The rise in ready-made homes in the West Valley and elsewhere could come as a result of what one expert called an oversight of the state’s groundwater laws.
If the land is to be divided into six or more parcels, the developer must obtain a 100-year guaranteed water supply certificate from the Arizona Department of Water Resources if the Arizona Department of Water does not already have a 100-year guaranteed water supply designation. This is probably also true for condominiums, as buyers typically purchase land that includes housing, and developers typically build six or more homes.
However, if the house is built on only one lot, as is often the case with rental housing, no certificate is required. Cathy Ferris, senior fellow at the Kir Water Policy Center and former state water commissioner, said secure water programs are tied to the definition of plots.
“I think we should include more, not less, of water supply issues,” Ferris said. Leasing and industrial projects, for example, are types of development that also require a 100-year guaranteed water supply, she said.
What is ready-built rental housing?
According to Adam Baug, zoning and land use attorney at Withy Morris Boe, there have traditionally been two types of housing: affordable homes and multi-family homes. About ten years ago, housing to build and rent appeared on the market. These are homes, but Bo said they will be rented rather than sold to own.
The housing became popular because many people don’t want to be homeowners, but at the same time they don’t want to live in apartments with people living above and below them, sharing walls. Bo said construction rental homes also don’t have the same maintenance obligations as homes.
In some ways, ready-made homes work just like apartments. Also, while it may be easy to imagine building an apartment on one plot of land, he can also build a ready-made house on one lot.
In Buckeye, one of the fastest growing cities in the country, the housing market may shift to rentals over the next few years. Developers there can no longer rely on groundwater to supply homes for sale, and Buckeye does not have his 100-year sure water supply designation.
Governor Katie Hobbs announced earlier this year that groundwater in the Hassayampa Basin, where Buckeye extracts most of its water, is no longer available to developers. Instead, developers will have to find another source of water.
In June, a similar regulation was expanded to cover all groundwater within the Phoenix Active Management Area, an area where certain regulations by the Arizona Department of Water Resources apply to groundwater.
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Construction rental housing developments currently planned in Buckeye include Avilla Marigold, being developed by NexMetro Communities. In May, some Buckeye residents voiced their opposition to the development on the city council, with some expressing concerns about the city’s water supply and others concerned about the potential influx of traffic into the area. The development is located west of the southwest corner of Jackrabbit Trail and Thomas Road.
The development was approved by the City Planning and Zoning Commission and the Buckeye City Council in May. The lease period will be one year or more, but since all development will be on the same site, a water supply security certificate will not be required. NexMetro Communities did not respond to a request for comment.
Is the rental exclusion a loophole in the groundwater law?
When the Groundwater Management Act was enacted in 1980, Ferris said built-for-sale homes weren’t intentionally excluded from the 100-year water security requirement, they simply weren’t built at the time and weren’t even considered. Another concern for the state water department is that it has no way of knowing what will happen to these homes in the future, Ferris said.
In addition to construction rental housing, the Guaranteed Water Supply Program currently does not require industrial companies to obtain a Guaranteed Water Supply Certificate. As a result, large manufacturing plants impact the amount of groundwater physically available to a plot, Ferris said. But Ferris said going forward, additional types of development should also be subject to the requirement.
Built-for-sale houses such as apartments are not usually built on subdivided land, so a 100-year water supply guarantee certificate is not required.
“The answer was that as long as it’s planted on a single lot, you can’t have a subdivision with a one-year lease or less,” said Michael Pearce, a water law attorney for Gammage & Burnham and representing both Buckeye and Queen Creek.
Pierce said he doesn’t believe the exclusion of built-for-sale homes is a loophole in the law, but it’s not the core issue.
“The question is whether it becomes very difficult or impossible to comply with a reliable water program, with the unintended consequence of a housing market shift towards rental housing,” Pierce said.
Pearce said he believes the solution is to look at ways to encourage water recycling to supplement groundwater demand, rather than relaxing reliable water supply programs. Sustaining future growth will require alternative water sources, he said.
Will there be an increase in built-for-sale homes in Buckeye?
Built-for-sale homes aren’t unique to Arizona, but Pinal County has seen an increase since similar regulations were enacted a few years ago, Pierce said.
More ready-made homes could emerge throughout Maricopa County as a result of recent groundwater regulations, but it’s too early to know for sure because the groundwater model for the Phoenix Active Management Area was only recently announced, said Spencer Kumps, vice president of legislative affairs for the Central Arizona Association of Home Builders.
About 80,000 plots in the county have a 100-year water guarantee, Kumps said. It will take several years for these to be filled with housing. So there probably won’t be any sudden changes in the housing market.
Either way, housing will be built. There is already a shortage of 270,000 homes across the state, both for sale and for rent, Kamps said. There is a shortage of about 45,000 houses for sale.
What kind of housing will get more attention?
Buckeye spokesman John O’Halloran said the city still has 10 years’ worth of single-family lots with certificates of guaranteed water supply. Currently, 1,900 apartment building permits have been issued, with an additional 2,700 units currently under review by the city.
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O’Halloran said in a statement that the proliferation of multifamily housing is being driven by the increased economic development seen in Buckeye.
“As the population grows, multi-family housing is responding to growing demand for affordable, accessible and diverse housing options,” O’Halloran said. “By offering a wide range of housing options, including apartments and condos, multifamily developments cater to individuals and families with varying needs and affordability.”
Bo said it’s possible that ready-made homes won’t grow significantly because ready-made homes can only exist where there’s a demand for them. If the demand is for single-family homes, the developer will consider obtaining his 100-year water guarantee certificate.
“Just because we can build it doesn’t mean we build it,” says Bo.
Here’s where to contact reporters: ahardle@gannett.com Or call 480-259-8545. follow her on her twitter @Alexandra Hurdle.
