Make Democracy Work

Published in East Valley Opinions of the Arizona Republic on Saturday, June 3, 2006 as “Affordable housing needn’t be pie in the Tempe sky.”

Last December comedian Jerry Seinfeld was rumored to be purchasing a penthouse in the downtown Tempe Centerpoint complex . If he had, a character like Kramer wouldn’t be moving in across the way. Tempe’s building for the upper crust. While a good pie has a flaky crust, the filling, like Cosmo Kramer, gives a city its vitality.

Tempe estimates more than 6,000 households with incomes below $30,000 currently pay more than half their income for housing. The city needs a comprehensive approach to make housing affordable for them.

In one of the city council’s grander gestures to date, in January they required the developer of Centerpoint Condominiums to provide $100,000 toward affordable housing.

Centerpoint will build 788 high-end condominiums, including 70 luxury ones in the upper floors allowed by the 30-story height allowance. In return, the city won’t even receive enough to buy a modest duplex for affordable housing.

More high-end homes are coming. A proposed complex adjacent to Arizona State University would include 266 condos, 180 hotel rooms, conference facilities, and offices, but no affordable housing. The Onyx proposed on the northern side of Tempe Town Lake would have a couple hundred condos starting at half a million dollars. Edgewater on the southern side already opened with its half million dollar one-bedroom condominiums.

Meanwhile, as light rail develops, many picture Apache Boulevard without trailer parks and budget motel apartments. Eyesores to some, but affordable homes to others.

Unless we’re prepared to allow families to live in garages, the market doesn’t automatically provide low cost housing. One realtor told me with soaring home prices, a would-be landlord needed to put down 40 percent in order to break even renting a single family home since market rents have lagged behind home prices. Multi-unit complexes are a better deal, but in the current environment it pays to convert apartments to condominiums if possible, creating upward market pressure on remaining rentals. Even though new residence halls for Arizona State University will pull some student renters out of neighborhoods, at best that impact will stabilize rents, not bring them down.

Tempe also taxes renters extra. Soon the Tempe City Council will expand the 1.8 percent city sales tax assessed on rent to all residential rentals, a tax that homeowners don’t pay and accumulates to $150 or more annually for most renters. If Tempe can allocate $3.6 million from voter-approved bonds to update the Tempe Historical Museum, then we can surely award half the rental sales taxes (about $2.1 million annually) to a fund dedicated to affordable housing. Developers could also be required to donate 1 percent of the amount a unit’s sale price exceeds the median single family home price. As Tempe’s median home price is $260,000, a half million dollar condo would generate a $2,400 contribution which the city could match with part of the 1.8 percent city tax on the sale of new construction.

By combining grants and interest-free loans, Tempe could use a three-pronged approach to create affordable homes. Funds could augment Section 8 rental assistance to assist the 485 very low-income households currently on the waiting list. Another portion could provide developers with grants and interest-free loans to build affordable housing for those with incomes below $30,0000.

Finally to move people out of homelessness, the city could award grants to private agencies to purchase or lease units for Housing First programs. In Housing First, homeless recipients are given stable housing and access to services with regular visits from agency professionals to assist the person or family through rough challenges. Having a home with personal support stabilizes their lives and enhances motivation to succeed. Studies find up to 90 percent remain securely housed five years later.

By expanding the pie, Tempe can welcome everyone, not just the upper crust.

Dave Wells of Tempe holds a doctorate in Political Economy and Public Policy and teaches at Arizona State University. Reach him at Dave@MakeDemocracyWork.org.