The passage of House Bill 2297 represents a major step forward for the housing industry as we work to remedy the state’s housing supply crisis. After back-to-back sessions where the Legislature studied the issue, but failed to enact meaningful fixes, HB 2297 – backed by the AMA, a bipartisan coalition of lawmakers, cities and towns, the apartment building industry, housing advocates, economic development organizations, and the construction trades – could lead to 150,000 additional homes built across Arizona.
HB2297 gives the greenlight to turn underutilized commercial buildings, office and retail space into new homes. In 2022, the Arizona Department of Housing estimated the state’s housing shortage at about 270,000 units. While new units have been built since then, the Valley’s apartments remain over 90 percent occupied. This measure will allow developers to skip the rezoning process, saving both time and money.
AMA President and CEO Courtney Gilstrap LeVinues explained the value of HB 2297 in an opinion column published May 1st in the Phoenix Business Journal:
While the Arizona Legislature has drawn headlines this session for polarizing fights over multiple issues, lawmakers from both parties and a broad coalition of stakeholders worked together to pass a meaningful bill that has been largely overshadowed by the session’s controversies.
Gov. Katie Hobbs signed HB 2297 into law on April 10. Sponsored by Republican Leo Biasiucci – and supported by Republicans, Democrats, the apartment industry, housing advocates, economic development organizations, construction trades and numerous cities and towns – this measure represents the Legislature’s most meaningful fix to Arizona’s housing supply crisis so far this decade.
What’s different now that HB 2297 will soon become law? The new measure will allow communities and developers to take abandoned and underutilized strip malls and commercial spaces and convert them into new homes and apartments without getting bogged down in years of bureaucracy. The bill contains carefully crafted parameters to such adaptive reuses, including limiting the law to cities with populations over 150,000 and ensuring each project meets the voter-approved density levels in cities’ general plans.
Given that Phoenix alone has more than 1,600 acres of underused or abandoned commercial spaces, turning these eyesores and relics into housing could mean as many as 76,000 new homes across the city.
Across the Valley’s larger cities and towns, the new law could create more than 150,000 new homes on these lots – with the law mandating that at least 10% of the total must be set aside for affordable housing and moderate incomes, defined as 80% to 120% of local area median income. In 2022, the Arizona Department of Housing estimated that we needed to build 270,000 new homes to meet increasing demand – so you can see what a massive impact HB 2297 could have on the state’s housing supply.
Adhering to the law of supply and demand remains the most effective and fastest way to address the Arizona housing crisis. A recent housing analysis by Zumper estimates that 33,000 new units will come online in Phoenix this year and HB 2297 will add to that positive momentum. The impact of the growing housing supply has been profound: As Zumper tells it, “heavily supplied Arizona continues to see prices cool as all 6 of the Arizona cities in our report either had flat or declining rents.” Glendale led the way with an annual decline of over 10% for a one-bedroom apartment, with one-bedroom rents in Scottsdale, Gilbert and Phoenix dropping about 9%.
The impact of HB 2297 should serve to grow the new construction numbers in subsequent years, while also increasing local property values and tax revenue, if history is any indicator. The inspiration for the measure – the conversion of an abandoned CVS pharmacy at Seventh Avenue and Osborn into 190 new homes – is an excellent case study. The abandoned CVS was initially valued at around $600,000 FCV (full cash value) before the reconstruction. Post-redevelopment, the same plot of land is now appraised at $57,425,200 FCV. Besides creating homes for 190 families, the property now generates an annual tax revenue of $419,930, with $65,955 for the City of Phoenix last year and over $350,000 for school districts.
Transforming an eyesore into useful living spaces has been made far easier by HB2297 and the efforts of its many supporters. It’s not often we witness both parties unite alongside chambers of commerce, labor organizations, the tourism and hotel industry, developers and proponents of building new housing at every price point. In a time where we have precious little common ground, growing the housing supply is something we all agree on – and took action to accomplish. Let the building begin, and let the marketplace continue to solve this crisis.
Congratulations to everyone who worked as an advocate for this important legislation.
