Arizona's land use and real estate questions have water law answers

Most of us have long kept real estate and water in separate mental drawers. Housing is the work of developers, builders, lenders, and zoning boards; water is something that arrives through a pipe and appears on a monthly utility bill. In much of the country, that distinction generally still holds.

In Arizona, things started shifting decades ago, when the state made water supply a condition of some types of development. That choice formally linked water law and land-use law. Before raw desert can become a residential subdivision, we now ask: Where will its water come from? But the Byzantine system Arizona built to police that connection is now under pressure from every direction: subdivision loopholes, rural groundwater depletion, declining aquifers, Colorado River uncertainty, and the urgent need for housing.

Historically, western water policy in the United States has been about moving water to where it was needed. The goal was to encourage westward expansion. To achieve this, people were building dams and diverting rivers long before Arizona became a state. Western water law developed to perfect and protect the rights of those who invested in, and relied on, the water delivered by such infrastructure.

Land-use law has a very different origin. During the Industrial Revolution, this body of law developed to prevent people from interfering with their neighbors' ability to enjoy their respective properties. This hyper-local focus on neighbors and neighborhoods meant that most land-use approvals largely ignore water-supply issues.

We did something unusual in Arizona in 1980. We began bridging the divide between land use and water. Facing severe groundwater overdraft and federal threats to infrastructure funding, a coalition of cities, farms, and mines struck a hard bargain and passed the Groundwater Management Act. The Act created Active Management Areas (AMAs) in the state's most heavily pumped regions, including the entire "sun corridor" from the Phoenix metropolitan area down to Tucson. It also created the Assured Water Supply program. Under this program, a developer generally cannot record a subdivision plat without proving to the Arizona Department of Water Resources that there is enough water for the proposed subdivision for one hundred years.

That's the headline: Four decades ago, we adopted a rule about water that began operating as a gateway for development. In Arizona, you can't turn raw desert into salable lots and rooftops without first addressing water. We began to recognize this new reality as far back as the 1970s, after a series of land-fraud schemes involving vacant desert parcels. We learned early that selling land is selling a promise about water.

Inside that regulatory gate, the system has largely done what it was designed to do. The cities and large private water companies that hold Designations of Assured Water Supply (the providers that serve most Arizonans) were pushed to assemble diversified portfolios, including Colorado River water delivered via the Central Arizona Project canal, treated effluent, stored water banked underground, water from Arizona's in-state rivers and streams, and a measured share of groundwater. Developers building inside those service areas inherit the assurances provided by these portfolios. In this way, metropolitan growth in AMAs has been deliberately weaned off depending exclusively on groundwater.

But not all development passes through the Assured Water Supply gate. With few exceptions, industrial or commercial developments are exempt from the program. And by dividing a parcel into five or fewer lots, a developer can generally escape Arizona's subdivision rules altogether. And with them, the Assured Water Supply program. This allows the creation of "wildcat" subdivisions through successive small lot splits. Rio Verde Foothills, a wildcat subdivision north of Scottsdale, made national news in 2022 and 2023 when hundreds of households lost regular access to water. It took three years, a special legislative fix, and a regulated private utility to find a solution. Rio Verde Foothills shows us what can happen when land is developed before addressing water.

Much of rural Arizona sits in a similar blind spot. Outside AMAs, groundwater pumping is mostly unregulated. That is beginning to change, one contested basin at a time. Voters created the Douglas AMA in 2022. The state designated the Willcox AMA in 2024 and the Ranegras Plain AMA in early 2026. Meanwhile, the Legislature spent recent sessions debating whether to give rural communities a lighter-touch alternative that would impose fewer restrictions than a "full" AMA. Embedded in these debates are the concerns of rural families watching the ground subside and their wells fail, as well as farmers' and landowners' fear of giving up control of the water their livelihoods depend on. Both concerns are real. Neither is going away.

Even where the system works as designed, it rests on two assumptions that are now under strain. The first is that aquifers can quietly backstop a century of pumping. Pinal County hit that wall first. In 2021, the Department of Water Resources' modeling showed "unmet demand" in the Pinal AMA, causing it to stop approving groundwater-dependent subdivisions. In 2023, the Department extended its model-based moratorium to the Phoenix AMA, stranding thousands of planned lotson the Valley's edges. The second assumption is that the Colorado River will keep delivering. The river is the renewable backbone of many municipal portfolios, but it is overallocated and shrinking. The interim rules governing the river are also set to expire at the end of 2026, and the four states in the Colorado River's Upper Basin are refusing to honor their delivery obligations to the states in the Lower Basin. In short, the water side of the ledger is tightening just as the housing side needs the most room.

This is where water law and the business of development stop being separate and reveal themselves as the same question: How, and where, should Arizona grow? Although the instruments are technical, the choices are civic and contested. How much should we constrain growth to protect a shared aquifer? What do we owe rural agriculture, and what does agriculture owe its neighbors? Should new rooftops rest solely on renewable water even if that makes housing even more expensive?

In 1980, Arizona tied the right to build new subdivisions to water supply when it would have been far simpler to leave the two in separate drawers. Our task now is to mind that gate, letting responsible development through while protecting existing communities. The real question was never whether Arizona would grow. The question is whether we will price water honestly into existing and proposed development, or whether we will keep discovering, one wildcat subdivision at a time, that we left it out of the math.