PHOENIX — Developers who have seen tens of thousands of potential home sites on the fringes of metro Phoenix stranded because of a lack of an assured water supply are getting a lifeline that resurrects their projects under a deal cut between Republican lawmakers and Gov. Katie Hobbs.

The proposal known as “ag to urban” allows homebuilders to buy water rights from farmers who retire their agricultural land if they promise to use only a certain percentage of the water the farm has been using to supply the new housing.

The agreement was confirmed Wednesday by Sen. T.J. Shope, R-Coolidge, who said both Republican lawmakers and Hobbs “think it’s the most consequential water bill that’s been passed and will get signed since the 1980 Groundwater Act.”

What’s in the deal immediately affects only Maricopa and Pinal counties.
But the legislation contemplates adding the Pima County Active Management Area to the program if a moratorium on new water certificates is put in place by state water regulators, Shope said.

If all three areas were included, more than 400,000 acres of farmland could be eligible for conversion. Shope said if half the land were converted from farmland, up to a million homes could be built while saving a huge amount of water.

“The ag-to-urban program is a win-win for farmers who are ready to retire but still want to capitalize on their land and for Arizona families looking to obtain their American dream through homeownership,” he said in a statement.

Still, not everyone is happy.

While big developers are celebrating a win, elected officials in rural Arizona are criticizing Hobbs for agreeing to back ag to urban without also tying it to new protections for groundwater in their areas. They have been pushing for a way to protect their water supplies for years, but Republicans who control the Legislature have refused to move their proposals.

Mohave County Supervisor Travis Lingenfelter, a Republican who chairs the northwestern Arizona county’s board, called it a missed opportunity.

“We really thought that that was the best leverage opportunity that we’ve seen since the groundwater management code was adopted,” Lingenfelter said Wednesday. “We were disappointed that they let that go.”

Hobbs spokesman Christian Slater declined to comment on either the ag to urban deal or on criticism from rural elected officials.

Minority Democrats and Hobbs want additional areas of the state designated as active management areas so big farms can’t move in and pump all the water out of the basins their cities, towns and small farmers rely upon.

The ag to urban proposal was prompted by a moratorium on issuing water certificates for new developments in western and southeastern part of metro Phoenix — including parts of Buckeye and Queen Creek — adopted by the state in June 2023.

The moratorium on issuing builders the necessary certificates of assured water supply was put in place by the Arizona Department of Water Resources with backing from Hobbs. The agency cited new data that showed there was not enough available groundwater in those areas to meet the requirements of a landmark 1980 law.

The Groundwater Management Act requires builders to show they have an assured 100-year supply of water.

That ban on issuing new certificates drew howls of protests from developers and Republican lawmakers who support development.

Shope has been working on a fix for the past two years and got Republicans who control the House and Senate to enact a version of ag to urban last year.
But Hobbs vetoed the measure, saying while she supported the concept of converting farmland to housing to lower water use, the bill fell short.

She wrote in her 2024 veto letter the measure did not ensure water would be conserved and homebuyers were not guaranteed there was enough water for 100 years. Hobbs also said the concept should not be adopted statewide because differing supplies in each of the state’s four initial active groundwater management areas required a more nuanced approach.

Shope introduced a different version early this year but it has been stalled amid negotiations with the governor.

“My hope is that it’s completely bipartisan,” Shope told Capitol Media Services Wednesday.

He said the Senate is expected to vote on the proposal Thursday and send it to the House. If it passes as he hopes, it could be on Hobbs’ desk by the end of the week.

Shope cited data from the Arizona Department of Housing that estimates there is currently a shortage of 270,000 housing units statewide. That, in turn, is driving up housing prices, saying the average median home sale prices in Arizona has increased more than 50% in the past five years.

All that, however, still does nothing for the rural residents who are worried large corporate farms will drain their regions of water.

Willcox Mayor Gary Hancock said he was frustrated by the failure of the governor to push for new protections for rural areas.

“We’ve got a lot of people out here in rural Arizona that need this water too,” Hancock said. “It’s hard to see the focus shift away from us.”

Lingenfelter said a coalition of counties in the northern and western part of the state have teamed to try to break the logjam on rural groundwater,

“Collectively, we represent almost 650,000 rural Arizonans that don’t have any water security at all,” he said. “We were really hoping that this was going to be the year that all the leverage was used, and we got something finally passed for our citizens.”