way, it will make homeownership even better.”

Luxury apartments make up about 87% of all the new rental complexes built in the Valley during the past few years.

Older complexes with lower rents in central Phoenix, Scottsdale and Tempe have been torn down to make way for the pricier options.

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Many come with rents averaging more than $1,500 a month.

The apartment industry knows more affordable apartments are needed.

Courtney LeVinus, CEO of the Arizona Multifamily Association, points to the lopsided luxury inventory as the most noticeable “supply/demand imbalance” in Arizona.

“There is a need and strong demand for reasonably priced housing close to employment centers and transportation,” she said.

Valley apartment developer Patricia Watts with Greenlight Communities saw the Harvard study on renter incomes in metro Phoenix and her company changed its development plans.

It’s now building three apartment complexes — one in midtown Phoenix, another near light rail on the border of Tempe and Phoenix and one in south Scottsdale — where the average rents will be closer to $1,000.

“The average renter in the Phoenix area makes $40,000 a year. That means they can afford $1,000 a month in rent,” Watts said. “To afford $1,600 a month, a renter needs to make $64,000. That’s a big gap."

When metro Phoenix's growth began to rebound five years ago, demand for apartments closer to employment centers surged.

Developers rushed to build new complexes in central Phoenix, Scottsdale and Tempe. Most of those were luxury apartments because they are typically the most profitable and easiest to get financing to build.

The increased demand drove up land prices near jobs, light rail, freeways and downtown areas.

Developers trying to build affordable housing now find it more difficult, and with few government incentives to help.

People living in these areas have gotten creative.

Christina Lopez works on Sarah Parks' hair at Lopez's salon on Feb. 21, 2019, in Phoenix. Sean Logan/The Republic

Hair and makeup stylist Christina Lopez lives with a couple and their young child in a central Phoenix home, about a mile away from her salon Volver by Christina.

She loves spending time with the friends she lives with and helping with the baby, but the couple has another baby on the way, which means Lopez has been looking for an apartment near her salon.

“It’s crazy what’s going on with rents, and the requirements to get into a lease are bananas,” said Lopez, who is 37. “I am making more money than I did, but I am self-employed, saving money and working on my credit. Some apartments don’t get that and make it too hard.”

She wants to pay no more than $1,200 for a two-bedroom rental. She wants extra room for someone else who might need it.

But finding that apartment in central Phoenix has been tough. She grew up in Avondale, where rents are less expensive, but she doesn’t want that daily commute.

“When I trained in New York, I shared an apartment with three other people and we paid only $500 each,” Lopez said. “A lot of us don’t understand what’s going on with rents in Phoenix. Are there really that many people who can afford to live in all the new complexes?”

What cities can do to encourage affordability

In downtown Phoenix, which has been front and center in the luxury apartment boom, the average rent is more than $1,600.

Cities in Arizona can't require developers to limit rent prices or to provide affordable housing, but some are trying.

Phoenix is encouraging developers to build more housing that workers, particularly in downtown, can afford. Earlier this year, city officials agreed to discuss giving developers a tax break or allowing them to build higher if they offer at least 10% of their apartments at a reduced rate.

That means rents of about $600 to $1,100 per month, depending on the size of the apartment unit, according to a Phoenix staff analysis. In city lingo, this is called “workforce housing” because the typical worker can afford it.

A city analysis shows there are currently no "workforce housing" units in the downtown core.

The developer of an apartment project planned at the Arizona Center, near Third and Van Buren streets, recently agreed to reserve 10% of its 354 units for workforce housing in exchange for a tax break.

A new residential highrise called Duo on Fillmore got the Phoenix City Council's nod for a tax incentive as long as 10% of the homes are affordable.

Phoenix Mayor Kate Gallego said the city needs to offer incentives for affordable housing.

"Phoenix used to be nationally known, for affordable housing. Unfortunately, that's not the reality here today," she said.

She sees possibilities in the substantial number of vacant lots Phoenix owns throughout the city. The idea is that the city could partner with local nonprofits to develop affordable housing on those lots.

In neighboring Tempe, where home prices and rents have soared higher than other parts of the Valley, the city is working on a housing strategy to set goals to develop affordable units, create incentives for developers and establish a housing trust fund to build more workforce and affordable homes.

"We need the entire spectrum of housing," said Patricia Garcia Duarte, CEO of the housing nonprofit Trellis. "Many people forget affordable housing is needed to create a healthy community."

Denise Robinson-Kinney moved 15 times in less than 30 years while raising three children as a single mom and working full-time.

She sometimes didn’t even unpack her boxes because she knew another move would come soon.

Denise Robinson-Kinney poses for a portrait in her home on Feb. 19, 2019, in Phoenix. Sean Logan/The Republic

Robinson-Kinney moved from Tucson to the Valley to work for the city of Avondale a few years ago. The rent prices shocked her so she lived with family and saved to buy a home.

In November, with help from a Maricopa County home-buying program and housing nonprofit Trellis, Robinson-Kinney bought her first home at age 54.

“I can’t believe I own my own home,” she said about her three-bedroom house with a $1,300 monthly mortgage. “I am so happy to come home every night now. I am unpacked.”

That's not to say things aren't tight.

Robinson-Kinney is so careful with her pocketbook that she waited a few months to spend $45 for a remote control for her garage-door opener. Otherwise, it would have squeezed what she could spend on food and other necessities.

“I would just walk around and open the garage from the inside until I could afford the remote,” she said with a laugh.

Avondale, along Interstate 10 in the West Valley, is one of the more affordable areas in metro Phoenix to buy a home.

A squeeze on the American dream

Higher prices and interest rates have pushed the Valley down a reputable list of the most affordable big U.S. cities to buy a home.

Metro Phoenix now ranks No. 21 on HSH.com’s list that calculates home prices, interest rates and incomes for the nation’s metro areas.

The Valley was the eighth most affordable U.S. metro area to buy a home a few years ago.

The latest ranking is a reflection of income growth outpaced by climbing home prices.

The median household income in metro Phoenix is $69,100, according to the National Association of Home Builder/Wells Fargo Housing Market Index. Household income typically includes two people working.

The average annual income of a Valley worker is only $51,000, according to the Arizona Office of Economic Opportunity. Average numbers are typically a bit higher than medians.

Metro Phoenix’s overall median home price — including resales and new homes — hit an all-time record of $275,000 last summer before tapering off to the current $273,000.

A homebuyer in the Phoenix area must earn $57,600 to afford to buy a home with a 20% down payment, according to the HSH ranking.

The squeeze between rising housing costs and incomes isn't new, but it is tighter than ever in metro Phoenix. Economic development groups work to attract high-paying jobs, but no one can control rising housing prices if the demand is climbing.

Affordable home prices have long been one of metro Phoenix’s biggest draws for companies and new residents, said national housing analyst John Burns.

Despite the region's tumble in the ranking, he said other cities' housing affordability problems could mean more growth for the Phoenix area as long as it remains relatively affordable.

Some programs try to make it easier for homeowners.

The program that helped Robinson-Kinney buy her first home has aided more than 18,500 Valley homebuyers.

The Home in Five Advantage program provides homebuyers with $6,000 to $14,000 to help cover the down payment and closing costs, two big hurdles for first-time buyers.

Home in Five is for those earning less than $99,200 a year.

Sheila Harris, founder of the Arizona Department of Housing Housing is an issue that impacts everyone, and everyone should care if people in our community can’t find homes. Quote icon

Home in Five is not a government-funded program, but it is an example of government-created agencies trying to help people buy homes in Maricopa County. The Phoenix and Maricopa industrial development authorities sell securities to investors to fund it.

Juan Salgado, chief executive of Phoenix's development authority, said homeownership provides financial and social benefits to individuals, families and communities.

Metro Phoenix grew for decades with homebuyers driving to the fringes to find more affordable homes.

When prices climbed, those buyers could sell and move closer in or buy bigger homes. The housing crash busted that model as most of the outlying suburbs were hit the hardest by foreclosures.

A decade later, rising home prices are again drawing buyers back to those suburbs.

Homebuilders understand that most Phoenix-area buyers don’t make enough to afford a $500,000 house and are trying to find ways to lower prices, Arizona housing analyst Jim Belfiore said.

Homebuilders are constructing smaller homes on smaller lots with fewer upgrades to keep prices lower. And the lower-priced homes are selling faster.

Chellberg, who increased his commute time to buy a home, recently bought a new home in San Tan Ridge with his girlfriend, Danielle Blain, 26. The new home is on the Valley's southeastern edge in San Tan Valley.

The couple paid about $265,000 for their Taylor Morrison home, almost $60,000 less than the median price for a new home in the Valley.

“We were willing to add to our commutes for the price,” said Chellberg, who works at American Airlines in Tempe.

He said similar new homes a bit closer in were selling for $100,000 more.

“We wanted a new home, but we didn’t want to overpay,” Chellberg said.

A more affordable home in the suburban outskirts comes at a cost.

Shannon Scutari, an Arizona growth expert, said transportation costs mean more to housing affordability than most people realize.

“It’s important to look at home prices, rents and incomes, but we must remember paying for one car and commuting can cost $6,000 to $8,000 a year,” she said.

Housing affordability is a tough balance for most people.

Beyond housing and transportation, many younger buyers and renters struggle with student loan debt that can cost $200 to $800 a month.

Recent surveys show half of all people in the U.S. don’t have $1,000 in savings.

“We need housing everyone can afford so everyone can prosper and have a good, healthy life here,” said Sheila Harris, founder of the Arizona Department of Housing and co-chair of a growing Phoenix Community Alliance group trying to tackle the issue.

“Housing is an issue that impacts everyone, and everyone should care if people in our community can’t find homes,” she said.

Harris said a growing number of business and government leaders see that metro Phoenix is on this precarious tipping point for housing affordability.

“I have never seen this many people engaged in doing something about housing in the Valley before,” said Harris, who has been an Arizona affordable housing advocate for more than three decades.

Republic reporters Jessica Boehm and Paulina Pineda contributed to this article.

Have an opinion or question about affordable housing? Reach the reporter at catherine.reagor@arizonarepublic.com. Follow her on Twitter: @catherinereagor.

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