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Arizona’s economic growth depends on education, housing, transportation and child care, experts say

Key Points: 
  • Polling and analysis identify bipartisan policies with big economic returns 
  • Investment in education, housing, transportation, child care boosts growth 
  • Report hopes to reframe conversation around policy 

A melding of public polling and analysis of potential financial gains revealed a shortlist of issues with both strong voter consensus and high returns on investment. 

In a conversation for the Arizona Capitol Times’ Morning Scoop, Center for the Future of Arizona President Sybil Francis and Rounds Consulting Group President Jim Rounds broke down key areas of party overlap and recentered key policy priorities through the lens of state economic growth. 

Francis and Rounds found addressing access to child care, dual enrollment, postsecondary attainment, affordable housing and transportation infrastructure could bring the state billions. 

The two hope a portrait of both broad swaths of support and benefits to be reaped down the line will stir action by elected officials in the coming years. 

“It’s really about sharing findings and spurring action. That’s really our theory of change,” Francis said. “We picked five issues, but there’s many more, which we certainly hope to get to … We can gain momentum if we can apply this kind of lens to other issues.” 

Every two years, the Center for the Future of Arizona conducts statewide polling to find areas of agreement across party lines. To be considered a consensus, 50% of Republicans, Democrats and unaffiliated voters must support the issue. 

Among a long list of key issues, the center identified five topics with significant public buzz and worked to frame them in terms of statewide growth. 

“A lot of lawmakers, especially when revenues got tight, said government needs to run more like a business,” Rounds said. “Well, a business would invest in things that will yield more money than it’s going to cost to invest.” 

Francis similarly framed it in terms of infrastructure — not in the brick and mortar sense, but in terms of centering the framework of people’s lives. 

“Each of these items is, in its own way, what I have come to think of as infrastructure that’s necessary for our economy to work,” Francis said. “Education helps people advance their lives. Housing provides stability. Child care opens up opportunities to go back to school or work if you can afford child care. So all of these things really also end up hanging together in a really nice way.” 

In 2024, 93% of voters surveyed supported ensuring all high school students have access to dual enrollment and other early college opportunities, including 91% of Republicans, 94% of unaffiliated voters and 95% of Democrats. 

Given dual enrollments cuts to both time and money spent in post-secondary, the push it offers students to pursue and complete further education, and the resulting bump in earnings provided by a certificate or degree, Rounds projected one cohort of students leads to the creation of 160 jobs, $47.8 million in economic input and $3.5 million in state and local tax revenues. 

In the same vein, greater postsecondary attainment could generate $20 billion in economic input, $8 billion in wages and $740 million in tax revenues annually. 

Though as it stands now, the state sees a gap in job openings requiring post-secondary education and the 10,400 post-secondary graduates produced each year. 

And as for the public, 85% of voters — 76% Republican, 82% Independent and 97% Democrat — support increasing the number of students who pursue and complete additional education, be it at a university, community college or trade school. 

There’s also the problem of getting to work or school, which puts transportation infrastructure on the priority list — with 90% of voters agreeing that “investments in our freeways, streets and transit throughout the state of Arizona, are critical to moving people, goods, and services throughout the state and essential to our long-term economic success.”

In studying tax revenue funding for transportation in both Maricopa County’s Proposition 400, and Pima County Regional Transportation Authority’s RTA Next plan, the report found a potential increase of 102,000 new jobs by 2045, a $112.9 billion increase to local business sales and a general return of anywhere between $1.60 and $3.70. 

“I don’t know what lawmaker, whether Democrat or Republican, wouldn’t be in favor of something where you spend $1 of taxpayer money and you basically save $3, you generate an additional $3 that comes into the state,” Rounds said. 

In turning to housing, Francis noted that polling data on housing affordability was perhaps unnecessary, but the results cemented the issue’s place at the front of voters’ minds. 

Surveys showed broad concern over homelessness, rental prices and home prices, with consensus on the need for additional affordable housing options. 

Addressing the high cost burden and financial and survival strain on households across the state could add $6.9 billion to the economy, supporting about 126,400 jobs and generating $600 million in state and local tax revenue. 

Rounds acknowledged the partisan slants in housing but called for reframing the issue. 

“On the surface, the concept can be seen as left of center from just an economic perspective or a political perspective,” Rounds said. “This is building the economy. This is how good government is run. I think Republicans should be embracing this just as much as the Democrats.” 

Finally, the report analyzed access to child care, amid a lopsided supply and demand in licensed facilities and children seeking a slot. 

The American Institutes for Research projected about 44,000 slot gaps in available licensed child care openings and children with both parents participating in the labor force. The need is greater in rural communities, too, with a shortage estimated at 37%. 

The follow up return on investment analysis found that increasing access to child care and making services more affordable could generate more than $12 billion in annual economic input, $4.9 billion in labor income, $464.9 million in tax revenue and 115,400 jobs. 

“I thought, there’s no way that number can be right. We’re going to have to go back and double check it, and it was confirmed. And like, OK, we’re going to triple check it, it was confirmed,” Rounds said. “It’s nice to see something have a large impact.” 

Research from the Common Sense Institute of Arizona backed up the findings, too. In its own analysis of child care access, researchers found that closing the gap in child care could draw 50,000 back to work, create 132,000 new jobs, and bring in $13 billion in new personal income. 

“Resolving that affordability issue should have economic dividends for the state of Arizona,” Glenn Farley, director of Policy and Research, said. “The harder part of that is how to resolve it. I don’t think we’re claiming to have all of the answers.” 

Francis and Rounds similarly did not offer any immediate policy answers. 

“I feel like we’re setting a ball on a tee and waiting for someone to come up with a golf club and smack it in the right direction,” Rounds said. “We’re teeing this up … we’re pointing at where the flag is, and then we’re hoping that eventually they’ll get there.” 

Rounds continued, “It’s probably going to be like my current golf game, which will be on a par five. It’s like eight shots. So it may take a number of different swings to get there.” 

But, he said reframing could still prove useful in legislative sessions to come. 

“If we say that you’re going to be, again, either having taxpayer relief or better services for taxpayers, or both by implementing these things, the economy is going to be stronger. There’s going to be more jobs, then, lawmakers will be listening a little bit more,” Rounds said.

“It’s easier to get them to see this is how the math adds up, and here’s why you should defend it with your party, you being a supporter, you putting your name on a bill.”

State issues assured water supply designation amid ongoing lawsuits

Key Points:
  • EPCOR Utilities is the first recipient of an alternative designation of assured water supply
  • The designation was granted under new water rules adopted last year
  • ADWR is currently fighting two lawsuits against the rules

Gov. Katie Hobbs announced the first recipient of an alternative designation of assured water supply amid ongoing lawsuits against the Arizona Department of Water Resources. 

EPCOR Utilities is the first entity to receive a designation under the Alternative Designation of a 100-Year Assured Water Supply rules adopted by ADWR last year. The designation will allow residential construction to begin in parts of the West Valley after a two-year moratorium.

“This ADAWS Designation is going to save water, it is going to support sustainable economic growth, and it is going to create more housing,” Hobbs said in a statement. “Today we are again demonstrating that Arizona can, and will, continue to grow our economy while protecting our water.

In June 2023, Hobbs restricted the approval of new assured water supply certifications in the Phoenix Active Management Area due to a shortage of groundwater. The Alternative Designation of a 100-Year Assured Water Supply was approved in October 2024, allowing developers to explore new water sources and offset groundwater pumping in order to build in the area.

Under the ADAWS, new developments cannot obtain a certificate of 100-year assured water supply unless they can demonstrate that supply across the water provider’s entire service area, not just the development site. ADWR Director Tom Buschatzke celebrated the first designation under ADAWS in a statement released Oct. 7.

“I commend Governor Hobbs for her leadership in this effort, and I further commend my hard-working staff for the countless hours they have contributed to making this alternative pathway to an Assured Water Supply a reality for participating providers,” Buschatzke said. “The many stakeholders involved in this process have been intensely engaged and determined to find that next adaptation of water policy that allows incremental, sustainable growth while protecting groundwater. I heartily commend them as well.”

Hobbs’ announcement comes as ADWR fights two separate lawsuits from the Home Builders Association of Central Arizona (HBACA), one of which was joined by Senate President Warren Petersen and House Speaker Steve Montenegro. The first lawsuit alleges ADWR did not have the authority to create the ADAWS, and the second challenges the concept of an assured water supply altogether. 

The second suit, filed by the Goldwater Institute on behalf of HBACA, challenges the groundwater modeling requirements used for the 100-Year Assured Water Supply Program, which was created by the Groundwater Management Act in 1980. 

In a press release issued after the first lawsuit was filed in March, Republican leaders described ADWR as a “rogue” agency and characterized the groundwater pumping requirements as a tax.

“This is government overreach at its worst,” Montenegro said in a statement in March. “The people of Arizona elected us to defend their interests, not allow unelected bureaucrats to impose illegal taxes that make the American Dream of homeownership out of reach.”

Petersen repeated that characterization in a statement to the Arizona Capitol Times on Oct. 7.

“The Governor has unilaterally charged a 33.3% water tax, without legislative consent — and this new tax ultimately will be paid by Arizona families,” Petersen said. “This is exactly the abusive taxation that the Senate sued to stop, and it illustrates why taxpayers cannot trust Katie Hobbs with their checkbooks.”

Republican lawmakers have been frustrated with ADWR since late last year for using a rulemaking process to create the ADAWS without specific legislation directing it to do so. Legislators also expressed frustration with the Governor’s Regulatory Review Council, the agency responsible for reviewing and approving state agency rules, for giving the ADAWS the greenlight in 2024. 

Hobbs’ office and ADWR have disputed the characterization of the requirements as a tax and have defended the ADAWS as a way to preserve water supplies and continue home building in areas of the Valley that are dependent on groundwater.

Attorneys for ADWR filed motions to dismiss both lawsuits. An oral argument in the case filed by legislative leaders and HBACA is scheduled for Nov. 19, while the lawsuit filed by the Goldwater Institute on behalf of HBACA is currently awaiting a ruling from the Maricopa County Superior Court. 

Dracula Deals: A new species of development project that demands action

We are calling it: America has grown a dangerous new species of development project, a breed of deal that requires comprehensive new safeguards — right now. 

Let’s call them “Dracula Deals.” These vampires don’t just need garlic; they require tall legislative guardrails! 

Extractive, predatory mega-projects like data centers, microchip fabrication plants, electric-vehicle and EV battery factories — projects that consume huge amounts of land, water and electricity — are so disruptive and costly they require new rules.

Don’t believe me? On data centers alone, read the news from places like Memphis, Tucson, Atlanta, and Prince William County in Virginia — where data centers, with their voracious demands for power and transmission lines, water, land, air to pollute, and tax breaks — are prompting lots of public blowback. Or New Carlisle in Indiana, Hillsboro in Oregon, and Genesee County in New York. 

By new safeguards, I especially mean process rules within state legislation that will enable local residents to become fully informed well in advance, empowering them to decide whether they wish to oppose, support, or improve a proposed project. 

First must come robust advance disclosure. At least 90 days before any legally binding vote to grant a Dracula Deal, any kind of land use privilege or development incentive, all application materials and supporting documents should be posted online. 

Specifically: a full accounting of any state and local tax incentives being requested; cost-benefit analysis; the unredacted project application with the legal name of the facility’s end user (not just the developer, an LLC, or a project code name); how much standby power generation the facility will have and how much air pollution those standby generators will emit; how much water it will use and which contaminants it will discharge and in what concentrations; how much power the facility will use and whether it will require new power transmission lines; and how much noise pollution will occur at what decibel levels and at what distance from other land uses. 

Nothing at the 90-days’-prior stage online posting should be covered by a non-disclosure agreement (NDA). Such deals should be subject to at least three public hearings during those 90 days or more as well. 

Will these safeguards enable more community groups to weigh in to oppose or improve such deals? You betcha. That’s the point. The stakes are too high, and the damage being done to the quality of life is too profound to let Dracula Deals continue to stalk the American landscape.

If Tennessee had such rules in effect, Elon Musk’s xAI could not have suddenly started running dozens of methane gas turbines, polluting the already-high-cancer Boxtown community of South Memphis.

If Iowa embraced these safeguards, Waukee could not have granted Apple a $208 million tax abatement with only a few days’ notice.

If Arizona adopted process protections, residents of Tucson would have known that Amazon Web Services was the water-sucking company hidden by that “Project Blue” code name. Luckily, a massive community turnout blocked the deal at the last minute.

Cloud computing and artificial intelligence (AI) are vital industries benefiting our nation and the world. But they don’t need billions in tax breaks and they have no right to treat communities like roadkill when it comes to land use, water supply, air quality, noise, and the price of electricity. 

Elected officials know this issue has become a third rail. When Congress considered whether to ban state regulation of AI for 10 years (as part of President Trump’s Big Beautiful Bill), the Senate backed off, 99 to 1. 

Now it’s state legislators’ turn — time to acknowledge the need for Dracula Deal laws that empower communities to protect their health, their quality of life, and their pocketbooks. 

Greg LeRoy directs Good Jobs First, a national watchdog group on economic development incentives and corporate accountability.

Historic Phoenix neighborhood fears impact of new housing law

Key Points:
  • Residents of historic Phoenix neighborhood seek exemption from new zoning law
  • Law requires cities to allow duplexes, triplexes, and townhomes in certain areas
  • Phoenix residents are divided on the law, with some supporting affordable housing

Neighborhood leaders in the Willo Neighborhood Association are pushing back against a 2024 law that would allow property owners to build higher density housing options in the Phoenix neighborhood, including duplexes, triplexes, fourplexes and townhomes. 

Brad Brauer, president of the association, told the Arizona Capitol Times the group is seeking to preserve Arizona’s history by obtaining an exemption from House Bill 2721. 

“We don’t want to prevent someone from having a place to live or a better first house to own, but I don’t think that taking away from a neighborhood is the way to go about that,” Brauer said. “I really wish that the city and our state would come up with a better idea than to come in here with a bulldozer.”

The law, known as the “Missing Middle” law, will require cities of 75,000 people or more to allow the development of duplexes, triplexes, fourplexes and townhomes on single-family residential lots within one mile of a city’s central business district. It also requires new developments of at least 10 contiguous acres to allow for at least 20% of the properties to be designated for higher density structures. The law will take effect on Jan. 1, 2026. 

House Majority Leader Michael Carbone, R-Buckeye, received bipartisan support for the measure in the 2024 session. It passed with a supermajority in both legislative chambers. 

The law is intended to open up home ownership opportunities for Arizonans. During the 2024 legislative session, Carbone said that too many homes are built by corporate developers in Arizona, and that his legislation was meant to bridge the gap for a “lost way of living” that was once more common in the United States.

“The legislation reinforces a homeowner’s right to use their property as they see fit which, for some, may include adding accommodations for multigenerational housing or to generate additional income,” Carbone said in a news release after Gov. Katie Hobbs signed his bill. “The enactment of this legislation is a significant step toward solving the state’s housing crisis, and I am proud of the bipartisan effort that made it possible.”

Brauer said several residents of the neighborhood, located in central Phoenix, are worried the implementation of the new law will put the neighborhood’s status as a historic district at risk.

In the 2025 legislative session, Rep. Aaron Marquez, D-Phoenix, ran House Bill 2719, which would exempt historic neighborhoods from the law. It did not receive a hearing in the House Government Committee and Brauer said Willo residents are hoping to find a Republican sponsor for the bill next session. 

Not all Willo residents are opposed to the new law. Sebastian Del Portillo, a resident of the neighborhood and deputy campaign director with Organized Power in Numbers, said he believes the neighborhood should have a greater variety of housing types available for working-class Arizonans, particularly given its proximity to downtown Phoenix. 

“There are already bungalows and apartments and different kinds of housing in Willo. They’re already part of the character of the community,” Del Portillo said. “I think (the law) will bring more people into the community.”

Del Portillo said the Willo community is slightly affluent because residents have worked with the city to invest in their community for decades. He believes more affordable housing options in the neighborhood would give people more opportunities for social mobility.

“People are forgetting that they’re in the middle of downtown Phoenix, which is extremely dense,” he said. “People in the neighborhood need to accept that they live in a main city in Arizona. They’re not out in Peoria and they’re not out in Goodyear. They’re here. So, accept that you live in Phoenix and embrace that you live in Phoenix because that’s what makes it so cool.”

Neighborhood residents like Brauer say they don’t believe the law will lead to affordable housing being built in the neighborhood. The law has no provisions requiring affordable homes to be built, and homes in the neighborhood typically range from $300,000 to $800,000, according to the Historic Phoenix Group of Homesmart. 

“Why would they want to come into a neighborhood, buy an expensive property, demo it for probably $400,000 to $500,000, and after you get past all the environmental stuff as well, then build a fourplex on top of it. I’m not sure who that benefits,” Brauer said. “It would just be more expensive and smaller housing.”

The city of Phoenix is currently drafting a middle housing text amendment and overlay district since the missing middle law requires municipalities to update zoning ordinances by Nov. 5. City staff noted in an Aug. 26 community presentation that the city does not have the ability to exempt areas for historic preservation.

Christopher DePerro, a team leader for text amendments and special projects in Phoenix’s Planning and Development Department, said during the presentation that the law doesn’t require the city to allow two-story structures everywhere on a single-family zoned lot.

“We’re not treating either middle housing or single-family housing any differently from each other. It’s exactly the same,” DePerro said.

The City Council has scheduled a hearing on Nov. 5 to take action on the text amendment, and the Willo association is encouraging its residents to attend both that meeting and the city’s Oct. 6 Planning Commission’s meeting on the text amendment to voice their opinions on the issue.

Mortgage costs rise as interest rates climb

The average American homeowner with a mortgage paid more than $2,000 in monthly costs in 2024, about a 4% increase over the previous year when accounting for inflation, according to government data released Thursday.

The data from the U.S. Census Bureau shows homeowners are paying more because of higher mortgage costs driven by rising inflation and interest rates, as well as through higher insurance fees.

Jacob Fabina, a Census Bureau economist, said the median homeowner spends more than 21% of their income on mortgage payments, insurance, taxes, utilities and fees, “which points to an increased burden on homeowners.”

Nearly 60% of homeowners have a monthly mortgage payment, though almost a million people paid off their homes fully last year. Nationally, about 35 million homes are owned free and clear, without a mortgage.

“The main story is that the monthly cost of owning a home with a mortgage has increased about 40% since 2014,” said Nadia Evangelou, senior economist and director of real estate research at the National Association of Realtors. “Rents have gone up even faster. We see about a 55% [increase] nationally.”

The Census Bureau data shows homeowners in Washington, D.C., bear the highest monthly costs of about $3,181. The median California homeowner pays $3,001 a month, while residents in Hawaii, New Jersey, Massachusetts, New York and Washington state all pay more than $2,500 a month.

The median homeowner in West Virginia bears the lowest burden, at $1,272 a month. In Arkansas, that homeowner pays $1,375 a month.

Median monthly costs are rising fastest in the fastest-growing states in the nation. Year-over-year costs jumped more than 11% in Florida, and more than 10% each in North Carolina, Georgia and South Carolina.

Southern states tended to see larger increases in monthly payments in part because of rising insurance rates as carriers boost premiums to cover rising threats from natural disasters like hurricanes and winter storms.

The higher costs come as fewer Americans move between homes, and as pending home sales slump, largely due to higher interest rates.

An August report from the National Association of Realtors found pending home sales fell by 0.4% from the previous month. Sales decreased from the same period in the previous year in the Northeast and the West, while sales increased in the Midwest and the South.

But Evangelou said early signs that the Federal Reserve may lower interest rates — a possibility that grew after key reports found inflation may be easing and that the job market is weaker than expected — could push more buyers and sellers into the market. She said she expects the Federal Reserve to cut rates at least twice this year, beginning at next week’s meeting.

“Last year, we had a very hot-running job market. Now we see that the job market is cooling. This will help to give some more room to mortgage rates to come down,” said Evangelou. “This will help with the lock-in effect, this will help with affordability.”

Evangelou said a reduction in mortgage rates from 7% to 6% could allow as many as 5.5 million households to be able to afford a median home. About 10% of those households could be expected to move over the next 12 to 18 months, adding more than half a million home sales once rates are cut.

About a quarter of homeowners faced added fees on their condos or to homeowners associations last year, the data from the 2024 American Community Survey found. Those fees vary widely: About a quarter of homeowners who face such fees spend less than $50 a month, while about 1 in 8 spend more than $500 a month.

More than half of Nevada homeowners pay condo or HOA fees. So do more than 40% of homeowners in Arizona, Colorado, Delaware, Florida and Hawaii. By contrast, fewer than 1 in 10 homeowners in Rhode Island, North Dakota and Maine pay such costs.

Reid Wilson is a State Affairs national editor covering state politics and policy out of our Washington, D.C. office. 

Housing solutions require local and state partnerships

Ann O’Brien

Housing affordability isn’t a Phoenix problem, a Tucson problem or a Flagstaff problem — it’s an Arizona problem. The solution isn’t found in any single policy or political party — it requires unprecedented collaboration between local municipalities, regional partners and state leadership.

As Phoenix vice mayor, I’ve spent the past year developing a comprehensive Housing Solutions Plan that demonstrates how strategic coordination can reduce red tape and increase housing options for all income levels. My 31-point framework offers a roadmap not just for Phoenix, but for communities throughout Arizona dealing with similar challenges.

Local innovation, regional efficiency

Phoenix must lead by example. That means accelerating housing production, preserving the homes we already have, increasing the number of units affordable to working families, and diversifying housing types to meet the needs of all income levels. My plan streamlines development through expedited permitting for small-scale projects and calls for a fee reduction or waiver program for projects that meet affordability requirements, making it easier for developers to build more housing options for low-income households. 

I’m also advocating for an alternate means and materials commission, made up of city staff, builders, engineers and sustainability experts to regularly review and recommend alternative construction materials and methods. It worked in Portland, where the city approved a cross-laminated timber for a 12-story mixed-use building, allowing more mass timber buildings in the region. Phoenix can set up its own process to vet and approve materials without compromising safety, while helping builders save time and money, giving the city more tools to meet housing and sustainability goals, and making it easier to adapt to changing supply and construction needs. 

Regionally, we should have a dedicated Housing Committee with the Maricopa Association of Governments (MAG) to coordinate strategies across the region. Housing challenges don’t stop at city boundaries and neither should solutions. That’s why my plan includes developing a shared set of building plans for common housing types that can be used across the region. Builders and homeowners can select from pre-reviewed and pre-approved designs to reduce permitting time and design costs. We should also create standardized development processes across municipalities to avoid unnecessary differences that stall projects and increase costs, especially for small-scale infill development.

State leadership

In Phoenix, we banned source-of-income discrimination to protect vulnerable residents. It’s time for Arizona to do the same. State leaders should also require all cities and towns to provide a basic level of service to support unhoused people and prevent homelessness. Such a law would create a more balanced system, help people stay closer to where they live, and ensure support is available no matter where someone falls into crisis.

Arizona’s eight-year statute of claim for construction defects is one of several factors making it harder to build townhomes, condos and other “missing middle” options. With an extended liability window, developers face substantially higher insurance premiums and a greater risk of lawsuits, even years after construction is complete, which discourages investment in smaller-scale, affordable housing that Arizona badly needs. State lawmakers should lower its statute of repose, as Nevada did, which led to a 15% increase in building permits for shared-wall housing.

Shared responsibility

Stable housing provides the foundation for community well-being. A home can be a key to building financial wealth, opening the door for generations to come. Emotionally, it brings a sense of pride and belonging. Mentally and physically, it provides consistency that residents need to attend school, go to work and plan their futures. Whether rented or owned, a reliable place to call home empowers people to grow, dream and thrive — and when individuals thrive, so do businesses, cities and our state. 

With coordinated effort across all levels of government, Arizona can ensure that everyone, regardless of income levels, has the opportunity to build their future here.

Phoenix Vice Mayor Ann O’Brien chairs the city’s Economic Development Subcommittee.

Arizona cities to seek legislation limiting short-term rentals

Key Points:
  • League of Arizona Cities and Towns seeks legislation to regulate short-term rentals
  • Municipalities want to limit short-term rental licenses to address housing challenges
  • Short-term rentals make up 10% of local housing stock in some areas

In the next session, the League of Arizona Cities and Towns will pursue legislation that allows municipalities to further regulate short-term rentals.

Members of the league’s resolutions committee approved seven policy goals to pursue as legislation for the 2026 legislative session during the organization’s annual conference Aug. 19-22, including an item that would allow cities to limit the number of short-term rental licenses issued in their jurisdictions.

“The focus will be on addressing the continued growth of investor-owned short-term rentals, which have contributed to housing challenges in many communities,” said Tom Savage, the league’s legislative director. 

According to a resolution prepared by the league, municipal leaders are seeking legislation that would allow them to cap the number of short-term rentals in an oversaturated area and reduce the threshold for license revocation to take action against properties that have repeat violations of city ordinances. 

The resolution states that short-term rentals have greatly impacted housing affordability and availability in some areas of the state, particularly small communities. Some areas with high tourism visitation are seeing short-term rentals make up as much as 10% of the local housing stock. 

One area of the state that’s been affected greatly by short-term rentals is Sedona. A 2024 community report from the city notes that 18% of the city’s housing stock was comprised of short-term rentals, leading the City Council to declare a housing shortage emergency and designate a parking lot for workers in the city to sleep in their vehicles if they’re experiencing homelessness through the Safe Place to Park program. 

Efforts to change state law for short-term rentals have gone unheard in recent legislative sessions. Republican and Democratic lawmakers introduced legislation related to short-term rentals in the 2025 legislative session, but no bill was heard in any committee despite Gov. Katie Hobbs urging the Legislature to address the issue in her State of the State Address at the beginning of session.

Sen. John Kavanagh, R-Fountain Hills, sponsored Senate Bill 1141 during the session, which would have shortened the threshold for cities to suspend a short-term rental license. Kavanagh was recently named Senate majority leader following the end of the recent legislative session.

The league has stayed away from lobbying efforts against short-term rentals at the Capitol as part of a 2022 moratorium league officials agreed to with Airbnb and Expedia Group that prevented the group from lobbying for local regulation for three years. That deal was a result of a 2022 law that allowed municipalities to issue short-term rental licenses.

That moratorium also prevents the league from attempting to repeal a 2016 law that prohibits cities and towns from banning short-term rentals until 2027, although individual cities have lobbied for changes to the statute individually. 

Counties are also seeking changes to short-term rental policy. Mohave County Assessor Jeanne Kentch hoped for legislation last session that would codify assessing properties that are used for renting for periods of less than 30 days in the same classification as hotels and motels. 

Rep. John Gillette, R-Kingman, sponsored the legislation with House Bill 2316, which was among the short-term rental bills that didn’t get a hearing. 

“When nobody likes it, it goes in a drawer,” Kentch said. “That’s what happened to my bill.”

Kentch said she believes her bill would create a more equitable environment for hotels and motels and make it easier for assessors in the state to determine their assessments for properties that are operating as short-term rentals.

HB2316 would have specifically applied to properties with transient renters. Kentch said she’s not looking to include a primary property that rents out an accessory dwelling unit to long-term renters with the bill. 

“I’m not fair to my hotels right now because I’m classifying them as commercial but I’m not classifying the house down the street that’s doing the exact same thing as commercial,” she said. 

According to data collected by the Arizona Neighborhood Alliance, a statewide organization of neighborhood leaders, there were more than 70,000 short-term rental units across the state in 2024, but there were only about 5,550 short-term rental transaction privilege tax licenses accounts established that year.

A July report from AirDNA, a vacation rental and analytics company, indicates about a quarter of short-term rentals in the state are “professionally managed” by a company that has at least 21 listings in the state. 

AirDNA didn’t have data about ownership of vacation properties, but the company shared with the Arizona Capitol Times that the two companies that manage the most properties in the state, Evolve and Vacasa, typically don’t own the assets they manage. 

Gov. Hobbs allocates funds to help first-time buyers in Arizona

Key Points:
  • Arizona governor allocates $5 million for down payment assistance
  • Single applicants making under $94,000 qualify for assistance in Phoenix
  • Qualifying buyers must complete a homebuyer education course to receive assistance

Some would-be homeowners in the state’s largest counties could get a helping hand from the state.

Gov. Katie Hobbs has allocated $5 million from the state’s share of federal COVID relief dollars to expand a program started last year that provides down payment assistance to first-time home buyers. That’s enough to provide $9,000 for 75 would-be homeowners in Pima County. The governor’s office said the additional dollars should help to purchase 65 homes in Maricopa County.

All this is in addition to an earlier $13 million program that provided financial assistance to about 500 home buyers throughout the state.

That includes rural counties, which, according to the governor’s office, already received their second infusion of dollars. With both pots of money, the governor’s office said 589 homes have been purchased through the program in the state’s 13 rural counties.

With the new dollars for Maricopa and Pima counties, the total number of Arizonans getting a financial bump from what is called the Arizona is Home program should reach 1,000.

All of this started as home prices in Arizona had skyrocketed, leaving many families unable to afford the monthly mortgage payments.

Those price increases have cooled somewhat with more homes on the market, but they remain largely unaffordable to most first time home buyers. 

Redfin, which tracks such things, says that the median sale price of a home in Phoenix in June was $455,722, up 0.2% since last year. But homes were remaining on the market longer.

In Tucson, Redfin reports a median sale price of $332,690, up 2.7%. But there, too, homes remained on the market for 61 days before sale, up 11 from the prior year.

“By putting homeownership within reach, we’re helping working families unlock the Arizona Promise and build their future right here in Arizona,” the governor said in a prepared statement. “Through Arizona Is Home, we’ve turned the dream of owning a home into a reality for hundreds of Arizonans, and now even more Arizonans will have that same opportunity.”

The extra funds are limited to first-time home buyers who have been Arizona residents for at least six months.

It starts with a cap on income equal to 120% of the area median income.

In Tucson, that’s $80,760 for individuals and $115,320 for a family of four.

The figures are higher for the Phoenix area: $94,350 for single applicants and $134,650 for families of four.

But both programs also require buyers to have a credit score of at least 640, which is considered below average, as scores generally range from 300 to 850, with higher figures considered exceptional. That score is based on several factors, the largest being whether someone makes timely bill payments and how much of their credit they have used.

In all cases, those who qualify must attend a homebuyer education course.

Hobbs has acknowledged that programs like this, as well as others designed to make homes and rentals more affordable, deal with just a small portion of the problem.

Lawmakers have approved various measures designed to address aspects of the issue. That includes requiring many cities to allow homeowners to build “casitas” on their property and mandates for communities to allow for more duplexes, triplexes, fourplexes and townhomes.

There is even a new law to allow construction to begin as early as 5 a.m. to expedite home building and provide heat protection to workers.

But what has eluded a deal has been a “starter home” proposal designed to override local zoning regulations to provide more affordable housing.

Proponents want to allow for smaller lot sizes, decreased setback requirements and elimination of requirements from cities like rear-yard patios and landscaping.

Cities and neighborhood groups have balked at the changes.

And there’s another potential sticking point: whether the homes built should be required to be sold to those who will live in Arizona, or if they could be snapped up by investors.

Hobbs vetoed a 2024 version of the bill. This year, that legislation failed to reach Hobbs.

Jake Hinman: Affordable homes, American principles

The “Arizona Starter Homes Act” failed to become law again in 2025, marking the second consecutive year it was not enacted. Lawmakers have attempted to pass zoning reform for multiple years now, but have had little success. Jake Hinman, a lobbyist with Mavrik Policy Group and one of the bill’s outspoken supporters, discussed the Starter Homes Act with the Arizona Capitol Times.

The questions and answers have been lightly edited for style and clarity. 

What are the biggest challenges to the housing market?

The most obvious challenge is we’re in a huge supply and demand deficit. There simply aren’t enough homes and not enough options out there for people to choose something that fits within their budget. Arizona continues to be one of the fastest growing states. Maricopa County continues to be one of the fastest growing counties in the country. Our state is doing a marvelous job with its growth and implementing policies to attract new investment. Because of that, people are moving here and families are growing in Arizona and we just simply don’t have enough homes to fill that market gap. Imagine that you have a dinner party and you have 10 chairs around your dinner table and you invite 11 guests over to that dinner party. No matter what, there will be one person without a chair at the dinner party. That’s sort of where we’re at with housing in Arizona and across the country right now. Because so many housing types have been made illegal, the market is left with very few options to choose from. So, you get very affordable housing because it’s subsidized, or you typically get very expensive houses as your option, but we’ve cut essentially everything out in the middle.

The Starter Homes Act could be one of those mechanisms. Sell me on the bill. 

It all kind of goes back to how we’ve outlawed or made illegal a variety of housing types that were once abundant across Arizona and abundant across America. One of those types are what we just casually call starter homes. These were the homes that our parents and our grandparents bought in their mid-20s and late-20s, and it’s what they used to build their equity and climb up the housing ladder. Throughout this entire process, I would talk a lot about how the average age for first time homebuyers is now 38 years old. The average home across Greater Phoenix is close to a half a million dollars right now. When you think about all of these Arizonans who desperately want to lay down their roots and have access to the American Dream, they’ve been simply boxed out of it all. The bill, we thought, was pretty straightforward. It’s just simply saying if somebody owns land, they should be able to build a modest or small house on it. These homes were once abundant in Arizona. If the market desires it, let builders bring those homes to the free market. These exact homes were once abundant in Arizona, but if we’re forcing an entire generation to wait until they’re 38 years old to purchase property and to obtain their American Dream, I think we have bigger societal issues that are going to be at play here, aside from economic issues of being able to attract a good workforce in Arizona.

This is an issue I know you’re passionate about. Why is it important for you?

This issue really goes back to the birth of our nation. America was founded on a number of principles, but one of those was private property. If you look at the early teachings of our founding fathers, you know that private property was a critical component in the formation of our country. It feels that, over the years, we’ve moved away from that to where a private land owner in the state of Arizona or across the country has lost control of their property, and now the government or the neighbors now have more control of somebody’s private property. Imagine telling Thomas Jefferson or James Madison that one day the government will be in the position of telling a private property owner what color to paint their house or what type of roof shingles they have to use or the type of exterior lighting for their house.

Were you encouraged by lawmakers’ attention to this issue?

There is so much interest in this on both sides of the aisle, and you’re seeing lawmakers who may not typically work together, come together on this issue to try to bring solutions for Arizona families. This is one of the top issues for voters. Constituencies really care about this right now because there’s a lot of people who are hurting. They’re hurting because rental rates are high right now, and they can’t access home ownership. I think lawmakers across the aisle are recognizing that and we are seeing other great policies to legalize backyard accessory dwelling units and other middle housing options get across the finish line. To me, that’s incredibly encouraging. 

What’s going to be your approach in the next session?

I honestly don’t know what next year will hold. I don’t know if starter homes will come back, to be quite honest with you. We’ve had two years where we haven’t been successful, so maybe we’re not ready for starter homes and home ownership just yet in Arizona. I hope this will be the year where we see local action.

What other legislation were you involved with this session?

I had the pleasure of working on a number of issues this year. One issue that I was really excited about working on was school lunches with House Bill 2164. This one was really interesting from the beginning. Health and wellness has always been an issue near and dear to me so it was very rewarding to work on this one. Probably what made it even more special was the fact that my wife was heavily involved. The bill is pretty straight forward. It basically says, any school sponsored meal or snack can’t contain eleven ingredients that we list off in the bill. Those ingredients are mostly synthetic foods dyes and some other ingredients that have been linked to certain health issues. But the basic idea is, if taxpayers are going to pay for school meals, then we can at least try to make these meals healthier with less ultraprocessed ingredients.

How did you feel about getting that bill to the finish line?

Honestly, I don’t think I was expecting the level of support and excitement. In fact, Rep. Leo Biasiucci and I often joke that we thought this bill would just end up being a conversation starter and maybe not get across the finish line. I don’t think either of us thought it would pass unanimously. Right from the start, we had so much support and I think that support, and frankly the national conversation that we are having around food right now, certainly helped in a big way. We had so many voices involved in this one. Biasiucci and Sen. Janae Shamp were incredible. Rob Schneider has been a huge vocal supporter and has been with us since day one and really brought a ton of energy and excitement around this bill. Calley Means, whose sister Casey has been nominated for surgeon general, was a huge proponent of the bill. All of this was capped off in April when, after the bill passed unanimously in the Senate, Secretary Robert F. Kennedy Jr. came to Arizona to talk about the bill. This one really was such a great team effort.

Arizona approves first water transfer to rural areas for new construction

Key Points:
  • Arizona approves first-ever water transfer from rural Arizona to active management areas
  • Buckeye is now allowed to withdraw nearly 6,000 acre-feet of water from Harquahala basin
  • Transfer will serve over 17,000 homes in Buckeye for 110 years

State water officials approved the first-ever legal transfer of water from rural Arizona into one of the state’s “active management areas” on July 18.

The Department of Water Resources will permit Buckeye to withdraw up to 5,926 acre-feet of water annually from the Harquahala basin in western Arizona for up to 110 years. That is enough to serve more than 17,000 homes.

In the same order, the agency said Queen Creek can take up to 5,000 acre-feet a year, sufficient to build about 15,000 homes.

All this comes two years after DWR refused to issue any permits for new subdivisions in some areas of both communities after concluding they lacked the legally required 100-year supply of water. That resulted in a lawsuit by the Home Builders Association of Central Arizona, which charged that the agency’s modeling is flawed.

None of what occurred Friday is likely to end the legal disputes over how the state implements the historic 1980 Groundwater Act, a foundational water regulation measure which ties development to available water. However, it could alleviate some of the pressure on developers who have argued that the inability to build in the far suburbs of Phoenix has barred them from developing on some of the last affordable land, which, in turn, has driven up the price of housing in Arizona.

It also is unlikely to provide help to residents of the state’s other active management areas who are running into problems maintaining the necessary supply of water for sustained growth.

That’s because the law the agency used to provide the permission to Buckeye and Queen Creek spells out that there are only three places outside active management areas where transfer of water is allowed. Harquahala is the largest of them.

But there are concerns that this approval, touted in a press release from Gov. Katie Hobbs, amounts to only an interim solution to a much larger problem.

Underlying all of this is the need for developers to demonstrate a 100-year supply of water to be state approved for construction.

That’s not an issue for municipal and private water companies, which can demonstrate they have sufficient water, including through contracts to obtain supply from the Colorado River.

They are presumed to have their own assured supply. So anyone the utility agrees to serve who is seeking to build homes within that service territory is presumed to have the amount of water required and can start construction without further approval.

Queen Creek and Buckeye, however, don’t have such assurances, which led state water chief Tom Buschatzke to conclude in 2023 that the state cannot guarantee there will be enough groundwater to support new development in these areas.

But Buschatzke said construction can take place if developers find sources beyond what’s under their land. And what occurred Friday paves the way for some of that.

“This approval from the Arizona Department of Water Resources unlocks another water supply that Arizona can use to support our communities, economy, and way of life,” Gov. Katie Hobbs said.

Senate Minority Leader Priya Sundareshan acknowledged that what DWR did is legal and in accordance with decades-old laws that set aside water beneath the Harquahala Valley for purchase from landowners to be piped where needed. But the Tucson Democrat said she remains skeptical of the longevity of the solution.

“I don’t think it solves anyone’s problems really on a permanent basis,” said the Tucson Democrat. Beyond that, she said the whole concept of denoting one area of the state as a place that other areas can raid for water is “philosophically wrong.”

That impact of such use has crossed the mind of Sarah Porter, the director of the Kyl Center for Water Policy at Arizona State University.

“The total amount of water that Buckeye and Queen Creek can withdraw over 110 years is a great deal of water,” she said, amounting to more than a million acre feet. “This is an area where less than 2% of the rain that falls results in recharge.”

So is the transfer good news? 

“It’s good news for Buckeye and Queen Creek,” Porter said. “These are two of the communities that are more challenged to have continued development unless they bring in new water supplies.”

But Porter, like Sundareshan, said this inter-basin transfer isn’t a total solution to ensuring that Arizona has enough water to continue to grow — especially with shortages of Colorado River water and the chances that the recent drought will shrink available supplies.

“Increasingly, there’s a recognition that we need to find some other water supplies,” Porter said, both for the Phoenix and Tucson areas.

“It’s going to be incremental,” she said. “And this is one of those incremental opportunities.”

She said that some other options are already being advanced.

One is the newly approved “Ag-to-Urban” legislation, which allows developers to acquire water rights from farmers who are retiring their land from agriculture.

Sundareshan said that it is the preferred choice when considering taking water from the Harquahala Valley, mainly because it ensures that one area of the state is not robbing the supply from another area. In fact, the new law not only limits where this new development can occur — within a mile of the retired farmland — but also caps the amount of water that can be withdrawn.

What’s also likely to be a source is “advanced water purification,’ a process that essentially purifies sewage to the point where it can be put back into the drinking water supply. While some communities are beginning to move in that direction, there has been some pushback against this approach.

And there’s something else that will prevent new construction from starting in those far edges of Phoenix that are affected.

Simply getting permission to transfer the water is just the first step. State water officials said the cities will need to demonstrate that they have a method for delivering the water, a process that could take years and millions of dollars, before any building permits that rely on that water are issued.

Despite that, officials of both cities said they were pleased by Friday’s development.

“This has been years in the making and will help diversify the town’s water portfolio with a more sustainable source of water that has been set aside for growth in the state,” said Queen Creek Mayor Julia Wheatley in a prepared statement. And Eric Osborn, her Buckeye counterpart, called it “a significant development … to ensure our current and future residents continue enjoying a great quality of life.”

There’s also a benefit for Harquahala Valley landowners, who will gain financially as they exit the farming business.

“This transition from farming to renewable energy was the long-term plan for this area, and we are grateful to be part of this process,” said David Lamoreax, who said his family has been farming in Arizona for more than 100 years.

Affordable housing: An issue yet unsolved

Key Points:
  • Lawmakers had ambitious goals for housing in 2025
  • Very little consequential legislation passed on the issue
  • Certain initiatives set to expire in 2026

Gov. Katie Hobbs outlined ambitious goals for Arizona’s housing policy during her State of the State Address in January, but some stakeholders think lawmakers punted those issues with little accomplishment. 

Hobbs had a major win with Senate Bill 1611, the “Ag-to-Urban” bill that allows high-water users like farmers to convert their farms into lower density housing, a far less water intensive alternative. According to the governor’s office, the measure could result in the construction of up to tens of thousands of new homes and conserve nearly 10 million acre-feet of water. 

The sponsor of the measure, Sen. T.J. Shope, R-Coolidge, called the new law the “most consequential piece of groundwater conservation legislation” since the 1980 Groundwater Management Act. Incidentally, the legislation could also have the dual effect of alleviating housing shortages by providing developers more leeway with water restrictions.

“Hard-working Arizonans will be able to pursue their American dream of homeownership as home supply increases in Maricopa and Pinal counties and prices naturally ease. Our farmers, who are ready to retire, can reap the benefits of their land while also allowing the state to save water,” Shope said in a news release after Hobbs signed the bill. 

Several housing policy advocates still felt unsatisfied with the 57th legislative session after the state’s Low-Income Housing Tax Credit program didn’t receive new funding for an extension.

Hobbs called for a LIHTC extension in January, along with cutting “red tape that’s driving up” the cost of housing and a $15 million appropriation for the Housing Trust Fund, but lawmakers accomplished little on those goals. 

A group of Republican and Democrat lawmakers formed a bipartisan housing caucus at the beginning of the session to work on the “Arizona Starter Homes Act,” Senate Bill 1229, and other housing issues. 

The Starter Homes Act proposed targeted municipal regulations on the construction of new homes, but lawmakers were unable to reach an agreement with cities, which believed the issue overrode their zoning authority, and the measure never received a vote in the House. 

The measure would have prohibited cities from requiring design features of homes like the inclusion of garages or specific amenities and floor plans. It called for minimum lot sizes of 3,000 square feet with the idea of allowing developers to build smaller homes with design features that homebuyers could afford. 

This was the third consecutive year that a comprehensive zoning bill was introduced at the Legislature. Former Republican Sen. Steve Kaiser watched as his zoning reform bill failed in the Senate in 2023, and Hobbs vetoed the 2024 Starter Homes Act after it received heavy opposition from municipalities.  

The League of Arizona Cities and Towns proposed its own Starter Homes Act bill in 2025 with Senate Bill 1698, but that measure wasn’t supported by legislators and failed to get a committee hearing.

All of this points to a complex issue being punted further and further down the road by legislators unable to reach a reasonable agreement with stakeholders. 

“We had a responsibility this session to deliver on affordable housing, and we failed,” Sen. Analise Ortiz, D-Phoenix, said during her vote for the state budget. 

The league’s bill would have limited starter homes to individuals or families with incomes below 120% of the area median income, and it would have limited occupancy for up to 15 years, while allowing cities to have more control over density in neighborhoods than SB1229 offered. 

League officials argue these provisions guarantee homes are sold to Arizona residents instead of being bought by corporations which would then turn around and list the homes on the market at a higher price while maintaining local communities.

“Buying an affordable house is a legitimate challenge across Arizona,” said the League’s Executive Director Tom Belshe in a news release. “We are looking out for the needs of Arizonans and are asking legislators to ensure that hard-working residents are able to buy homes – not out-of-state investors and speculators.”

Although the major housing goals for the governor and other lawmakers were punted to 2026, Democrats celebrated some small housing wins. 

Senate Minority Leader Priya Sundareshan, D-Tucson, noted in her budget vote that it includes $16.5 million for homelessness services such as eviction prevention and shelter operations for youth and families. 

Hobbs’ Homes for Heroes initiative also got $2 million, and that program helps keep military veterans from being unhoused. 

All of this equates to affordable housing remaining a key issue in 2026 for legislators looking to make the American dream a little more realistic for Arizonans.

Funding cuts and rising costs create dangerous summer conditions

Katie Martin

For the past 25 years, it has been my privilege to lead a team that provides a variety of home improvement programs for Arizonans of all ages. I’ve seen firsthand how a properly weatherized home or a paid utility bill can mean the difference between life and death during our brutal summers. 

In a state where summer temperatures regularly soar into the triple digits, rising utility bills and non-working or failing cooling systems can be fatal. But this year the problem isn’t just the price of keeping cool — it’s the erasure of the programs that help our most under-resourced neighbors survive the heat. 

On April 1, 2025, nearly the entire staff administering the Low-Income Home Energy Assistance Program (LIHEAP) was laid off. LIHEAP and the organizations it supports assist 6.2 million low-income households each year, including seniors, families with children, and people with disabilities. It helps fund the work we do at AllThrive 365: weatherizing homes, providing utility assistance, delivering meals and more.

One of the most vital programs supported by LIHEAP is the Weatherization Assistance Program (WAP). Since its inception in 1977, WAP has been a cornerstone of energy equity and housing stability, backed by decades of strong bipartisan support. With that support from both sides of the aisle, WAP has transformed the lives of more than 7 million households nationwide, and more than 26,000 in Arizona alone. For many low-income families, seniors and individuals with disabilities, weatherization is the difference between hardship and health, between surviving the summer and thriving at home. It’s not just about lowering utility bills — it’s about preserving health, restoring dignity and, in many cases, saving lives.

The uncertainty surrounding the future of these federal programs is already sending ripple effects across the country. In Maricopa County, where last year’s extreme summer heat claimed 602 lives — a slight but meaningful decrease from 645 in 2023 — we were just beginning to see signs of progress. Programs like the Weatherization Assistance Program were playing a critical role in that shift, helping vulnerable residents stay safer in their homes. But now, with no clear path to restored funding or operational capacity, that progress is at risk. So far this summer, local emergency departments have already reported over 1,000 heat-related illness visits — and we haven’t even reached the hottest part of the season. The stakes couldn’t be higher.

As a direct consequence of these possible funding cuts, AllThrive 365 was forced to halt intake of new clients for our Weatherization Assistance Program as of April 22. Our wait-list number has grown significantly since this hold was issued, and we are currently facing a backlog of more than 500 individuals and families with an urgent need for safer, healthier, and homes with a lower financial energy burden. 

For decades, this program has allowed Arizonans to age in a place with dignity, reduced hospitalizations from chronic conditions like asthma and COPD, and drastically lowered monthly utility bills. Without it, tens of thousands are now at risk — not just of discomfort, but of serious health consequences.

This is more than a housing issue — it’s a public health emergency. Heat-related deaths have reached alarming levels among the most under-resourced members of our community. And with no secured LIHEAP funding for the coming year, we fear those numbers will rise.

Roughly 20,000 AllThrive 365 participants rely on federally funded programs. Now, they’re left in limbo, unsure where to turn for help. Meanwhile, the cost of cooling continues to rise. The National Energy Assistance Directors Association (NEADA) estimates that the average family could pay $784 to cool their home this summer. For many Arizonans already struggling to make ends meet, that’s simply out of reach.

The combination of record-breaking heat and shrinking federal dollars is a dangerous one. AllThrive 365 is urging Congress, state, and local leaders to act and prioritize funding for LIHEAP and the Department of Energy’s weatherization programs. We can’t afford to put more lives at risk due to a lack of funding.

I’ve dedicated my career to helping people live with dignity and safety. But now, I’m watching as decades of progress unravel. We need Congress, state and local leaders to act — urgently. Restore LIHEAP. Fund weatherization. We can’t let another summer become a death sentence.

Katie Martin is the AllThrive 365 Home Improvements Program administrator.

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