There’s a straightforward-sounding solution to the housing shortage: build more homes. Obvious, right? Yet homebuilders across the country — including right here in the Phoenix metro — are not cranking up production anywhere near the pace the market needs. The reasons go deeper than most people realize, and they have serious consequences for anyone trying to buy a home in 2025 or 2026.
Let me walk you through exactly what’s holding builders back.
The Cost Problem Is Worse Than You Think
Raw construction costs have exploded. Lumber, concrete, roofing materials, HVAC systems — everything that goes into a house cost dramatically more coming out of the pandemic than it did in 2019, and prices haven’t fully retreated. Tariffs on imported materials have added another layer of pressure. Canadian softwood lumber, for instance, faces duties that have added thousands of dollars to the cost of framing a single-family home.
Labor is arguably the bigger squeeze. The skilled trades — framers, electricians, plumbers, tile setters — are in short supply nationwide. Here in Arizona, the construction workforce shortage is real and measurable. The Arizona Builders Alliance has been working to address workforce pipeline issues, but training new trades workers takes years, not months. You can’t fix a decade of underinvestment in vocational education with a single program.
The math on a new home gets tight fast. When your all-in build cost hits $200 per square foot before land, and land in Maricopa County isn’t cheap, you’re looking at a finished product that has to retail well above $400,000 just to break even. That’s not a starter home anymore.
Financing and Margin Pressure Are Real
Builders don’t pay cash to build subdivisions. They borrow. And the cost of that construction financing has jumped alongside everything else. Higher short-term rates mean carrying costs eat into margin every month a home sits unsold.
Builder confidence has been falling as affordability pressures persist, and that’s not just a sentiment survey — it directly affects how aggressively builders acquire lots and pull permits. When a builder’s finance team runs the pro forma and sees slim margins with meaningful downside risk, they greenlight fewer projects. Simple as that.
Publicly traded builders face additional pressure from shareholders who want consistent returns, not heroic volume at thin margins. That’s part of why you’re seeing companies like Pulte shift strategy toward build-to-order models — they’d rather control inventory risk than chase volume.
The Regulatory Gauntlet
This one doesn’t get enough attention. In most Arizona cities, getting a new subdivision from raw land to shovel-ready lots is a 2-to-4-year process. You’ve got:
- Land entitlement and zoning approvals
- Environmental review
- Infrastructure agreements (roads, utilities, water)
- Engineering plan approvals
- Permit issuance — sometimes lot by lot
Every one of those steps takes time and money, and any single agency can create a bottleneck that adds six to twelve months to the timeline. Municipalities often have limited staff, and when permit volumes are high, wait times stretch out. Chandler, Gilbert, and Queen Creek have all seen significant infrastructure extension costs tacked onto new developments in recent years, and those costs flow straight through to the buyer.
There’s also the political reality. Existing homeowners often oppose new density in their neighborhoods. They show up to city council meetings. They file objections. Builders spend real legal dollars fighting for entitlements that should be routine.
Why Builders Are Skewing Toward Higher Price Points
When you’re facing compressed margins, you naturally build where the margin exists. That means bigger homes, more amenities, higher price points. A builder can make $50,000 on a $250,000 entry-level home or $90,000 on a $550,000 move-up home — the choice isn’t hard when both carry similar construction complexity.
The result? Starter home inventory is already trailing 2019 levels by roughly 300,000 listings nationally, and new construction isn’t filling that gap. The builds happening at the affordable end of the spectrum are increasingly build-to-rent product — projects like the 108-unit development in Surprise — rather than homes people can actually buy and own.
This creates a genuine structural problem. The supply that the market needs most is the supply that pencils the hardest.
What Would Actually Move the Needle
There’s no single fix here. But the levers that matter most are:
- Streamlined permitting: Cities that adopt over-the-counter permitting for standard designs and invest in plan review staff would see faster starts almost immediately
- Zoning reform: Allowing gentle density — duplexes, townhomes, small lot single-family — in more locations would expand the supply of lower-cost units
- Infrastructure financing tools: Special districts and creative financing structures can help front-load the cost of roads and utilities so developers aren’t carrying all the risk
- Workforce investment: More apprenticeship programs, more pathways into the skilled trades, and immigration policy that accounts for labor market realities in construction
Some of this is starting to move at the federal level. Congressional proposals aimed at reducing red tape and incentivizing local zoning reform are worth watching, though the track record of federal housing bills translating into local change is mixed at best.
Where This Leaves Buyers
Honest answer? In a tough spot for the foreseeable future. The structural underbuilding of the last decade doesn’t get fixed in a year or two. Phoenix is better positioned than many markets — we have land, we have active builders, and Arizona has generally been more development-friendly than coastal states — but even here, the pace of new supply isn’t keeping up with demand.
If you’re waiting for a flood of new inventory to push prices down significantly, you’ll likely be waiting a long time. The smarter move is understanding the market as it actually is, getting clear on your budget and priorities, and making the best decision you can with current conditions. Talk to someone who works this market every day. The data matters, but so does knowing which subdivisions have strong resale history, which builders are delivering on time, and where the next infrastructure extensions are headed.
That’s where a ground-level view of the Phoenix market pays off.