An Arizona trial court this afternoon struck down the Arizona Department of Water Resources’ new restriction on development known as the “Unmet Demand Rule”—a restriction limiting construction throughout the Maricopa County area—as a violation of state laws restricting the powers of bureaucratic agencies. Finding that the Department “did not comply” with state law “when implementing the challenged rules,” a Maricopa County Judge declared the water restrictions invalid.
The lawsuit involves the so-called “Unmet Demand Rule,” a restriction that fundamentally changed development in the Phoenix area—effectively strangling home construction in one of the fastest-growing residential markets in the country. Here’s how it works: Arizona law requires that home builders ensure that there’s enough ground water to provide for the needs of the specific development that’s being planned. That’s worked well for many decades, ensuring that even in Phoenix’s desert climate, homeowners have plenty of access to the water needed in their neighborhoods.
But Department officials recently decided to change course, adopting a new “Unmet Demand Rule” instead. It requires that developers now prove that there’s enough water supply for the entire “active management area” for 100 years, rather than just for the development being planned. And that’s a problem because Phoenix’s “active management area” is enormous—it’s the size of the state of Connecticut. That means the “Unmet Demand Rule” has effectively halted home construction in the entire Phoenix area.
Representing the Home Builders Association of Arizona, we went to court to challenge the Rule. As we pointed out in our briefs, the reality is that although Phoenix is a desert, there’s plenty of water to serve the needs of development. Yet the “Unmet Demand Rule” transformed overnight how home building could work in Maricopa County—restricting construction at a time in which the limited supplies of residences have caused housing prices to soar.
And that was illegal, because the Department had no power to adopt the “Unmet Demand Rule” in the first place. State law sets forth a process for creating new rules, and the Department didn’t bother trying to comply with those processes. Instead, it claimed that it had simply discovered somehow that this was what the law required all along. “This argument,” declared the judge in today’s ruling, “lacks merit…. [The Department] is utilizing criteria when reviewing applications that did not previously exist while claiming that it is still applying the existing rules.” What’s more, “this new expansion of the scope of the ‘affected area’ has created obstacles to obtaining the required certificates and resulted in [the Department] halting the issuance of [paperwork necessary for construction].”
Today’s ruling is a crucial victory for Arizonans, not just in Phoenix but throughout the state, who might well have been on the Department’s target list had it been allowed to get away with redefining the rules in this way. The case is also a reminder of the dangerous power that the pervasive “administrative state” wields over our daily lives—as unelected and unaccountable bureaucracies exert authority over every detail of construction, business, and property ownership, to cite just a few examples. The only solution to the arbitrariness and lawlessness of these agencies is to rein in their power—and for courts to ensure that they obey the law.
You can learn more about the case here and read the decision here.
Timothy Sandefur is the Vice President for Legal Affairs at the Goldwater Institute’s Scharf-Norton Center for Constitutional Litigation.
