A May 24th roundtable discussion on the Southern Arizona housing crisis – sponsored by Arizona Public Media (AZPM) – offered a fascinating look into what drives the cost of housing and rising homelessness in and around Tucson.
The discussion was two conversations in one, including advocates for the unsheltered community in a 20-minute segment followed by representatives of the home builders’ community and the multifamily industry. Jim Tofel, a Managing Member with Tofel Dent Construction, talked about the impact that tweaks to the construction code can have on an apartment project.
“Our per unit cost [on a phase built in 2012] was about $78,000, a door,” Tofel explained, citing an apartment development his company built in Sierra Vista. “Phase two started in 2022. And our per unit cost went to $257,000 a door, and these units were identical. So on the surface, it looks like there was about 300% inflation over a decade.
There was more to this stratospheric increase than simple inflation, Tofel added.
“But when you dig below the surface, there’s really more going on than that,” he said. “Our slab was an inch and a half thicker, there (were) more post-tension cables. Our exterior walls went from 2×4 to 2×6. Instead of R13, and insulation, you had R19 insulation. There were better windows, better air conditioners, better water heaters.”
Another factor driving prices? The cost of financing, Tofel said.
“A developer told me about two years ago that for every tenth of a point interest rates go up on a 200 unit apartment complex, he’s got to come up with $300,000,” Tofel said. “And so you start doing the math, if you have a 200 unit apartment complex, and interest rates have gone up 3%, that’s an extra $10 million of equity that has to be brought to the table.”
David Godlewski, President and CEO of the Southern Arizona Home Builders Association, spoke about the impact of the “five Ls – land, labor, lumber, legislation or the local political regulatory environment, and lending.” Godlewski said that “huge changes in those areas over the past few years” combined to “(drive) the price of housing.” He added that raw material costs also play a major role.
“Lumber specifically, is somewhere in the range of 30 to $35,000 per home,” said Godlewski. “That doesn’t include … steel, gypsum, any of the other type of materials. So I think they’ve somewhat walked back from the exorbitant numbers during the pandemic, but at least on the residential side, things are still significantly elevated for material pricing.”
You can listen to the entire 40 minute discussion here. It’s a comprehensive, 360-degree on a complex issue – unlike a lot of what we see on the issue. It’s worth your time.
