A troubling pattern is emerging across the American West: State and local bureaucracies are quietly reshaping water policy in the name of environmental protection, often without clear environmental justification, and they’re making it harder — if not impossible — to build new homes in the process. The result is fewer houses, higher housing costs, and major policy decisions made outside the democratic process.
Simply put, some of the same political leaders who claim to want more plentiful and affordable housing are aggressively using the power of their offices to make it more difficult to build.
Nowhere is this pattern more evident than in Arizona, where a court recently halted one of the most extreme examples of administrative overreach in the country. The story began in 2024 when, with the stroke of a pen, deputies in Governor Katie Hobbs’s administration effectively blocked new home construction in most of Maricopa County, which includes Phoenix. As a result, at least 13,000 new homes — nearly a third of the region’s anticipated supply — went unbuilt in one of America’s fastest-growing markets.
Hobbs’s anti-housing rule wasn’t authorized by the people’s elected representatives. In fact, not only did the legislature never adopt any law allowing it, but officials in her administration did not even promulgate a formal rule. Instead, they just stopped processing permit applications.
Their justification was that Arizona law requires developers, when seeking permission to build, to show that there is enough groundwater to provide for the needs of the proposed development. That commonsense rule has worked well for decades, and for good reason: Despite Phoenix’s desert climate, there is plenty of water for the foreseeable future.
But the Hobbs administration changed the game by unilaterally adopting a novel concept called “unmet demand,” a vague, expansive standard under which new housing could be blocked based on speculative water shortfalls far beyond the site of any proposed development. In short, this meant developers didn’t just have to prove there is enough water for their development — they had to prove there is enough groundwater across the entire county to serve the needs of the proposed use for the next 100 years. That is a sweeping requirement, particularly because Maricopa County is twice the size of Connecticut.
Arizona is not alone. Across the Southwest, administrative agencies and local governments are imposing similarly draconian requirements, often without legislation or even official rulemaking. On California’s Central Coast, the Cambria Community Services District has imposed a decades-long moratorium on issuing water service permits for parcels that do not have grandfathered rights, effectively blocking all development on a large number of properties, despite many property owners demonstrating sufficient water supply. Property owners have also challenged subsequent actions by the California Coastal Commission blocking development in the area to protect Monterey pines. Policies like these help explain why the state continues to face a severe housing shortage.
Whether framed as “groundwater modeling thresholds,” “basin-wide risk assumptions,” or “sustainability metrics,” the result is the same: fewer homes, higher costs, and decisions made by unaccountable bureaucrats rather than through democratic lawmaking.
These policies carry severe consequences. When housing supply is artificially constrained, prices rise, families are priced out, and economic growth slows — not because lawmakers have weighed water and development needs, but because administrative agencies have changed the rules.
At least in Arizona that overreach has been checked. Representing the Home Builders Association of Central Arizona, attorneys at the Goldwater Institute, where I work, challenged the “unmet demand” policy as unlawful. The court agreed, holding that the agency cannot impose sweeping new standards without following the rulemaking procedures required by laws adopted by the legislature.
That ruling reaffirms a fundamental principle: Administrative agencies do not have a roving mandate to make policy decisions of vast economic and social consequence. The allocation of water resources plainly involves critical public policy questions, and responsible stewardship is crucial. But so are property rights, affordable housing, and growth. That reality makes it even more important for agencies to follow the law, rather than make it.
Agencies should not be free to undemocratically reshape entire markets — whether for housing, water, or anything else — by simply signing an order or denying a permit. Those decisions should instead be made by voters, legislators, and stakeholders.
What happened in Arizona reflects the administrative state’s recurring temptation: bypassing legislatures in favor of unilateral bureaucratic action. But the costs of that approach are borne by everyone — not only through higher prices, fewer opportunities, and slower economic growth, but through the erosion of democratic accountability itself.
As welcome as the court’s decision is, it should also serve as a warning: If states across the West are serious about both responsible water management and housing affordability, they must ensure that the rules governing both are adopted lawfully, transparently, and with full public accountability.
This article originally appeared in National Review.
