(The Center Square) – Arizona’s new law allowing for easier financing for developers will help lower housing costs, according to experts.
Gov. Katie Hobbs signed House Bill 2999 into law, allowing developers to finance public infrastructure projects through bonds.
HB 2999 creates State Affordability Infrastructure Districts, which allow developers to access lower financing for projects such as roads and transportation, water and wastewater systems, broadband infrastructure and utilities.
Tyler Cobb, a Taft Law Firm public finance attorney, worked on HB 2999, which was sponsored by state Rep. Jeff Weninger, R-Chandler. Cobb told The Center Square that the bill will help with housing affordability in the state.
If Arizona can increase its housing supply, it will make homes more affordable, Cobb said.
Many Arizona infrastructure projects have “lain dormant for years in search of an infrastructure solution, and this is going to allow a lot of these projects to move forward,” Cobb said.
If developers can access cheaper capital, it means homeowners will pay “less up front for the cost of the home,” he noted.
Jason Morris, a founding partner of the Phoenix law firm Withey Morris Baugh PLC, told The Center Square that Arizona’s new law will help lower housing prices in Arizona.
“If you look at the impediments to being able to build an affordable home or even be able to stay within the budget, the biggest single factor is the public infrastructure that’s necessary before the first home gets built,” he said.
Before the piece of legislation, Morris said a developer would need to finance all public infrastructure costs.
He noted the developers would have to borrow money to finance these projects, which was then factored into home prices.
The financing for public infrastructure projects is short-term, relying on construction loans, which are “very costly,” the land-use attorney said.
Morris explained Arizona is seeing the effects of not having this legislation and the negative effects on the “streets and infrastructure because developers can’t necessarily afford everything at the onset of development.”
“It’s been detrimental overall to the state to not have this,” he added.
Morris said Arizona’s new law does not mean homes will be built faster, but rather the bill “opens up areas that previously haven’t been able to be developed because the financial burden of developing certain areas was so great.”
According to Cobb, to form a State Affordability Infrastructure District, 100% of landowners in an area must support it. When an area has buy-in from all the landowners, he said the group will request its district be formed with the Arizona Finance Authority.
Cobb noted for a district to be formed, it must plan to finance more than $5 million in infrastructure costs.
If the district is approved by the Arizona Finance Authority and the district wants to issue bonds, it will need to hold an election, the public finance attorney said.
He added that if the bond is approved by voters, the district will create a feasibility report for the Arizona Finance Authority outlining its “repayment burden.”
The Arizona Finance Authority will review the bond’s financing plan, Cobb explained. If approved, the district can start issuing bonds.
Districts can’t levy additional taxes after the debt is paid off, Cobb said.
“Nobody is ever going to be forced into” a district,” he noted.
People who do not live in these districts will not be impacted, the public finance attorney said.
Morris said there is a “strict amount of borrowing a district can do so that it’s never beyond the capability or the value of the underlying property.” These districts can only tax to finance public infrastructure, he added.
According to the land-use attorney, the new law provides transparency about the potential tax burden homeowners will pay. He noted all the information is online for people to view.
Leave a comment