Judge blocks Arizona water rule that halted new housing developments
A judge handed a huge win to developers Tuesday when he blocked an Arizona water rule that put a stop to new housing developments in some areas of the Valley.
The ruling prohibits the Arizona Department of Water Resources from using its “unmet demand” rule for the Phoenix Active Management Area.
The Home Builders Association of Central Arizona, represented by attorneys from the conservative Goldwater Institute, filed a lawsuit in January 2025 to challenge what they said were illegal assured water supply restrictions put in place by ADWR.
In a Tuesday ruling, Maricopa County Superior Court Judge Scott Blaney found that ADWR didn’t have the legal authority to implement the new unmet demand rule in the Phoenix Active Management Area because it didn’t comply with the Arizona Administrative Procedures Act rulemaking process.
Blaney wrote that the unmet demand rule was illegal and blocked ADWR from using it to determine if developers had enough groundwater for the 100-year-supply requirement.
“We’re delighted that the court has struck down the bureaucracy’s newfangled restriction on home construction — a rule that reduced the availability of homes and raised housing costs in one of the nation’s fastest-growing housing markets,” said Timothy Sandefur, the Goldwater Institute’s vice president for legal affairs.
All residential home builders within Arizona’s designated groundwater Active Management Areas must obtain a certificate of 100-year assured water supply, or a commitment from a water provider that already has a certificate of assured water supply to provide water to their subdivision before they can build. Developers must meet several criteria to obtain a certificate, such as ensuring the water will be of good quality and that it will be physically, legally and continuously available.
In June 2023, Gov. Katie Hobbs, a Democrat, released an updated hydrological model for the Phoenix AMA — which covers most of the metro area — showing a projected 4% shortfall in its 100-year water supply. The announcement halted some plans for new housing in Queen Creek, Goodyear and Buckeye that relied only on groundwater, even as the region faced a severe housing shortage.
These areas are not served by any water providers, so developers’ only option is to apply for their own assured water supply certificate.
The Department of Water Resources released an updated version of the model in November 2024 in which it doubled down on its decision not to issue more assured water supply certificates.
The Homebuilders claimed that, under the unmet demand rule, if modeling shows that one well within the Phoenix AMA is predicted to go dry within the next 100 years, it is treated as though no groundwater will be physically available anywhere in the AMA, even if that well could be relocated to an area with a full water supply. The rule would also consider all water in the AMA unavailable if any well within it couldn’t access quality water at 1,000 feet deep.
Previously, developers could obtain a certificate of assured water supply by providing ADWR with a hydrological study showing the availability of water at one well point, instead of across the entire active management area.
“ADWR is utilizing criteria when reviewing applications that did not previously exist while claiming that it is still applying the existing rules,” Blaney wrote in his preliminary ruling on Tuesday.
The judge wrote that he agreed with the Goldwater Institute’s argument that the state cannot “be allowed to rationalize a new rule by camouflaging it as just a new implementation of an old rule.”
The Goldwater Institute claimed that this would give government agencies the option of sidestepping the legal rulemaking process by claiming that they had reinterpreted existing rules.
The Homebuilders Association, the Goldwater Institute and their supporters said that the department’s refusal to issue assured water supply certificates was causing “enormous harm” to developers and landowners.
The builders said that ADWR had essentially blocked residential developers from starting new projects, and continuing ongoing projects for which they had “incurred significant expense in reliance on their legal entitlement to Certificates of Assured Water Supply.”
The Arizona Department of Water Resources told the Arizona Mirror in a written statement that, although a final judgment in the case is still coming, the department plans to appeal Blaney’s decision once it is made.
“This case is just the latest example of the dangers of the unelected, unaccountable administrative state,” Sandefur said in his statement. “Here, bureaucrats decided to drastically rewrite Arizona rules governing home construction in ways that harmed not just Phoenix but all Arizonans. We’re glad the court has made clear that no — they must obey the law, not rewrite it.”