Montenegro Claims Victory after Judge Flips AZ Housing Water Rule

PHOENIX — Arizona House Speaker Steve Montenegro is claiming vindication after a Maricopa County judge ruled that the state illegally required developers to secure substantially more water than their projects would use before receiving approval to build. Montenegro joined the Home Builders Association of Central Arizona in challenging the Arizona Department of Water Resources rule, arguing that the agency exceeded the authority granted to it by state lawmakers. Maricopa County Superior Court Judge Scott Blaney agreed, finding that ADWR could require developers in designated Active Management Areas to demonstrate a 100-year water supply but could not force them to obtain an additional 33% beyond their projected needs.

Montenegro previously called the requirement “government overreach at its worst,” saying it increased housing costs through an administrative policy that had not been authorized by the Legislature.

“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 even more out of reach,” Montenegro said when the lawsuit was filed.

Blaney wrote that state law plainly requires applicants to show enough water will be continuously available for the proposed development for at least 100 years. Requiring 133% of projected demand, he concluded, conflicts with the statute.

The ruling is the second recent legal setback for ADWR. Blaney separately voided an agency policy used to determine whether proposed developments had “unmet” water demand, finding that officials failed to follow the proper rulemaking process.

Attorney Andrew Gould, who represented the homebuilders, said the 133% requirement forced homebuyers to subsidize water for other users and contributed to higher housing prices. The broader effect on development remains uncertain. Gould contends that developers can now qualify by proving a 100-year supply of water from groundwater, surface water, effluent, or imported water.

Gov. Katie Hobbs’ administration warned that the decision could have the opposite effect, halting housing projects in water-scarce areas. Hobbs Spokesman Christian Slater said the state intends to appeal, arguing the ruling threatens housing affordability and Arizona’s long-term water security.