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Arizona lawmakers approve changes for more affordable housing

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By Bob Christie
Capitol Media Services

PHOENIX – Lawmakers aligned with both housing advocates and homebuilders are close to striking a deal with cities on a proposal designed to help address Arizona’s housing shortage by boosting construction of townhomes, duplexes, triplexes and similar homes in larger municipalities -- on land now set aside for single family homes.

The proposed deal will require cities who have long opposed the Legislature’s efforts to preempt their authority over zoning rules to allow the smaller, cheaper homes on lots within a mile of the central business districts of larger cities.
The agreement also requires those cities to permit up to 20% of those smaller multi-family "missing middle'' homes in any home development of 10 acres or more. The compromise will apply to 15 cities which have 75,000 or more residents.
The proposal by Rep. Michael Carbone, R-Buckeye, has been stuck in the Senate for weeks after narrowly passing in the House in mid-March. The delay came amid opposition from the League of Arizona Cities and Towns, the association that works to ensure city interests are heard at the Legislature.
Carbone said in an interview Monday that a final deal is in sight.
"We’re right there with a deal being made,'' Carbone told Capitol Media Services. "We're all trying to get to that last point.”
Carbone said that in addition to boosting housing supply, allowing smaller, in-fill developments like duplexes and townhomes will help small contractors build their businesses. He argues that those firms are now essentially locked out by large, corporate contractors.
The measure could come up for a Senate vote as soon as Wednesday.
Cities initially opposed Carbone’s proposal because it would have required them to allow townhomes, duplexes, triplexes, fourplexes and even fiveplexes on any lot, anywhere in a city, zoned for single-family homes.
A Senate committee cut fiveplexes out of the bill, and the new deal covers just those business district and larger developments.
Central to the issue is that young workers and families can't afford a traditional single-family home now that prices and interest rates have surged. They are seen as potential buyers of these new, smaller units.
Carbone's legislation, House Bill 2721, is one of many proposals advanced this year as lawmakers work to address the biggest housing shortage Arizona has experienced in recent times. The League, at the urging of Democratic Gov. Katie Hobbs, has been deep in negotiations to try to reach deals on some of the housing proposals.
Hobbs vetoed one of the most far-reaching bills, a measure sponsored by Republican legislative leaders that had bipartisan support they called the Arizona Starter Home Act.
HB 2570 would have overridden local zoning rules and allowed small lots anywhere in larger cities while barring a host of other local rules affecting homebuilding. In her veto letter, Hobbs called it a far-reaching "housing reform experiment'' that had unknown and far-reaching consequences.
She has since signed some housing measures, including one allowing apartments to be built in areas now zoned for commercial and industrial uses after the League eventually backed it.
It mandates cities with a population of 150,000 or more to allow up to 10% of their existing commercial, office or mixed-use buildings to be converted -- and torn down, if necessary -- to make way for apartments or condominiums without zoning changes or public hearings. The “adaptive reuse” bill, HB2297, says the affected buildings must no longer be commercially viable and allows cities to protect certain business areas from home development.
Cities also backed a measure signed by the governor that requires them to approve or deny any zoning change within six months and to do a housing needs assessment every five years.
The moves by cities come amid complaints about city approval delays from some lawmakers and developers and other criticism of cities for their role in the housing crisis.
League Executive Director Tom Belshe pushed back, saying cities are working to address the issues.
League lobbyist Nick Ponder has repeatedly reminded lawmakers during committee hearings that cities don't build houses, just OK the needed zoning. He’s also pointed to the large number of home and apartment sites in metro Phoenix that have all needed approvals but aren't being built by developers.
Belshe said the League and cities are actively engaged in trying to address the housing crisis, backing changes to zoning laws when they’re reasonable and negotiating in good faith.
“We feel like we’ve tried to stretch ourselves on this issue. The governor has asked us to,” Belshe said in an interview. “We have been negotiating, and some of our members, these are going to be big changes for them.''
One big hurdle remains: legislation to allow small backyard homes formally called “accessory dwelling units” but commonly called casitas, granny flats or in-law units on all single family lots.
Tucson, Phoenix and some other larger cities already allow casitas in many areas, but many lawmakers want statewide rules.
But the sticking point is whether mandating such an allowance statewide actually would do anything to promote affordable house. That based on the fear that these units would end up not as options for local residents but instead would be used as Airbnb’s or other short-term rentals, or STRs.
"That’s not housing, that’s not solving a housing crisis,'' Belshe said. "There’s nothing about taking a housing unit and turning it into an STR that solves the housing crisis in any way.''
But the sponsor of the Senate bill, Sen. Anna Hernandez, D-Phoenix, cautioned that she would lose support from many Republicans if the bill banned those short-term rentals.
Foes of such a restriction include Senate President Warrent Petersen. The Gilbert Republican told Capitol Media Services that he has a problem with a ban on using new casitas as short-term rentals, although he declined to outright say he would not vote for the bill is it contained that provision.
"I believe in property rights,'' Petersen said. "I believe you should be able to use your house as you want.''
Hernandez said she's offered compromise language that would require the main house to be owner-occupied but the League said no. The result is that her bill and a similar House version, HB2720, have been stalled for weeks.
That issue of short-term rentals relates to more than just casitas.
They have been a major concern ever since the Republican-controlled Legislature and then-Gov. Doug Ducey, also a Republican, enacted a law barring cities from regulating short-term rentals. That law led to a proliferation of short-term rentals in cities large and small, limiting available rental housing and is helping drive the current housing shortage.
Some tourist-heavy cities like Sedona have seen local workers living in their cars because so many properties that used to be affordable rentals have been converted to short-term rentals. Sedona is too small to be affected by Hernandez's bill.
Carbone said the casita bill remains the subject of tough negotiations.
"We’re hashing it out,'' he said. "I think folks were thinking this would be the easy bill, but it’s become a lot more complicated.''
He said that while he sees the League’s position on short-term rentals, he’s not in favor of banning them for new ADUs. And he would not say if he would vote for the measure if the ban was put into the bill.

On Twitter: @AZChristieNews