Correction: This story has been corrected to reflect the agency involved in expanding potential uses of Homeowners Assistance Fund money. It is the U.S. Treasury Department, not the state treasurer.
Arizona is one of the fastest-growing states in the nation, but also faces a growing housing problem.
Home prices are rising swiftly and so are rents, and the state’s homeless population is growing.
“We have a huge housing and homelessness issue here in Arizona,” said Chad Campbell, a Democratic strategist and former lawmaker. “I don’t know of many people, regardless of party or political ideology, that don’t agree that this is an issue,” he said.
Gov. Katie Hobbs’ housing agenda includes incentivizing affordable housing development, allowing more flexibility for local regulation and letting cities tighten up the rules on short-term rentals. The regulatory changes would need to move through the Legislature, but the incentive plan would largely be accomplished by a big-ticket spending item in the governor’s budget proposal: a $150 million deposit in the Housing Trust Fund.
The Housing Trust Fund is administered by the Department of Housing, which means new Director Joan Serviss will oversee any money that lawmakers put into the fund this year. Serviss said the bulk of the money would go toward the Low-Income Housing Tax Credit program, which gives tax breaks to developers who build affordable housing.
“We anticipate the funds to be used to bolster rent and utility assistance to keep people stably housed, but also prevent them from losing their housing through eviction prevention, legal aid and repair programs,” Serviss said in an interview on Feb. 8 in her new office. “And then probably the biggest will be that gap financing to bring that public-private partnership of the federal and state low-income housing program to bear. That’s really what’s going to bring more housing online, that (Low-Income Housing Tax Credit) program.”
Unlike other state agencies, where Hobbs is charging new directors with dramatically changing the course charted by prior officials, Serviss indicated that a lot of her work would be in line with that of her predecessor. Tom Simplot was appointed to lead the Department of Housing by former Gov. Doug Ducey in 2021, after working with the Arizona Multihousing Association, a developer lobbying group.
“I want to continue upon his great success,” Serviss said, referring to Simplot. “But ultimately, I want to make sure that we have a holistic approach towards the affordable housing pipeline and how it actually ends homelessness.”
Serviss comes to the department after spending 12 years leading the Arizona Housing Coalition, a nonprofit that advocates for housing issues in the state. Last year, she submitted a report to a state committee that called for putting $200 million into the Housing Trust Fund.
But even with the large chunks of money that officials are looking to sink into housing, Serviss indicated she’s not eyeing concrete goals like getting a specific number of unhoused people into housing or other measures of success. Given the continued inflation of Arizona’s housing market, she said just keeping things the way they are might be an achievement.
“How do we at least stay the course? I think that’ll be success,” she said.
Last year, the Legislature put $60 million into the Housing Trust Fund, then managed by Simplot.
Of that money, $26 million went into the Low-Income Housing Tax Credit program, according to figures provided by a spokesman for the department. Another $9 million went to other rental programs and $20 million went to fund “special projects” such as homeless shelters and transitional housing, re-entry housing and homeless youth drop-in centers.
Beyond the commitment to spend the majority of Housing Trust Fund money on the Low-Income Housing Tax Credit program, Serviss said she would likely turn to the new Governor’s Interagency Community Council on Homelessness and Housing for guidance. That’s a committee that Hobbs is rebooting to examine housing issues. Serviss will have a leadership role in the council, along with Department of Economic Security Director Angie Rodgers.
But a question hanging over the governor’s plans on housing is whether the Legislature will play along. While there’s bipartisan agreement that housing needs to be addressed, there isn’t necessarily agreement on what to do about the issues.
A legislative proposal introduced this week by Sen. Steve Kaiser, R-Phoenix, initially included provisions that would send money into the Housing Trust Fund, but an amendment to the bill on Feb. 8 stripped that out of the bill.
And the regulatory provisions of the bill also highlight the divide over how to address housing issues.
“It’s the NIMBYism, that’s really creating problems for us – for legislators, and for Department of Housing and local jurisdictions,” Serviss said, using an acronym for “Not In My Backyard,” a term used to refer to movements opposing new development.
But what should be done about that?
Kaiser’s bill takes aim at obstacles to development by effectively wiping out zoning restrictions put in place by many municipalities around the state. It would change things like maximum height requirements and minimum lot sizes, potentially paving the way for more development proposals to make it through municipal planning departments rather than getting held up in the permitting process.
But opponents say the proposal just amounts to another state preemption that would take power away from cities, which, rather than having their hands tied, should be given more latitude to enact local regulations that favor development and affordable housing.
“The balance for the state is … how do you create regulations that make it easier to build more affordable housing without overruling the will of individual cities too much?” Campbell said. “That’s the tightrope you have to figure out how to walk as a lawmaker.”
Serviss also has some ideas for framing development issues in a way that’s understandable to folks who resist new developments.
“You need to speak to the inconveniences that everyday residents can understand … that’s what I think changes people’s minds and makes them realize that we need to have a diverse housing stock, not just single-family residences,” she said.
“If I can’t drop my child off at a childcare center because it’s closed because they can’t recruit enough people, that’s an inconvenience. If I can’t get my coffee (because) the barista isn’t working, because she can’t come into work because housing is too far” away.
On top of the money she and Hobbs hope to move into the Housing Trust Fund, Serviss is wants to get a little more flexibility to spend a big chunk of money that’s already under the department’s control.
Last year, Ducey allocated almost $200 million in federal Covid funding to a Homeowners Assistance Fund, aimed at preventing homeowners from losing their properties to foreclosure if they’d seen their income hit as a result of the pandemic. So far, about $67 million of that money has been spent, leaving around $130 million in the pot.
Serviss said she’s planning to work with the federal Treasury Department to expand the criteria for spending that cash to not just keep homes out of foreclosure but provide cash infusions that can “make people homeowners,” like contributing to downpayments.