Phoenix multifamily investment guide

Most of the guides in this series spend their regulatory section explaining a constraint. Arizona is the opposite case, and the clearest instance of it is a tax that no longer exists.

Subsection (H) of Section 42-6004 of the Arizona Revised Statutes provides that "From and after December 31, 2024, 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." The Arizona Department of Revenue states the consequence plainly: "Currently, there is no state or county tax imposed on residential rentals. Therefore, Arizona cities are not be able to impose a tax on residential rentals from and after December 31, 2024." Residential rental for this purpose means a letting of thirty or more consecutive days; hotels and other transient lodging are unaffected.³⁶

We wanted to see the repeal in the operative rate schedule rather than only in the statute, because a rate table is what a city actually bills from. The department's Phoenix city profile still lists Commercial Rental, Leasing and Licensing for Use at 2.80 percent under business code 213, with an additional Commercial Lease tax of 0.10 percent under code 313, alongside a general retail rate of 2.80 percent. Residential Rental does not appear on the schedule at all. The same landlord in the same city pays 2.90 percent of gross rent on a commercial lease and nothing on a residential one.⁷

We are deliberately not stating what Phoenix charged on residential rent before the repeal. A figure is in wide circulation, but the city no longer publishes that rate and we could not retrieve it from a primary source, so it is not in this guide. The commercial rate above is offered as a measure of what a municipal rental tax costs in this city, not as a claim about the former residential one.⁷

One consequence of the repeal is easy to miss and belongs in acquisition diligence. The tax ended; the liability for the years it was owed did not. The department states that for tax periods before January 1, 2025 an owner "must comply with filing and payment requirements" and that "These periods remain subject to audit as allowed by statute," and it instructs owners who under-reported to file amended returns. A buyer of an Arizona rental portfolio is buying whatever pre-2025 transaction privilege tax exposure the seller carries, and that exposure is invisible in a current rent roll because there is no current tax to look at.⁶

• No city, town or other taxing jurisdiction may tax residential rent from December 31, 2024.
• There is no state or county tax on residential rentals either.
• Phoenix still taxes commercial rent at 2.80 percent plus a 0.10 percent additional levy.
• Periods before January 1, 2025 remain subject to audit, so the exposure survives the repeal.

The tax is gone. The exposure for the years it was owed is not, and it does not appear anywhere in a current rent roll.

A permissive rulebook is not a free lunch. It is a signal that competition arrives without asking permission, and the Phoenix numbers show exactly that.

Maricopa County permitted 31,651 residential units in 2025 against a stock of 2,000,280, about 1.58 percent on our arithmetic. That is a heavier pipeline than most of our coverage, though not the heaviest: Boise permitted 2.28 percent of its stock in the same year. Pinal County is the outlier. It permitted 8,048 units against a stock of 209,076, about 3.85 percent, which is the highest permit intensity we have measured anywhere in this series. Pinal is adding housing at more than twice the rate of Maricopa, against a base less than a ninth the size.²

The demand is genuinely there to meet it. Maricopa County grew 6.0 percent between April 2020 and July 2025, adding 264,256 residents, and Pinal grew 26.6 percent, adding 113,387. Those are large absolute and proportional gains, and they are the reason the pipeline has been absorbed so far. But absorption that depends on continued in-migration is a different underwriting proposition from absorption that depends on a supply constraint, because in-migration can slow and a constraint cannot.²

The second charge is subtler and, in our view, the more binding of the two. Median gross rent in Maricopa County is $1,708. Median monthly owner cost with a mortgage is $1,931. The difference is $223 a month, which is the same figure we measured in Philadelphia and a fraction of the $1,181 gap in Seattle or the $824 gap in Portland. In Pinal County the gap is narrower still, at $177.²

That number is the ceiling on rent growth here, and it operates without any regulator being involved. Where owning costs $1,181 a month more than renting, a rent increase does not send a tenant to a mortgage broker, because the alternative is not available at any realistic saving. Where the gap is $223, a meaningful rent increase closes it, and the tenant with a down payment has a real choice. Maricopa County is already 65.2 percent owner-occupied and Pinal 81.7 percent, so the population has demonstrated that it takes that choice when it can. Rent is about 23.0 percent of median household income in both counties on our arithmetic, well inside any burden threshold, which tells you the pressure on rents is not coming from affordability. It is coming from the purchase option and from the pipeline.²

• Maricopa permitted 1.58 percent of its stock in 2025; Pinal permitted 3.85 percent.
• Maricopa added 264,256 residents since 2020 and Pinal 113,387.
• Owning with a mortgage costs $223 a month more than renting, and $177 in Pinal.
• Rent takes about 23.0 percent of median household income in both counties.

A $223 gap between owning and renting is a rent ceiling that no regulator has to impose. Every increase pushes the tenant closer to a mortgage they can already almost afford.

Phoenix is the mirror image of the market we published immediately before it, and setting the two side by side is the clearest way to state our position.

Portland has a hostile rulebook, almost no new supply and a core county losing residents. Phoenix has the most permissive rulebook in our coverage, very heavy supply and a population growing at 6.0 percent in the core county and 26.6 percent on its southern edge. Those are not two points on a scale; they are two different risks. In Portland the thing that can hurt you is written in a statute and you can read it. In Phoenix the thing that can hurt you is a competitor breaking ground next door and a tenant who can qualify for a mortgage, neither of which appears in any code.²

We would underwrite the established inner-ring submarkets, and Tempe and the Mesa and Gilbert corridor in particular. These carry the deepest rental base in a county that is 65.2 percent owner-occupied, they sit next to the employment that is actually growing, and they are the least substitutable by a single-family purchase in the outer ring. The tax position genuinely helps: no municipal tax on the rent and no assessment penalty are real basis points of net operating income, not a talking point.²³

We would not buy in the Pinal corridor at present. Permitting 3.85 percent of an entire housing stock in a single year is a rate of new competition we are not willing to underwrite against, the county is 81.7 percent owner-occupied so the rental base is thin to begin with, and the $177 gap between owning and renting means the product competes directly with a purchase. The 26.6 percent population growth is real and we are not disputing it. Our position is that the supply is arriving at least as fast as the people.²

Two diligence items we would treat as non-negotiable in this state. Pull the seller's transaction privilege tax filing history for periods before January 1, 2025, because those periods remain open to audit and the current absence of the tax hides the question. And underwrite rent growth against the purchase alternative rather than against a regulatory cap, because in this market the cap is the mortgage payment. Investors comparing this with a market where the constraint runs the other way should read our Las Vegas guide, which shares the desert growth profile, and our Columbia guide, where the assessment ratio does penalize a rental.⁶²

Pull the seller's pre-2025 transaction privilege tax filings. The tax was repealed, the audit window was not, and a current rent roll shows no trace of either.