Editor’s note: The population in the Phoenix metro area has exploded over the past decade, with waves of new construction spilling into formerly rural communities. This two-part series examines the cause of this desert bloom and its effect on local real estate markets. (See Part 2.)
Gilbert, Ariz., a burgeoning suburb of Phoenix, was once known as the “Hay Capital of the World.” Now it is one of the fastest-growing communities in the nation.
Its hay days are over and its heyday is here – in a very big way.
In the 1970s, the Gilbert Town Council annexed 53 square miles of county land to give the community some room to grow. The town’s population was 1,971 in 1970, and by 1980 it was home to 5,717 residents.
Today, the town’s Chamber of Commerce reports that 1,000 new residents are moving to Gilbert each month. “They’ve told us it is because of our ‘small-town’ friendliness, great schools, pristine neighborhoods and a thriving business community,” according to the town’s Chamber of Commerce Web site.
But Gilbert is no small town. In fact, it is one of the most populous towns in the country, with more residents than many cities. Gilbert has consistently ranked among the fastest-growing U.S. communities since 1990 among those with a population of 100,000 or more, and in July 2005 the town population was estimated at 165,700 – about 8,307 percent above its 1970 total.
Gilbert is just one of several booming suburbs in the Phoenix metropolitan area. The demands of a skyrocketing population in the region are driving new development at a fever pace and pushing up real estate prices to unprecedented levels. While the region has historically been a very affordable place to live, the booming real estate market has introduced new challenges for residents and newcomers alike.
An abundance of jobs, sunshine and affordable housing have fueled and sustained this growth explosion for many years already in the region, though experts say it is shortsighted to believe this surge will continue indefinitely. Even a region that thrives on growth can have growing pains, they say.
From 1975 to 1995, an estimated 40 percent of all agricultural land and 32 percent of all undeveloped desert land in the region was lost to urbanization, according to “Hits and Misses: Fast Growth in Metropolitan Phoenix,” a report released in 2000 by the Morrison Institute for Public Policy at Arizona State University.
The Phoenix metro area encompasses about 9,226 square miles – which makes it larger than New Jersey, and the city of Phoenix alone spans about 470 square miles. The state’s population passed the 6 million mark this year, with about 4 million of those residents living in the Phoenix metro area.
“Phoenix is a growth machine. The whole economy is based on population growth here. The predominant industry is importing people,” said Grady Gammage Jr., a land-use lawyer and senior fellow at the Morrison Institute for Public Policy.
Throughout the Phoenix metro area, “the cities are pretty uniformly pro-growth,” he also said. “They have policies that encourage development, for the most part.” There is major growth projected in and around the Phoenix suburbs of Buckeye and Surprise, Gammage noted, among other areas.
“Growth is the dominant employer in Phoenix. We have very large-production home-building operations that employ lots and lots of people,” Gammage said. A lot of (home-building interest) has been based on relatively inexpensive land and it has been relatively efficient and economic to build here. It’s not hard to deliver houses at a relatively efficient price point. In 2005, however, we crossed a line of affordability for the first time – the median family in Phoenix can no longer afford a median house.
“The growing pains are getting pretty serious. The air quality is very dusty, very dry and (it) looks awful. Transportation is a mess,” he said. “There remains a consensus that we want to continue growing but that consensus is beginning to weaken. People are beginning to say, ‘Gosh, how much bigger do we really want to get?'”
Gammage said he saw a graph last year projecting that the tide of domestic migration could turn in Arizona by 2025, when the state could potentially be a source of domestic out-migration to other states. The overall population, though, could still grow due to international migration.
“That’s a line that California crossed a long time ago,” he said. Many Arizona residents, though, are in denial that their state could follow that path, he said. “We measure success by whether we’re growing faster or slower than Atlanta and Las Vegas. My own sense is that we could slow the growth and maybe stabilize at some point.”
Arizona’s population is projected to reach 11 million people by 2030, with about 8.3 million people residing in the Phoenix area, said Greg Vogel, CEO of the Land Advisors Organization, a land brokerage company based in Scottsdale, Ariz.
Arizona has a very fluid exchange of residents with California, in particular, Vogel noted. “For every three people that move here two people move out. There are a lot of people coming and going, a lot of movement – more gain than loss,” he said. There were 63,000 building permits issued in the Phoenix metro area in 2005, and there is a projected demand of about 50,000 housing units per year, he said.
So far, there are no signs of slowing down. In January, a development group that includes home builders Toll Brothers Inc. and Meritage Homes Corp. announced the purchase of a 5,485-acre land parcel in northwest Phoenix for $312 million. Initial development plans call for about 4,840 acres of single-family homes and attached homes on the land, or about 7.6 square miles of new residential development. The purchase marks the largest dollar-volume land transaction in the state’s history.
Gammage said there is still a significant amount of private land around the Phoenix area that could potentially be developed. And the state has more than 8 million acres of trust land that can be sold off to raise money for education. About 17 percent of the state’s land is privately owned – the bulk is owned by federal, state and tribal governments. The regional water supply, secured years ago to support agriculture, should be adequate for many years to come, he also said.
“I argue that Phoenix (growth) is not a classic example of leapfrogging or sprawl,” Gammage said. Phoenix is an increasingly dense city, and development typically expands outward from the city’s edge. Lot sizes tend to be smaller in the Phoenix area than in some other metro areas. The growing Phoenix suburbs “are a part of metropolitan Phoenix. They are not in any sense detached communities.”
Most new-home construction took place about 18 miles to 21 miles away from downtown Phoenix during the 1990s, and these suburban areas continue to expand.
The “Hits and Misses” report by the Morrison Institute for Public Policy reports that population grew 263 percent in the Phoenix region from 1960 to 1990 while the urbanized area expanded 199 percent in that period. Average lot sizes for new homes have actually shrunk about 12 percent from the 1970s to the 1990s.
“By contrast, metropolitan Chicago gained 4 percent in population while urban land area increased 47 percent,” and Metro Atlanta consumed nearly twice as much land to accommodate roughly the same number of people as Phoenix, the report states.
Shannon Hubbard, a Phoenix real estate investor and Realtor who runs a home-inspection business, agrees that the boundaries between communities in the Phoenix area are fading away as the region grows. “Phoenix is just one big city now. You don’t even know when you drive out of Tempe and into Mesa, practically,” she said.
The rapid growth is burdening some utility systems, such as the city’s sewer lines. “The sewers are having problems – (they) are about at capacity,” Hubbard said.
According to a city of Phoenix Web site that addresses the topic, “decades of redevelopment, incremental connections to existing sewers and other changes have left particular segments of the system with little extra capacity to deal with unusual events. The result is that some areas now have limited sewer capacity and are predisposed to (overflow) events. The city has had to initiate the construction of new sewer capacity projects and restrict new taps to the system until those projects are completed.”
George Bosworth, executive director of the Urban Land Institute’s Arizona chapter, said transportation, air quality and affordable housing are among the major issues facing the Phoenix metro area.
There are major developments planned in the area of Casa Grande and Maricopa, which are Pinal County communities south of Phoenix, he said. And Apache Junction, a community east of Phoenix, is “in the path of state land auctions that are going to be held this year that will possibly double the amount of developable land in that municipality.”
He added, “One of the things that ULI Arizona hopes to do is to look at the future of this valley region with the prospects of continued population growth projected to bring up to 3 million additional people in the next 20 years.” ULI has a mission to facilitate discussions about responsible land use among community leaders. “We’re not an advocacy-based group. We’re the tentmaker and we bring to the big tent as many groups as possible.”
Arizona’s first population boom was in the post-World War II era of the late 1940s and early 1950s, and active retirement communities became a staple for the area in the 1960s and 1970s, Bosworth said.
“Since the 70s, the economy has transformed from … cotton, copper and cattle and become more of a technology-based and affordability-based economy. The cost of living, the cost of housing was relatively attractive in Arizona – particularly compared to California but also compared to other metropolitan areas,” he said. Technology companies and the home-building industry are key drivers in the state’s current boom, he said.
“Arizona doesn’t have a coast, it doesn’t have a port, it’s not like a place where people naturally congregated for 1,000 years,” said Gammage, a fellow with the Morrison Institute for Public Policy. It was farming that drew people to settle in the Phoenix region, he said, and the quality of life there has kept the region growing.
But can the area sustain its quality of life along with the rapid growth in population?
A 2004 survey of residents in the Phoenix metro area, conducted by the Morrison Institute and The Arizona Republic newspaper, found that about 66 percent of respondents believe the region is growing too fast, though that has dropped from 78 percent in a 1998 survey and 74 percent in a 1999 survey.
“We all think there’s a tipping point out there but we’re not sure when it’s going to hit,” Gammage said. Some people think that point could arrive in five or 10 years, while others think it may be decades away, he said.
There are already some very tangible effects of the region’s build-out, Gammage said, such as the heat effects of urbanization, sometimes referred to as the “asphalt effect.”
“I’ve lived here my whole life and in the last 50 years the nighttime temperature has gone up by 11 degrees. In the next decade we will have a summer where the temperature doesn’t go below 100,” he said.
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