ZenCity, a Stackable Modular Housing Project in Mesa, is One Answer for the Housing Shortage

Article originally posted on AZ Central on July 26, 2023

Developers of ZenCity, a new 90-unit stackable modular apartment project in downtown Mesa, hope its housing model will help address shortages that face the state. Arizona is home to some of the fastest-growing communities in the country and Maricopa County is the fastest-growing county, according to 2022 United States Census Bureau data. Arizona needs between 100,000 and 270,000 additional homes, depending on various studies.

The modular homes are the brainchild of former state Sen. Bob Worsley, who sees the ZenCity project as a step toward addressing that shortage. Worsley knows the area well and what its needs are because he spent seven years representing the area in the state Legislature. “This was my base,” Worsley said. “That’s why I wanted it done here” first, he said.

Developers will invest about $30 million to build the five-story building on the half-acre property along Main Street. The first floor will be reserved for a grocery store. The project could wrap up construction by summer 2024, Worsley said.

Councilmember Jenn Duff, who represents the area, reminisced about the combination of historic and New Age buildings in the downtown core.

“This project is a peek into our future,” Duff said.

Futuristic features and amenities

Studio or two-bedroom units take advantage of every square inch by utilizing robotic features, like converting the bedroom into the living room by raising the bed into the ceiling. The units come furnished with all major appliances, including an electric oven, microwave, dishwasher, fridge, and a stacked washer and dryer. It also comes with energy efficient amenities like a smart thermostat and tankless water heater. Made of steel, the units are built to withstand high winds, snow loads and earthquakes.

“This thing is built like a tank,” Worsley said. It will be a mid-rise building with high-rise density, he said.

The available units at ZenCity will be studios or two bedrooms and the monthly rent could range from $1,000 to $1,200, Worsley told The Arizona Republic. Worsley said he imagines the building will be filled with Arizona State University film students, adjunct professors and working professionals.

A solution to the housing shortage?

ZenCity is part of the larger endeavor of ZenniHome which are prefabricated housing units. Those units are being built in Page, near the Utah border north of Flagstaff, in a portion of the former Navajo Generating Station coal power plant that was closed in 2019.

The modular homes can also be used as a single family home or as an accessory dwelling unit. Worsley said the company has 40,000 preorders on the ZenniHomes. Most of the customers are developers who are looking for an easy, cost-efficient way to build a multi-family product, he said.

Worsley said about 3% of those preorders are for ADUs, or accessory dwelling units, most commonly known as granny flats. However, he anticipates that number could grow if Phoenix changes its housing codes to allow for those types of backyard housing units.

The ZenniHomes comes in two models:

• The Denizen, a 320-square-foot studio home.
• The Citizen, a 640-square-foot two-bedroom home.

The base prices for the Denizen and Citizen cost $90,000 and $125,000, respectively.

Developers say federal tax incentive helped this project happen

For years downtown Mesa was discussed as a place with a lot of “potential,” Mayor John Giles said at the groundbreaking event. For Giles, “that was a painful conversation” when he spoke with developers because it meant conceding “things aren’t happening.”

“We don’t have that discussion anymore,” he said. One reason the district has seen a boom in new projects, developers say, is a federal tax incentive for the area. Downtown Mesa is one of 11 opportunity zones in the city, an area that allows developers to take advantage of a federal tax break.

The opportunity zone program was created in 2017’s federal Tax Cuts and Jobs Act to attract developers to reinvest capital gain monies in qualifying low-income census tracts. No tax will be owed on appreciation for investments held for 10 years. Taxes owed for the initial investment are reduced to 15% and are deferred until 2026.

The program was built to spur economic development into areas that have been neglected.

“That program was fundamental for us to do what we did here,” said Chris Loeffler, the CEO of CaliberCos Inc., a real estate investment firm. CaliberCos has pooled together $185 million of funding from largely Arizona-based investors to build projects that are often harder to find funding for like ZenCity, which is “first of its kind,” Loeffler said.

The investment firm also has nine other properties in Mesa that it’s seeking to redevelop, one of which includes the building for Level One Arcade that recently celebrated its grand opening.