Key Points:

• Ag-to-Urban allows farmers to trade irrigated land for residential development

• Program aims to minimize water use and expand housing opportunities 

• Its complex application process may deter some farmers

With Arizona’s Ag-to-Urban program now offering farmers new means to trade in their irrigated land to residential developers, some have begun expressing skepticism over the program’s rules and effectiveness. 

Ag-to-Urban officially went into effect on Sept. 26, allowing farmers to trade in their irrigation rights and sell their farmland to developers. 

The program aims to minimize water use and expand housing opportunities in the state by providing farmers with a means to transition efficiently from farmland to residential land. That said, while the program’s purpose is to convert farmland and save water, some builders are frustrated with its practicality and question whether it warrants enough participation from developers. 

Spencer Kamps, vice president of legislative affairs for the Home Builders Association of Central Arizona, said, “It’s a new program. It’s a new way to build. It’s been completely untested before, and that limits the ability to put homes in the ground.”

Despite agreeing with the sentiment of the bill, Kamps said he does not foresee it being a success due to its lack of practicality regarding the amount of water it provides to developers. 

Kamps specifically mentioned the density requirements for the law, citing it as a potential deterrent for builders. When agricultural land’s rights are traded in for credits, the land is given 100 acre-feet of water for 100 years in Pinal County and 150 acre-feet of water for 100 years in Maricopa County, roughly equaling one acre-foot and 1.5 acre-feet of water per year for 100 years. 

According to the Arizona Department of Water Resources, “in Arizona, one acre-foot is typically enough water to serve three single-family homes for a year.” One acre-foot of water is equivalent to 325,851 gallons of water, according to the ADWR.

Kamps said that such a low density ratio eliminates the higher-density projects, such as apartments and condos. This will narrow the amount builders willing to participate in the program, Kamps said. 

Sen. T.J. Shope, R-Coolidge, the sponsor of the final bill, said he agrees that not everyone will find the program appealing. 

“It’s truly voluntary,” Shope said. “It’s going to be something great for some people and for others, I am sure that it’s going to be something that they don’t feel like they need to use.”

Shope said the bill was never meant to encourage the development of more condos and apartments, but instead was intended to produce more single-family homes in Queen Creek, Buckeye and Pinal County.

“That really should come as no surprise to folks, because this has always been counted as a way to get single-family housing jump-started,” Shope said. 

Ben Bryce, assistant to the director at the Arizona Department of Water Resources, said participants shouldn’t view the water density regulations as requirements but rather as a set amount of water allocated to the land, with the ability to be used as one pleases. 

“How (developers) build with that is sort of up to them. If they want to build low density housing, and they can do that with the amount of water that they would get … then great,” Bryce said. “And if they want to build high density housing, and they can show a way to do that, then great.”

According to research from the University of Arizona on water consumption, multi-family homes use, on average, 5.3 acre-feet of water per acre per year. 

Tim Beaubien, senior director of government affairs at Arizona Realtors, said the type of developers that participate in the program depends on the farmland involved. 

“Some (farmers) may sell off larger portions with a larger water allocation that could be conducive to larger single-family home plan communities,” Beaubien said. “Some of them might want to retire a smaller allocation of the agricultural land they own that might be more conducive to the condo.”

An additional limitation, Kamps mentioned, is that farms must retire land after relinquishing their irrigation grandfathered rights, as it is illegal to pump groundwater for irrigation without them. The entire process may take longer than can be financially sustained by an average farmer, resulting in lost profits for the farm and proving to be a deterrent to farmer participation, Kamps said. 

Now that builders are limited to 1.5 acre-feet per year, they have two tests to meet, creating a lot of risk, Kamps said. 

Patrick Bray, executive vice president at Arizona Farm and Ranch Group, said he sees some aspects of the program as “backwards,” such as the length of the process, and expects minor participation because of it. 

“It is problematic, and there are several limitations to the program,” Bray said. “That’s why I don’t see development going gangbusters because of this.”

As a producer himself, Bray said the convoluted process of applying for Ag-to-Urban would deter him from ultimately applying, especially because there is no guarantee of approval. 

“When you put hurdles into a program that create uncertainty, that’s not beneficial to the producer and it’s not beneficial to the developer,” Bray said. “It needs clear, concise direction.”

Beaubien said a lot of these immediate visible hiccups with Ag-to-Urban may take time to flush out and truly understand. 

“Once we figure out what type of land sales are being made as a part of this program, we’ll have a better understanding as to the type of development that goes with it,” Beaubien said.

Beaubiean said he sees the program as a “win, win, win” situation, as it helps farmers retire, encourages more housing and saves water. 

“It’s better to take somewhat of a positive step forward instead of no step at all,” Beaubiean said.