The managing editor of one of the nation’s biggest residential rent search engines is taking issue with what a local economist told Scottsdale City Council about the impact of adding more luxury apartments to the city’s inventory.
Elliot Pollack, chief economist for the Home Arizona told City Council on July 6 that as new luxury apartments become available, rents for existing apartments either won’t rise as fast as they otherwise would or they actually go down.
But rent.com Managing Editor Brian Carberry told the Progress that older apartments won’t go down in price, and the newer ones will just go up, Carberry said.
“That’s just going to move the curve,” Carberry said.
Pollack told Council, “It’s all about supply and demand.”
According to the report Pollack gave, essential workers, such as nurses, police officers and firefighters, are not able to afford the $795,000 median price that existed in March for a Scottsdale house, based on housing costs not exceeding 30 percent of their salary.
While that leaves them either buying a below-median price house or renting, even the latter option looks pretty grim.
With an average salary of $78,965, the average cop cannot afford a two-bedroom apartment, the report said. And a firefighter with an average salary of $58,753 cannot afford even a one-bedroom apartment in Scottsdale, according to the report.
That means that firefighter needs to be in a double-income relationship, get a roommate, rent a below median price apartment or live somewhere else, Pollack said.
“There’s not a lot of good alternatives,” he said.
The report shows nurses, with an average salary of $86,600, comprise the only classification of essential worker able to rent a two-bedroom apartment in Scottsdale. It also said even they can’t afford to buy a home.
Councilwoman Kathy Littlefield said older apartments are not going down in price. In many cases, developers are instead renovating them and charging more. Often that is done to the detriment of current long-time residents who can no longer afford the higher rents – frequently leaving them with no place to go.
“It’s not a humanitarian effort,” Littlefield said. “That’s just staring at your pocket book.”
She has decried the number of apartments coming on line in Scottsdale in the past.
“We’re not only over-building according to what the desires of our citizens are, but we’re building the wrong things, apartments instead of (single) family homes,” Littlefield said.
She says council needs to be careful when developers come with re-zoning requests to build apartments, but has no hard and fast rule on the number that she feels should be built here.
“Developers want us to go too far one way and I don’t think that’s good for the city,” she said.
Councilwoman Tammy Caputi, on the other hand, took an opposing view, siding with Pollack.
“The real problem is that vacancy rates are approaching zero percent and housing prices are soaring out of control,” Caputi said. “Our city is struggling from a lack of housing supply at all income levels along with huge demand, which has pushed prices past the reach of many, and is forcing families, young people, workforce, and long-time residents out of our city.
“We aren’t going to build poor quality housing in Scottsdale. We have the highest development standards, strict zoning regulations, and soaring land and construction prices, but even building luxury housing increases the overall supply and moderates pricing on existing units.”
There are approximately 11,242 apartment units in the development pipeline, according to city estimates. That breaks down:
• Prospective: Zoning entitlements are still being sought or the cases are so old that it’s unknown as to whether the entitled project will be built (9 projects, 3,057 units).
• Planned: Zoning entitlements have been approved and Development Review cases are being sought. Development Review cases within this category that are approved have not been issued a building permit (12 projects, 5,100 units). Notably, 1,556 of these units are planned for future phases that still need city review.
• Under construction: Active building permits (10 projects, 3,085 units).
Some have argued that the real number of apartment units in the city’s pipeline is closer to 14,000.
But Caputi said those people are purposefully trying to distort the numbers.
“Arguing over the exact number of apartments in our ‘pipeline’ is a distraction, and a campaign boogeyman,” Caputi said, adding:
“Unfortunately, the issue has been weaponized by extremist candidates and used to sow fear, doubt and uncertainty. The facts, however, speak for themselves – over the last two decades, Scottsdale has been delivering about 1% new housing stock per year – a very reasonable and healthy number.”
Despite new apartments coming online, rents are not dropping in Scottsdale. In the last year, single-bedroom apartment rents have gone up 8% over this time last year while two-bedroom apartments have increased almost 2%, Carberry said.
The average monthly rent for a one-bedroom apartment in Scottsdale is $2,226 and a two-bedroom’s average rent is at $2,782, Carberry said.
“Scottsdale is always going to be pricey,” he said.
The only governor on how high apartment rents can go is what the market will bear.
One thing that could help bring rents down is an uptick in homebuyers, which would reduce the demand for apartments, he said.