An Arizona trial court has put a halt one of the most significant bureaucratic overreaches in Arizona’s history, striking 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.
In a ruling on Tuesday afternoon, the court found that the department “did not comply” with state law “when implementing the challenged rules,” and a Maricopa County judge declared the restriction invalid.
Arizona is facing a housing crisis. The illegal restriction imposed by Gov. Katie Hobbs’ administration made the problem worse by effectively strangling home construction in one of the fastest growing residential markets in the country.
The Goldwater Institute sued the Hobbs administration in January 2025 on behalf of the Home Builders Association of Central Arizona.
“We’re delighted that the court has struck down the bureaucracy’s newfangled restriction on home construction—a rule that reduced the availability of homes and raised housing costs in one of the nation’s fastest-growing housing markets,” said Timothy Sandefur, the Goldwater Institute’s Vice President for Legal Affairs. “This case is just the latest example of the dangers of the unelected, unaccountable administrative state. Here, bureaucrats decided to drastically rewrite Arizona rules governing home construction in ways that harmed not just Phoenix but all Arizonans. We’re glad the court has made clear that no—they must obey the law, not rewrite it.”
The case involved the way builders ensure there is enough groundwater to provide for the needs of the specific development being planned. In certain parts of Maricopa County, builders must obtain a certificate showing a 100-year groundwater supply before they construct new housing—and home builders have historically met this requirement. But in 2024, the Arizona Department of Water Resources imposed its new “Unmet Demand Rule” requiring homebuilders to show a 100-year groundwater supply across the entire water management area rather than at the site of the proposed development.
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.
It was also illegal with the Department having no power to adopt the “Unmet Demand Rule” without following the rulemaking process laid out in state law that ensures stakeholders and those impacted can provide input, according to Goldwater. Instead, the department claimed that it had simply discovered somehow that this was what the law required all along.
“This argument,” declared the judge, “lacks merit.”
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