The Phoenix apartment industry could be on the brink of collapse after two of the city’s biggest developers filed for bankruptcy in the first week of January, according to a report from Axios.
The filing, filed Monday by two Phoenix-based developers, shows that the company that owns Phoenix Central and New Century, Inc. has been in financial distress since January.
The company’s financials are not public, but the report shows the company owes $1.3 billion to creditors.
The bankruptcy filing comes as the Phoenix area’s rental vacancy rate has been rising, which could hurt the city and its economy.
A Phoenix city official told Axios that the city “is in financial straits, and our job is to make sure we are taking all the necessary steps to prevent a repeat of what happened last year,” Axios reported.
The city is also grappling with the ongoing aftermath of Superstorm Sandy, the storm that ravaged the city in November.
The bankruptcy filing could affect the Phoenix metropolitan area’s housing market, which has been growing and thriving since the housing bubble burst in 2007.
But the financial collapse of the two Phoenix developers could make it harder for the city to rebuild its housing stock.
The developers have already been hit with a lawsuit by the city of Phoenix over their failure to keep the rental unit market safe and healthy.
The suit was filed by former Phoenix city councilwoman and former Arizona Governor Janice Hahn.
In the filing, the city says the developers have been making “several significant investments” to repair and revitalize the city, including building “a new convention center, the largest-ever convention center in the United States,” a hotel, apartments and offices for the elderly, as well as a new airport and a new medical center.
Phoenix Central and its subsidiary New Century have been involved in numerous major real estate projects around the world, including projects in Hong Kong, the United Arab Emirates, and other parts of the Middle East.
The companies also are building a new downtown Phoenix office tower and a casino in Las Vegas.
The Phoenix housing market has been suffering from a glut of vacancies in recent years.
A recent report from real estate analytics firm Zillow said the city has over 700,000 vacancies, making it the second-most overcrowded city in the country, behind Los Angeles.
Phoenix has also been plagued by a massive housing shortage in the last year, with nearly 6,500 new housing units not being built.
The market is also seeing an increase in homelessness.