Partial fix for build-to-rent loophole in the works, but more groundwater legislation stalled

Lawmakers are advancing bills that would tighten up some aspects of groundwater management in the state, but more ambitious groundwater proposals have stalled in the legislature so far this year.

A pair of proposals sponsored by Rep. Gail Griffin, R-Hereford, and Sen. Justine Wadsack, R-Tucson, would at least partially close a loophole in the Assured Water Supply (AWS) program that allows developers to skirt the AWS permitting process by renting out homes, rather than putting them up for sale.

The AWS program, part of the 1980 Groundwater Management Act, in most cases requires homebuilders to show that subdivisions where they’re planning new homes have a water supply that will last 100 years before they can move forward with the project.

“The issue is… we have some single-family homes that are being built for rent and the statutes today exempt” them from water supply review, Griffin said at a committee hearing on Wadsack’s bill on Tuesday. “We need to close that loophole,” she added.

Senate Bill 1432, Wadsack’s proposal, would require an AWS certificate for any proposed development with more than six homes in an active management area. The original proposal applied only to unincorporated areas, but Wadsack indicated she intends to amend the bill to include incorporated areas, as well.

Griffin’s proposal takes a different approach, ending an existing exemption in the AWS system for properties that are rented for less than one year. Griffin said the two women are strategizing about how to address the problem with legislation.

“This is a work in progress, we still need to tweak how we end up with the final bill, or bills,” she said at the Tuesday hearing.

The bipartisan support that the idea has received so far suggests it has a chance of making it into law. Wadsack’s bill passed the Senate with a 28-1 vote and passed the House committee on Tuesday 10-0. Now it will head to the full House.

Griffin’s bill passed the House 31-28, on party lines, but it could get bipartisan support going forward. It was set to be heard in the Senate Natural Resources, Energy and Water committee on Thursday, after the Arizona Capitol Times’ print deadline. Sen. Priya Sundareshan, D-Tucson, indicated on Wednesday that she would support the proposal in committee.

A spokeswoman for Gov. Katie Hobbs wouldn’t say where the governor stands, but suggested the idea is in line with her agenda.

“(F)inding solutions for rural groundwater issues and closing loopholes in our water management laws are policy priorities for the administration,” said Murphy Hebert, a spokeswoman for Hobbs, in an email.

At an event last month, Hobbs hedged her bets on the built-to-rent issue.

“What I can say for certain is that my office is not going to entertain any legislation that creates additional loopholes,” she said in a conversation hosted by the developer lobbying group Valley Partnership.

It’s not clear exactly how many residences are constructed using the build-to-rent loophole, but the figure is probably at least in the thousands.

Documents provided by the city of Casa Grande in February show that more than a dozen built-to-rent developments have started the permitting process since 2021, with more than 3,000 total units proposed across the different sites. Earlier this month, Buckeye Mayor Jerry Orsborn said his city had about 6,500 multifamily housing units in the development pipeline.

But even if some form of built-to-rent legislation is likely to pass this year, other proposals that would take more aggressive action on groundwater management haven’t made progress in the legislature.

One idea is to create a new class of groundwater management area that could be used in rural areas. It’s an idea that’s taken slightly different forms in recent years and this year’s proposal would establish “local groundwater stewardship areas” that provide a measure of local control over groundwater use in areas where residents vote to self-regulate.

Most of the state’s land area lies outside of the six Active Management Areas and outside those AMAs, there aren’t any restrictions on how much groundwater local landowners (and renters) can pump. That’s led to some scandals like the revelation that a Saudi alfalfa company is pumping vast amounts of water for a cut-rate price to irrigate farmland in La Paz County.

The proposal to create local stewardship areas was run in both chambers by Republican lawmakers from Legislative District 30, Sen. Sonny Borrelli, R-Lake Havasu City and Rep. Leo Biasiucci, R-Lake Havasu City. But leaders of the Natural Resources, Energy and Water committees, Griffin and Sen. Sine Kerr, R-Buckeye, didn’t give the bills a committee hearing.

“We’re disappointed that for yet another year, reasonable groundwater legislation to provide protections for residents in the 80% of the state that are currently unprotected, didn’t even get a hearing,” said Nick Ponder a lobbyist for Highground, which pushed the bill.

Ponder said that he thinks a majority of the legislature would support the proposal, but it’s not going anywhere because Griffin and Kerr have decided they’re against it.

Another idea is to require monitoring and measurement of groundwater use around the state – including outside of the AMAs. That’s something Tom Buschatzke, director of the Arizona Department of Water Services, said is a good idea.

“You can’t effectively manage what you’re not effectively measuring,” he said in a January interview.

Sundareshan and Rep. Andrés Cano, D-Tucson, both introduced proposals to require groundwater use measurement and reporting, but neither bill got a committee hearing.

Another proposal both Democrats introduced – which didn’t get a hearing in either chamber – would change technical rules around ADWR’s water projections, allowing the department to use projections of future water use, not just current use, in determining when groundwater supplies are threatened.

“There’s so much more to do to address our water crisis and fix the loopholes. We’ve barely scratched the surface this year,” Sundareshan said.

Griffin declines to speak to the media about her work, but Regina Cobb, a former Republican lawmaker who pushed for more groundwater regulation during her time in the legislature, said that Griffin’s stance on groundwater legislation is based on her views about private water rights and a sense that current groundwater use is basically OK.

“I feel like there needs to be something done and she (Griffin) feels that nothing needs to be done – that we are good where we’re at,” Cobb said.