Governor Hobbs Vetoes Housing Bill as Renters Feel the Pressure

Phoenix, AZPhoto byChris TingomonUnsplash

A recent bill passed by the Senate is being returned to the legislature following Governor Katie Hobbs' veto of the measure.

The bill SB1184, which had previously passed both chambers of the legislature, would have made some changes to taxes on landlords and, in theory, passed some of those gains along to tenants and renters throughout the state - at least according to the bill's proponents. Governor Hobbs took a different view, which was evident in her press release following the veto. Said Hobbs:

First, this bill lacks any enforceable mechanism to ensure relief will be provided to renters. As noted by the legislature’s own attorney, provisions in the bill that purport to require that tax savings be passed on to renters face challenges under both the state and federal constitutions. If we are going to promise relief to renters, it’s important that we are able to ensure they actually receive it. For working families faced with ever-increasing rental prices, this proposal just doesn’t fit the bill.

The mechanism that Hobbs was criticizing in her response was a two-tiered system to remove some prices from renters without putting additional pressure on their landlords. The compromise, then, was to forbid certain local taxes and then force those tax savings along to the renters. The bill's exact language included:

A CITY, TOWN OR OTHER TAXING JURISDICTION MAY NOT LEVY A TRANSACTION PRIVILEGE, SALES, GROSS RECEIPTS, USE, FRANCHISE OR OTHER SIMILAR TAX OR FEE, HOWEVER DENOMINATED, ON THE BUSINESS OF RENTING OR LEASING REAL PROPERTY FOR RESIDENTIAL PURPOSES.

A separate provision in the bill then required that any difference in costs before and after the bill be passed along from landlords to their tenants in the form of a rent reduction. That latter part is the item of note for Governor Hobbs, who argues it cannot be enforced or guaranteed and is, in fact, ripe for a legal or constitutional challenge.

While rent in Arizona has risen significantly in recent years, its rent hikes pale in comparison to some other popular metros according to real estate data from Redfin. Average rent in the Phoenix area, for example, rose from roughly $1,700 in February of '21 to $2,100 in the most recent Redfin data, while some metros like Miami or others have increased by 50% or more in the same period using the same data.

Mesa, AZPhoto byConner BeardsleyonUnsplash

Still, that's no consolation to renters facing rising costs in the state. And while Governor Hobbs' veto praises the legislature for attempting to address rising housing costs, no alternative was presented to the bill and no other relief for renters appears forthcoming. According to common financial advice, housing costs should not exceed 33% of a household's before-tax income. Using that metric, over 500,000 residents in the Phoenix area alone are paying more for rent than they can afford.

Rental costs were perceived as a problem in the area even before recent price hikes, with the Phoenix government beginning housing initiatives to address supply shortages as far back as 2020. Unfortunately for Arizona residents, the state's affordability problems have only continued to pile up since then.

For now, though, it appears renters will have to keep persevering. Unless the legislature overrides Governor Hobbs' veto, no legislation addressing housing costs will reach the state's residents. Totally new legislation is still possible, but as of this writing, none on this topic have passed in either house or are pending the Governor's signature.

Author's note: To read the full text of the bill, please select the links above.