BALANCING ACT
Will more multifamily units tip the Valley’s market into oversupply?
ARIZONA MULTIHOUSING ASSOCIATION
WHAT’S THE OVER/UNDER?
Phoenix’s multifamily growth leaves market balance in question
By KYLE BACKER
Following the onset of the pandemic, Arizona managed to further diversify and expand its economy, cementing its reputation as a top-tier commercial hub — bringing both prosperity and new problems. As residents and businesses poured into the Valley, demand for multifamily housing outstripped supply, leading to higher rents and diminished affordability across the region. Developers responded with a burst of apartment construction that tamped down rents and increased vacancy, leaving some observers concerned about the balance of the market.
“To be candid, I’m not sure if we’re over or underbuilt,” says Justin Steltenpohl, CEO of P.B. Bell. “If I had to choose, I’d say Greater Phoenix is still under. 2022 was the first year we had around 10,000 units built, then that number increased substantially to 28,000 in 2025.”
Even though more multifamily housing has been built recently, Steltenpohl says focusing just on the past few years doesn’t capture the long-term trends. He sees it like this: if 12,000 units were needed annually for a decade and a half, but during 12 of those years only 8,000 were built, there would be an 84,000-unit shortfall.
“The problem is the entire backlog came to market within a few years,” Steltenpohl continues. “It reminds me of ‘Tom and Jerry’ when there’d be kinked garden hose, and a huge bubble would grow until it sprayed water everywhere. Right now, we’re all feeling like a wet cat.”
Data drivers
The factors leading to the surge of apartment construction can be traced back to a combination of economic and demographic drivers. Connor Devereux, director of market analytics for CoStar Group, notes that Maricopa County was the third fastest growing in the nation in 2024, climbing up a spot in the rankings. New residents tend to be renters, adding to overall demand.
“One of the explanations for why folks continue moving to Phoenix is that we’re a relatively affordable market. People leave places like L.A. or the Bay Area and end up saving thousands each month on housing expenses,” Devereux says. “We also draw population from the Midwest, primarily for career reasons.”
Steltenpohl points out that the development of multiple industries in the Valley — such as advanced manufacturing, biotechnology and
healthcare — over the past decade has made the market more attractive.
“That brings people here, and they need places to live,” he continues. “It’s impressive that we’ve been able to absorb all the units we have in the past few quarters considering the sheer amount that have come online.”
Prior to the pandemic, the Valley consistently outperformed the U.S. average in terms of job creation. In the half-decade leading to the outbreak of COVID-19, Devereux notes Phoenix recorded approximately 4% annual job growth compared to the nation’s nearly 3%.
“Phoenix also did not lose as many jobs as the U.S. overall, making our pandemic recovery much swifter,” he continues. “But employment growth has slowed considerably during the back half of 2024 and into 2025. That’s worth monitoring to see how it impacts underlying apartment demand.”
The unemployment rate is still lower than the national average, but Devereux describes the Phoenix market as being in a holding pattern where most companies aren’t accelerating the pace of hiring — but not enacting layoffs either.
“There’s this weird paralyzing stalemate, which I think is largely driven by uncertainty around tariffs and the future path of monetary policy. It’s hard for businesses to make long-term hiring decisions when they don’t know what sort of environment they’ll be operating in,” Devereux continues. “Hopefully, once we move past these current challenges, we’ll see employment pick up again as employers have a better understanding of the playing field.”
Another metric influencing multifamily demand is consumer confidence, which is a survey of people’s feelings regarding the direction of the economy. When people feel uneasy about their financial situation, they’re less
(Image licensed from ©Adobe Stock)
ARIZONA MULTIHOUSING ASSOCIATION
likely to sign a new lease or move across the country to take a job in Phoenix.
During the first half of 2025, Devereux notes that consumer confidence plummeted, but as tariffs were delayed and the stock market improved, optimism started to build. The big question, Devereux says, is if the recent period of low consumer confidence will translate to less renters overall as it has in the past.
“So far, there has been a disconnect between soft data like consumer confidence versus hard data like inflation,” he continues. “A lot of economists are wondering if this negative soft data reading portends future macroeconomic weakness. If consumer confidence bounces back to 2024 levels, that bodes well for the demand outlook. If it weakens again, we might be in for some softening.”
Correction incoming
As it stands today, renter demand has remained strong in the Phoenix market. Devereux notes that over the last four quarters, almost 18,000 units were absorbed — nearly twice the amount when compared to prepandemic data.
“We’re actually above where we were in 2020 and 2021,” he continues. “The challenge is that demand is being spread out across a greater number of units since construction has also been high. This means individual property owners aren’t feeling the impact as much, especially since many of these renters end up in newly built apartments.”
Jamison Manwaring, co-founder, managing partner and CEO of Neighborhood Ventures, adds that an important milestone was reached
early this year when more units were absorbed than delivered.
“That suggests demand is now basically equal to supply,” he continues. “If you look at the next few years, new construction falls off a cliff. It takes anywhere from two to four years to build, so once interest rates come down and projects start again, there will be a period where we’ll have a shortage of units compared to demand.”
One of the factors supporting this demand is that wages have risen faster than rent over the last two years, making housing more affordable. At the same time, single-family homes have become more expensive.
“It used to be much easier for someone to jump from a Class A apartment to owning a house,” Devereux explains. “But home prices have surged 65% from the fourth quarter of 2019 through the first quarter of 2025 and mortgage rates have more than doubled.”
On the other hand, Steltenpohl notes that renter demographics are also shifting. More young people are choosing to live in apartments after seeing how the Great Recession impacted their parents’ finances.
“Most of the people who rent our apartments could afford a home, but they either just don’t want to, or they want to live in area where homeownership would be too expensive,” he continues.
Even though multifamily demand is robust, it hasn’t kept pace with apartment deliveries. The good news, Devereux says, is the spread between these two indicators has narrowed recently, signaling that the market is approaching stability. Still, with
upwards of 30,000 excess units to work through, vacancies have risen — leading to lower rents and stiffer competition for tenants.
“Something like 55% of properties are offering some form of discount,” he continues. “New builds in high growth areas are where renters are most likely to find the best deals — six to eight weeks of free rent is pretty standard right now. I expect concessions will remain elevated throughout 2025 and the first half of 2026 as supply side pressure abates.”
Manwaring adds that the influx of new supply has given renters more options, with many opting to move into new builds because those operators need to lease hundreds of units quickly and are offering rich incentives to reach that goal.
“That has kept rents flat, but we do forecast that we’ll get back to a deficit of new construction in the next few years,” he continues. “Right now, we’re still absorbing all the supply that has come to market.”
As that happens, Steltenpohl expects rents to start ticking up and concessions to come down. This correction, he says, has already begun and will allow the Phoenix market to reach relative normalcy within 12 to 18 months.
Looking forward, some unknowns remain regarding whether the Valley is over or underbuilt, but Devereux is sure of one thing:
“Between the Phoenix apartment market’s incredible performance following the pandemic and this slowdown over the last couple of years,” he concludes, “it feels like we’ve been in the front row of a rollercoaster.”
Jamison Manwaring Justin Steltenpohl Connor Devereux
MONEY
AMA Board Chair Adam Greco explains how the association goes beyond boosting profits
By ISAAC CHAVEZ
rizona is amid an economic expansion, with companies from around the country and world choosing the state as a worthwhile place to do business. At the same time, population numbers continue to tick up as more people answer the desert’s call. Having the appropriate amount of housing for newcomers and sunsoaked locals alike is crucial to maintaining sustainable growth. That’s why the Arizona Multihousing Association (AMA) seeks to bolster the apartment industry, ensuring ethical, quality rental housing is available throughout the Grand Canyon State. AZRE magazine sat down with AMA Executive Board Chair Adam Greco, director of portfolio development for Mark-Taylor Residential, to learn more about his involvement with the association, the value it brings to members and the community at large, and his thoughts on the multifamily market. The following responses have been edited for clarity and length.
AZRE: How did you get involved with the AMA?
Adam Greco: When I first moved here from Chicago in 1999, I had a drive to understand real estate here in the great state of Arizona. After I made a few connections while preparing for my licensure test, someone suggested that the multifamily sector might be the best fit for my personality. Over the next couple of years, I gradually worked my way up from a leasing agent to a manager, and that’s when I was introduced to the AMA.
A big part of what the association does is education, so I attended some classes and networking events where I met people who ended up being mentors and long-term friends. I started to get more involved with committees, then I
(Image licensed from ©Adobe Stock)
I’ll say this time and time again — I was never so scared in my life. As a young professional, I just wanted to make sure I didn’t mess anything up and was actually contributing to the board’s initiatives. From then on, my role and engagement continued to grow. I’ve been in the business for 27 year now, and I consider myself lucky to be involved with the AMA and our industry.
AZRE: As chair of the executive committee, what are some of the goals the AMA is currently working towards?
AG: There are four pillars that we are focusing on this year: engage, elevate, advocate and promote. On the last point, we want to show the public that our industry creates jobs and champions philanthropic initiatives — not just the AMA itself, but what management companies and ownership groups are doing throughout the state. Promoting these efforts isn’t so people can make more money — it’s about giving back and being a part of the community.
AZRE: What value do you think the AMA provides its members?
AG: Beyond the learning opportunities, the AMA is involved in legislative advocacy. Most people think we only do
AZRE: In light of the growth we are experiencing, what are your thoughts regarding the state of the market?
AG: We’ve been in a pretty substantial growth period when it comes to delivering new products. In the Valley, we have delivered over 70,000 units, with another 30,000 units or so coming over the next two years. This means that it’s never been a better time to be a renter. Since we have a bit of an oversupply in the multifamily market, people have options. Rents aren’t high, and depending on the area of town, they can receive some great concessions.
AZRE: You mentioned the multifamily market has added a significant number of units. Are we in danger of being over built?
AG: As our population continues to increase, we will probably find an equilibrium going into the end of 2026 maybe the beginning of 2027. Right now, we do have an influx of apartment units in Phoenix, Tucson and Flagstaff, so there will be a bit of struggle to lease those up.
But again, that is a direct result of Arizona being such an desirable,
more units?
AG: There will always be a couple hoops you have to jump through, but the AMA and Capitol Consulting have done an amazing job on the development side. House Bill 2447 was signed this year which requires municipal legislative bodies to authorize administrative personnel to review and approve site plans, land divisions, design review plans and related applications based on objective standards. That will speed up a process that would sometimes take several years to finish, resulting in lower costs for developers and greater affordability for residents.
AZRE: There has been talk of turning old hotels or offices into multifamily spaces — do you think this is a feasible route to bringing more units to the market?
AG: It’s something that we absolutely need to look at. Converting an office may be a little bit more difficult than it sounds because you’re taking a large open space and redesigning where plumbing and electrical lines need to go. Hotels will be a little bit easier to do that with. It won’t solve all our challenges, but it is a good option.
(Image licensed from ©Adobe Stock)
ARIZONA’S POPULATION IS EXPLODING
We can solve the housing supply shortage. To do so, we must build more rental apartments and homes to meet our growth in population. If we don’t, Arizona risks falling further behind, sending housing prices higher.
Arizona needs 17k new apartments annually to meet demand
is what Arizona apartment residents contribute to the local economy annually
Over 97% of valley rentals are occupied (highest rate ever recorded)
17k 270k 300 $66.8B 97% 20
For every available rental unit, there are 20 applicants
According to the Arizona Department of Housing, 270,000 new housing units are needed to meet demand people on average move to Arizona daily
ARIZONA MULTIHOUSING ASSOCIATION
HOUSE RULES
How the 2025 legislative session will impact Arizona’s multifamily industry
By KYLE BACKER
After 169 days of deliberation, the Arizona Legislature adjourned on June 27, avoiding a government shutdown and concluding the lawmaking season. Of the issues affecting the state, the current housing shortage remains a highly salient topic for voters due to its impact on affordability today and its potential to hinder future growth. A coalition of organizations are advocating for policy solutions to this mounting problem, including the Arizona Mulithousing Association (AMA).
“During the last few legislative sessions, we’ve been fixated on the zoning and entitlement process so projects can go from concept to certificate of occupancy as quickly as possible,” explains Courtney LeVinus, president and CEO of the AMA.
In 2025, she continues, two bills were signed by Gov. Hobbs that streamline
local approvals and expand opportunities for multifamily development. House Bill 2447 requires municipalities to authorize administrative personnel to approve site plans, land divisions and design review plans — removing the need for a public hearing.
The goal, LeVinus says, isn’t to prevent local governments and residents from having a say on what is built. Instead, she advocates for striking a balance where municipalities can respond to the needs of their communities without having drawn out entitlement procedures.
“We’ve seen a rise in NIMBY groups weaponizing the process to drive off multifamily developments,” LeVinus notes. “There is a lot of misinformation out there, like apartments bring crime, increase traffic and overburden schools. We deal with these false narratives on a daily basis.”
Another successful effort to expedite multifamily development was House Bill 2110, which directs cities with populations of 150,000 or more to permit adaptive reuse or new development on at least 10% of commercial, office or mixed-use parcels.
“This bill was a cleanup of last year’s House Bill 2297,” LeVinus says. “Commercial space that is functionally economically obsolete can now be converted to multifamily either by using the existing structure or demolishing it and building new units from the ground up.”
Elliot D. Pollack & Company was commissioned by the AMA in 2024 to conduct an economic impact study following the signing of House Bill 2297, which found:
• Up to 150,263 multifamily units and 15,026 affordable and workforce housing units could be brought to
(Image licensed from ©Adobe Stock)
ARIZONA MULTIHOUSING ASSOCIATION
“
” One of these perennial initiatives is a push for rent control as a solution for housing affordability.
market throughout Arizona.
• One-time tax revenues generated by construction are estimated to be $4 billion for the state, counties and cities.
• The legislation removes barriers of multifamily development that will help the market more easily respond to future demand, keeping future rent increases more stable.
“All those units could be brought online without going through rezoning, which can be anywhere from a twoto-four-year process,” LeVinus adds. “We’re trying to get more housing to market as quickly and efficiently as we can. This legislation helps us get there.”
Protecting operators
The construction of new apartments will help meet increasing demand as Arizona continues to grow, but the sticks and bricks are only one side of the housing equation. These communities require companies to manage them, and the AMA supports policies that create a fair regulatory environment for the industry.
For example, the association supported House Bill 2068, which provides liability protection if a service animal injures another resident, their pet or otherwise causes damage.
“We have seen a surge in these kinds of lawsuits,” LeVinus says. “The challenge for property owners and managers is that they have to allow service animals because of the Fair Housing Act and the Americans with Disabilities Act. House Bill 2068 was
patterned after what other states have implemented, and its signing was a big accomplishment for us.”
During the 2025 legislative session, the AMA also fought to preserve the Arizona Residential Landlord Tenant Act, which outlines the obligations and remedies for both parties in a rental agreement. LeVinus notes that 41 bills were introduced targeting the law — all of which were defeated.
“More bills like these are coming forward each year,” she continues. “For the most part, they don’t make it through committee, but it’s still concerning for the industry.”
One of these perennial initiatives is a push for rent control as a solution for housing affordability. LeVinus argues that it may sound like a simple solution, but the reality is rent control reduces supply, making housing more expensive. Property values tend to decrease in rentcontrolled communities, which she says ultimately reduces revenue for local governments, impacting public services.
Instead, the AMA advocates for solving the underlying issue — a lack of housing — through policies that enable units to come to market quickly.
“We know that price controls don’t work,” LeVinus says. “Just look at Saint Paul. Several years ago, they implemented a stringent rent control ordinance, and new development dropped 80% because it doesn’t make financial sense for companies to build
there. In Arizona, rent has decreased in many submarkets because we’ve permitted more rental housing in the last few years than we have in decades.”
Work remains
While the AMA had victories to celebrate after the close of the legislative session, LeVinus says there is still much to be done. The association supported the continuation of the Arizona Department of Housing, which did succeed — but only for two years. The hope was for a longer extension, but she says the AMA will continue to advocate for the department’s existence.
The state’s Low Income Housing Tax Credit program, however, was not lucky enough to merit even a half-measure.
“Arizona is now the only state in the union to implement something like this and then allow it to sunset,” LeVinus says. “That is unfortunate because those public-private partnerships help create the most affordable units, which are the ones we need. We’ll be back next session focusing on resurrecting that program.”
When evaluating the progress made in 2025, LeVinus says there was a mix of good and bad.
“Positive steps were taken to get more units to the market faster, which is good. But I feel Arizona missed the boat on supporting programs that help those that need it most,” she concludes. “That means we’ll have more to do next year — there’s never a dull moment when it comes to the legislature.”
Courtney LeVinus
at ann.mcsherry@azbigmedia.com and let AZ
Interested in being an AZ Big Media event sponsor? Contact April
