Ron Rayner’s family has farmed in the West Valley for generations. He runs A Tumbling T Ranch, growing wheat, alfalfa, cotton and barley on land in Buckeye, Goodyear and Gila Bend.
From his office in Goodyear, you can see new developments springing up all around from the north. But to the south, it’s still sprawling fields of crops and a clear view to the Estrella Mountains.
“I grew up right here, on this place. That little wooden house. Just to the north of us, there we had five kids in one room, my siblings. So we grew up right here on this piece of ground,” Rayner said.
Rayner is part of a group of Arizona farmers eyeing an opportunity to sell some of their land to developers eager to use it to boost Arizona’s housing supply.
The concept is known as “ag-to-urban.”
It’s a pathway to convert farmland to residential use, a process that is currently restricted because of groundwater shortages in Active Management Areas — parts of Arizona, including the metro Phoenix region, that are subject to regulation under the state’s groundwater code.
Certain housing projects in areas like the Phoenix AMA must prove they have at least 100 years of assured water supply before building. When Democratic Gov. Katie Hobbs took office in 2023, she announced groundwater levels in the West Valley were too low to meet that requirement. As a result, developers are not currently allowed to build new subdivisions there.
Building homes on agricultural land provides developers an opportunity to meet the 100-year requirement in a different way — by retiring the agricultural water rights on that land.
According to the Arizona Department of Water Resources, the average acre of agricultural land in the Phoenix Active Management Area — a zone with groundwater restrictions — uses about 3.8 acre feet of water per year.
Depending on the land, residential developments use as little as a quarter of that.
In one ag-to-urban proposal, legislative analysts estimate roughly 2.85 acre feet of water — per acre, per year — would be saved in the Phoenix AMA if agriculture land was converted to residential use. That’s enough savings to meet the AMA’s water supply requirements for housing development.
In exchange, developers are offering roughly $70,000 to $250,000 per acre of agricultural land, according to Spencer Kamps, vice president of legislative affairs for the Home Builders Association of Central Arizona.
Farmers like Rayner have a choice between the annual profits from crops on their land, or accepting a one-time payout. Rayner says the payout is a reasonable offer, considering the increasing restrictions he faces on the land’s water rights.
“Our water duties are limited, and there's nothing more worthless to a farmer than land without water, and so if they keep cutting our water duties back, pretty soon you have land that you can't use,” he said.
Rayner said whether that’s enough money to sell would depend on the farmer and the cost of growing their crops.
“If you're lucky and your costs are not too high, you might net $500 an acre (farming) at the most,” he said. “So $500 an acre as an annual return as compared to an asset value of $250,000? Well, $500 is just a pitifully small amount.”
Technically, ag-to-urban isn’t a new concept, according to Sen. T.J. Shope (R-Coolidge) — it’s been going on in Arizona for decades.
“The houses that are on top of that previously irrigated farmland use less water than traditional farming operations,” Shope explains. “Hence why we were able to have the same amount of water use with 7.5 million people versus 1.5 million people 75 years ago.”
According to officials at the state water agency, there are about 139,000 acres of agricultural land eligible for ag-to-urban conversion in the Phoenix AMA — enough to build as many as 417,000 homes, or about 3 homes per acre.
Developers, Republican lawmakers and the governor all recognize the opportunity to build, but disagree over the details — and whether the executive branch can act without legislative approval.
“In theory the coolest idea in the world, right? Take high water use, go to a lower water use, we're great, but in reality it gets much trickier than that,” said ADWR adviser Ben Bryce.
The main area of contention is how much water developers would be allowed to use.
Officials at ADWR, under Hobbs purview, have proposed a conversion rate — which dictates how much of the retired agricultural water rights can be shifted to urban use — that allows 1 acre foot of water per acre of land.
Shope thinks that’s too restrictive. He’s proposed legislation that would allow double that amount in the Phoenix AMA, and more than double what the governor’s staff has proposed in another active management area in Pinal County.
Kamps says homebuilders favor Shope’s plan — a low conversion rate, Kamps explains, will limit the amount of housing that can exist per acre.
Another big sticking point is whether the agricultural land being converted for urban use must be irrigated.
Critics, including environmentalists and some tribal leaders, note groundwater will only be saved if the land housing is built on was actively irrigated for crops before it is converted under ag-to-urban. Building housing on barren farmland might diminish the area’s groundwater supply, rather than save it, they argue.
Shope’s legislative proposal requires land up for conversion to have been irrigated for at least one out of the past five years. State water officials have proposed a three out of five year requirement.
Shope and homebuilders also argue ADWR doesn’t have the authority to establish an ag-to-urban program, let alone set conversion rates or irrigation requirements for developers.
“I enjoy the flattery of them attempting to do or at least trying to do something via rule making that mimics the bill, however I don't think that that exists,” Shope said of the department.
But Hobbs has so far vetoed Shope’s attempts to establish an ag-to-urban program legislatively. As for ADWR’s efforts, analyst Ben Bryce says the agency is in an investigatory phase of their plan right now. The department has been hosting numerous informal and public meetings for months.
Shope doesn’t support the agency taking unilateral action, but says everyone — lawmakers, the governor’s staff and developers, should come to the table to negotiate.
“This is an opportunity for all of us to get a win,” Shope said. ‘I'm of the frame of mind that it's going to be a long victory parade and I don't really care who's in it. Let's just make sure it happens.”
