Could some Arizona rentals eventually require a 100-year water supply certificate? - The Arizona Republic

Could some AZ rentals require 100-year water supply certificate?

Could some Arizona rentals eventually require a 100-year water supply certificate?
Alexandra Hardle

Whether or not build-to-rent communities should be required to obtain a certificate of an assured water supply before being built was discussed Tuesday afternoon by the state's Assured Water Supply Committee.

Under current state law, developers in cities that don't have a 100-year assured water supply designation must get a 100-year assured water supply certificate from the Arizona Department of Water Resources before moving forward with construction plans. Valley cities that don't currently have such a designation include Buckeye and Queen Creek.

But the rules don't apply if the developer is building a rental. Because the assured water supply program is tied to the definition of a subdivision, meaning only developments that have six or more lots must have the certificate. Typically, single-family homes are each built and sold on a separate lot, while an apartment building is usually on one single lot. However, build-to-rent homes are also built on one lot, leading to what some experts are calling a loophole in the state's groundwater law.

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The Assured Water Supply Committee was formed by Gov. Katie Hobbs earlier this year to update the state's Assured Water Supply program and look into new policies. Ben Alteneder, chief legislative liaison for ADWR, said that continued development without the assured water supply negatively impacts the image of Arizona's ability to manage its water supply, as well as putting homeowners at risk.

Stuart Goodman, a lobbyist representing the National Rental Home Council, said despite the loophole, the market has driven the increase in build-to-rent developments. People may choose to rent a home instead of purchasing because they cannot afford it or simply don't want to deal with the maintenance that comes with owning a home.

Spencer Kamps, vice president of legislative affairs for the Home Builders Association of Central Arizona, said the state's economy is suffering after Hobbs released the new groundwater model earlier this year, resulting in some land prices decreasing and some housing projects being stalled. Instead of getting rid of a more affordable housing option for many, Kamps said the focus should be making purchasing a home more accessible, with the problem already exacerbated by the state's housing shortage.

"I recommend we take a pause on this until we find solutions to put for-sale housing into options for buyers outside designated providers," Kamps said.

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State Rep. Gail Griffin, who represents District 19, sponsored House Bill 2445 earlier this year. Although the bill ultimately failed when it got to the Senate, it would have prevented leases of one year or less from being exempt from the definition of a subdivision, effectively broadening who must obtain a 100-year assured water certificate.

Griffin said there is also an issue when it comes to fairness. Build-to-rent homes look just like a subdivision but currently are not subject to the same requirements when it comes to paying fees. Currently, subdivision developers are subject to fees to the Central Arizona Groundwater Replenishment District to pay for Colorado River water to replenish used groundwater. Because rental developments do not need a certificate of 100-year assured water supply, they don't have to pay those fees.

State Sen. Priya Sundareshan, who represents District 18, said her hope is to continue the conversation about subdivisions and build-to-rent homes during the next legislative session. The Assured Water Supply Committee, which is a part of the Governor's Water Policy Council, will be submitting recommendations before the end of the year.

Sundareshan thanked the National Rental Home Council for seeking parity, which refers to build-to-rent communities being treated the same way as for-sale houses.

"I do think this comes down to the ultimate consumer protection principle that we're trying to keep here with assured water supply," Sundareshan said.

While Sundareshan said she understands and cares about housing issues within the state, she doesn't think sacrificing consumer protection in the short term and leaving people without an assured water supply will be a long-term solution to the state's housing issues.

Kamps said the 100-year requirement initially came about as a sort of consumer protection for people making significant investments on houses. But that same protection shouldn't be required for those who are renting, Kamps said.

Who has access to groundwater?

Phoenix's water resources management advisor Cynthia Campbell said the investment is threatened, however, if build-to-rent communities are accessing groundwater that has already been allocated for subdivisions. Earlier this year, Hobbs released a report essentially stating that all groundwater in the Phoenix Active Management Area has been allocated.

After the meeting, Campbell clarified that sub-developments won't get their certificate taken away — Campbell was referring to the physical availability of the groundwater. At the end of the day, the certificate is a piece of paper, said Campbell. As long as there are some developments that have to prove 100 years of water availability and some that don't, but still have access to the same water, there are two different systems happening at the same time.

That raises the question of how much consumer protection is really being provided, Campbell said. While the water is here right now, the question is whether it will be there in 100 years.

Campbell added that's not to say Arizona is running out of water. The state has a proactive outlook on water, and the Governor's Water Policy Council is a continuation of that, Campbell said.

While the discussion is still in the early stages, several cities could be impacted if the definition of a subdivision is eventually altered. Buckeye, for example, might see an influx of build-to-rent communities and the city currently doesn't have a designation of 100-year assured water supply.

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The city released a statement to The Arizona Republic that said that the application of the Assured Water Supply Program to build-to-rent communities could "detrimentally affect" the city, with a further negative impact on the Valley and state.

The growing city is dedicated to providing diverse housing options, and the action would provide another roadblock to the affordable housing issue, the statement said.

"In our pursuit of providing affordable housing choices for our residents, we are actively striving to comply with ADWR's stipulations to attain designated status and secure control over our water future. However, the cities most impacted by the decisions made by the Assured Water Supply Committee still don’t have a seat at the table. While valuing the Committee's efforts, it is not representative of all the municipalities in the Phoenix AMA."