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Where it is hardest to build new construction in the Valley

by Dalton Herring on July 31, 2017

The Valley remains one of the more development-friendly regions in the country, but a clustering of three east Phoenix and south Scottsdale ZIP codes are less inclined to residential construction than anywhere else in the area, according to a new study from BuildZoom, an online remodeling resource.

The ZIP in which it is toughest to build is 85018, which includes the Arcadia and Camelback East neighborhoods. In second and third sit 85014 and 85251, which contain a smattering of historic midtown neighborhoods and south Scottsdale, respectively.

The rankings are based upon changes in housing inventory coupled against changes in housing price index. Following the basic supply-demand logic of the study, an area with minimal changes in stock — or even a decrease in housing — but significant increases in price is hard to build in, said Issi Romem, the chief economist for BuildZoom, who conducted the research.

In 85018, for example, there was a 1.7 percent increase in the amount of housing units between 2000 and 2015. But during that same period, there was a 112.9 percent leap in the housing price index.

“They’re all low-density suburban areas, with houses that are one or two stories tall,” he said. “What this means is that ground cover has been completed. All the vacant land in the area has been built on.”

In some cases, this phenomenon stems from physical barriers that limit outward growth, like the Phoenix Mountains Preserve or the Salt River Pima–Maricopa Indian Community. In others, an area or municipality might have more restrictive zoning rules that could prompt developers to look elsewhere.

The neighborhoods in question tend to be older, meaning developers have depleted the supply of vacant lots, and more “chi chi,” which boosts demand, Romem said. They also sit between the relative density of downtown and the ample undeveloped acreage of exurbia.

But the categorical statements in the study can be misleading, said Mark Stapp, a professor of real estate at Arizona State University.

“When you see what’s happening in places like Arcadia, there has actually been a lot of construction, and it continues,” he said.

It’s just that the housing developers are pursuing in Arcadia is mostly “one-off,” as Stapp described it, meaning that the projects in the area are pricey single-family homes instead of multi-unit complexes that would offer a greater number of total units.

“Given the methodology that was used, the lack of large quantities of supply means you’re going to have small numbers of new units added,” Stapp said.

Regardless, the denizens of these areas should refrain from sounding any alarm bells — the Phoenix metro was ranked 36th out of the country’s 50 biggest cities in terms of construction unfriendliness. And there’s certainly no shortage of housing in the city as a whole, Romem said. Areas where the housing shortage is more significant will see densification efforts long before Phoenix.

Still, the study highlights the applicability of a key economic principle.

“It points to the fact that building more does help curb housing price increases,” Romem said. “Simple supply and demand do work; it’s more complicated because location matters too.”



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