Will Phoenix become a suburb of East Los Angeles?

Implications: The subject article talks about the concentration of Hispanic immigrants in the Phoenix metro area. The Hispanic population has always been an important component of Valley residents and now is even more so. I also refer the reader here to a further article entitled Valley salary growth lags behind national average www.eastvalleytribune.com which is part and parcel of this immigration as well as that of other ethnicities entering the Valley during this heavy population growth period. The first generation of immigrants will live well but the second generation and beyond are normally the ones who challenge for positions as community leaders in business and government. The first generation’s median economic history usually involves base wage level employment as they struggle to educate and vest their children with America’s future.

Analysis:

These numbers are part of the reason the Valley lags the country in wage levels. The border is now more accessible in Arizona than in California and the living is easier to manage economically than in California, the previous and still current immigration magnet leader.

For a hint of the Phoenix metro area’s future, look at what’s happening now throughout Los Angeles County and in downtown Los Angeles. The region is now sponsoring smaller units in denser developments overall and downtown Los Angeles is becoming a gentrified upper income community. See Southern California is becoming a tight fit www.latimes.com and L.A. moves toward more N.Y.-style downtown www.latimes.com for a good outline of these activities.

The import here is that we might be able to predict the future housing stock dominating the Phoenix landscape by observing the current activity in Los Angeles as a model. It appears that perimeter developments featuring large lots and single family development will no longer work for the average wage earner. The average household will no longer feature children and the need for bulk space will not be as important. Importantly, middle class family units no matter their composition will substitute other budget items as a priority. Try healthcare, education and transportation as elements which will be more important to the family than housing move-ups.

This market will be a challenge to the large home builders as they cannot be assured of the conforming land planning which allows production building of the same floor plans and site plans over and over. Moreover, although the mass of the market will be overwhelming, the NIMBY’s will arise to extend the planning period as well as the cost of making a project ready for construction. There will be pockets of growth which will be so expensive as to require upper income levels like the future holds for downtown Los Angeles. Capital expenditures for developments will be heavily front loaded as phasing of multi-family units requires early installation of project amenities and utilities in anticipation of future market absorption.

I believe the future can be seen here. The planning innovations and capital formation programs to get there will be fascinating as they unfold.