Most people that live in Arizona can understand the basic driving forces behind a housing shortage here and how it impacts their life. As more people move to the Phoenix Valley and the state, there is increased demand for affordable housing. Unfortunately, there are many challenges to building more housing throughout the state. Those challenges combined with the growing population have driven up home prices and rental rates. For real estate developers eager to bridge this gap, the road to building affordable housing can be a tricky one, fraught with various legal challenges. This article will delve into the most significant hurdles that developers face – the zoning process, community pushback, and financing difficulties – and will highlight how an experienced commercial real estate attorney can help navigate these challenges.
ASU Morrison Institute’s Housing Arizona Report
The Morrison Institute for Public Policy at Arizona State University released a report in November of 2022 that detailed the most challenging issues faced by developers and outlined some ways for state and local governments to work with developers to create more affordable housing in Arizona.
For the report, they interviewed 15 active real estate developers in Arizona to identify the biggest hurdles to building more housing in general and gather ideas on solving them going forward. There were three key issues mentioned by all the developers that took part in the research project; zoning issues, community pushback, and financing challenges.
Many cities in Arizona zoned the majority of their land for single family homes. Those developers that want to pursue building apartments and multi-family complexes need to pursue rezoning the land before any development plans can proceed. In most cities in Arizona, this is a time-consuming and slow process.
While most people agree that building more affordable housing is a good idea in theory, this sentiment can quickly change when it will be built down the road from their home and has the potential to lower their property values. This can add complications and slow down the zoning process as many people file complaints against the project. The study found that more than 30 apartment development projects in Phoenix were delayed or canceled due to aggressive complaints from members of the community.
Financing construction projects has generally become more challenging over the past few years as the costs of every aspect of these projects has increased. Those financing challenges impact more projects in Arizona when combined with the first two issues of zoning and neighborhood pushback.
Proposed Solutions for Arizona Affordable Housing
Reducing zoning challenges and expediting the rezoning process for priority affordable housing projects was the most important proposed solution from the Housing Arizona report. Encouraging cities and towns to revisit their single family zoning policies and reduce the red tape for development projects to get approval would allow Arizona as a whole to respond to housing demands much faster going forward. The report detailed that Arizona is one of the few remaining states that does not allow local governments to enact mandatory inclusionary zoning so these initiatives would require new state legislation.
Navigating These Challenges with a Commercial Real Estate Attorney
These challenges can also represent opportunity for those developers that have a professional and experienced team to assist with navigating the process to identify potential areas well-suited for affordable housing development, get through the zoning process, craft a campaign to address community concerns, and establish flexible financing options for the project. Here are a few of the key ways that an experienced commercial real estate attorney can assist developers of affordable housing in Arizona:
Getting Through the Zoning Process
In Arizona, as in many states, the zoning process can present a substantial hurdle to developing affordable housing. Zoning ordinances dictate the type of housing that can be built in certain areas and these can vary greatly between municipalities.
Many zones are designated only for single-family residences, limiting the potential for multi-unit developments often associated with affordable housing. Moreover, developers may need to apply for a zoning variance or a rezoning, which can be time-consuming, complex and uncertain.
An experienced commercial real estate attorney can provide invaluable guidance through this process. They can help developers understand and navigate local zoning laws, assist with applications for variances or rezoning, and represent the developer in hearings and appeals.
Handling Community Pushback
Community pushback is another challenge. Despite the urgent need for affordable housing, not all communities are welcoming of such projects. Fears around neighborhood character alteration, decreased property values, or increased traffic can lead to strong resistance. This opposition often takes the form of protests, lawsuits, or pressure on local politicians to deny necessary permits or rezoning requests.
Engaging a seasoned attorney can be crucial in these situations. They can facilitate community outreach to educate residents about the project’s benefits and allay fears, represent the developer in any legal disputes, and lobby local politicians to support the project.
Financing Difficulties
Perhaps one of the most daunting challenges developers face is securing financing for long-term real estate development projects, especially for affordable housing. Traditional lenders often perceive these projects as riskier due to the reduced profit margins compared to conventional housing developments. In addition, accessing public funds or subsidies, which often come with strings attached, can be a bureaucratic maze.
A commercial real estate attorney well-versed in affordable housing projects can provide strategic counsel here. They can help developers explore a range of funding options, negotiate loan terms, and ensure compliance with any conditions attached to public funds. They can also guide developers through the application process for Low-Income Housing Tax Credits (LIHTC), a significant source of funding for affordable housing.
The Overall Role of an Experienced Commercial Real Estate Attorney
Given the complexities of developing affordable housing in Arizona, having a seasoned commercial real estate attorney on your side is not just advisable, but generally essential to the success of the project. They can guide you through the intricacies of the zoning process, help manage community relationships, and navigate the complex world of financing. The role of a great real estate attorney goes beyond merely tackling these challenges. They can also advise on strategic matters such as site selection and risk assessment, and can provide proactive legal guidance to avoid pitfalls that could delay your project or increase its cost.
Building affordable housing is more than just a real estate project; it’s an investment in the community. Despite the hurdles, the long-term social and financial rewards can make it worthwhile to see these complicated development projects through. With the right legal partner, these challenges can be overcome, helping to make the goal of affordable housing in Arizona a reality. The attorneys at Gottlieb Law can assist real estate developers as they tackle the myriad of challenges facing them as they look to build affordable housing in Arizona. Contact our firm today at 602-899-8188 to schedule an initial consultation or make an appointment on our contact us page of the website.