"Why can't I afford a home?"
It's a familiar question for so many people—young, mid-career, even retirees hoping to move to our state. My colleagues and I have researched their question and have some answers.
A favorite scapegoat is the rise in short-term rentals (STRs). Wealthy people are buying up second and third homes to make a few extra bucks on Vrbo or Airbnb, the argument goes. This hypothesis appears to be incorrect. Looking at 10 years of data from sharing platforms, the U.S. Census Bureau, Zillow, and other sources, it is clear Arizona's affordability crisis is structural.
The number of STRs in Arizona is rising—there were about 57,000 listings in 2024, up from 10,000 to 15,000 in 2010—but the state has roughly 3.3 million housing units and 200,000 seasonal or vacation homes. Car prices aren't rising because of Uber and Lyft vehicles. Nor is the number of Airbnb or Vrbo users significant enough to move home prices.
Instead, the roots of today's affordability problem lie in the decade after the Great Recession, when the state's housing pipeline weakened dramatically. In the five years before the crash, Arizona permitted and built roughly 400,000 housing units; over the next decade, that number fell to about 211,000. Tighter lending, inflation, more costly building conditions, and slower conversion of permits into completed housing left the market vulnerable.
Regarding permitting, Arizona has no statewide standard for building codes and regulations. Instead, homebuilders and residents grapple with 106 building-regulating and permit-issuing jurisdictions, each maintaining its own building codes, permitting offices, processing times, and fees.
We reviewed 2.8 million building permit record summaries across 29 jurisdictions, covering nearly three-quarters of the state by population. On average, getting a permit added 23 days to residential project completion times. And it's getting more difficult to do permitted residential work in Arizona. For perspective, in Pima County, project and permit times have tripled over the past two decades.
Approval times correlate strongly with project completion times. We found that, on average, an additional day of permitting time added four days to a project. Across all the permit data we reviewed (all jurisdictions, all years, all project types), a 10 percent reduction in approval time was associated with a 6 percent reduction in project time, all else equal. Jurisdictions with more efficient permit approval processes had shorter approval times, resulting in shorter overall project times.
Longer timelines result in higher costs for developers, homeowners, and homebuyers.
State land use policies also affect home prices. Today, nine million acres, 13 percent of the state's landmass, are owned by the State Land Trust. Most of this land is idle and undeveloped, even though more than a third of it is proximate to urban areas and potentially developable.
These forces constrain supply, leading to higher home prices—now and in the future.
Arizona's housing market continues to face a persistent imbalance between supply and demand. We estimate that Arizona faces an immediate need for 56,000 more housing units than the market can currently provide. A sharp slowdown in permitting activity in 2025 signals that Arizona is not only failing to build enough housing to meet immediate needs, but that, at the current pace, the long-term deficit is unlikely to be resolved in any reasonable timeframe.
While there has been a moderate decline in home prices since their 2022 peak, the declines appear to be driven more by reduced buyer demand than by meaningful gains in housing supply. In other words, the declines more likely reflect a shorter-term market fluctuation rather than a correction of the underlying issue.
Price declines also haven't come close to returning prices to historical trends or price-to-income ratios. Mortgage costs are still placing substantial strain on households, with the typical household requiring far more income to afford an average mortgage than in the pre-pandemic period. As a result, many prospective buyers remain priced out of the market, contributing to slower sales activity and rising inventory levels.
Policymakers can reverse these trends, but only if they focus on the real drivers of Arizona's housing affordability crisis. Constraining the availability of STRs won't work, but permitting and land use reforms will.
