Arizona Legislature to vote on deal to overhaul city zoning rules

PHOENIX — A state senator pushing a major overhaul of city zoning rules he contends will spur construction of more affordable housing has reached a deal on a slimmed-down plan with the League of Arizona Cities and Towns, whose opposition had halted the effort for the past six months.

It could be voted on as early as Monday.

Phoenix Republican Sen. Steve Kaiser says the most contentious parts of his initial proposal are now gone. They included provisions giving developers the absolute right to build apartment complexes on any property near a light rail or street car line regardless of current zoning, major restrictions on parking requirements for new construction, strict timelines for rezoning request approvals and limiting public opposition to proposed developments.

And he’s raised the population threshold for cities and towns to be subject to the state preemption of some of their existing zoning restrictions from 25,000 to 50,000. That change means 20 of the state’s 91 cities and towns will be covered, including Tucson and Marana. 

The revamped proposal, which League lobbyist Nick Ponder says the group has agreed to support, will require cities to approve detached backyard casitas known as auxiliary dwelling units, create areas where people 55 and older can rent single rooms in homes with a shared kitchen and bathroom, and give developers with approved proposals the right to grade properties without waiting for extra inspections.

Affected cities and towns also would be required to adopt two of three other major changes, all designed to help builders target vacant lots or redevelop in the urban core of municipalities. Those include designating areas where duplex, tri-plex or four-plex units can be built, approving the use of manufactured housing, or letting homes be built on lots as small as 5,000 square feet. In addition, each city and town will have two years to do a housing needs assessment.

Cities were briefed Thursday and Friday on the bill's final language, and Ponder said he had their OK to negotiate directly with Kaiser. Whether they all agree or there is pushback will have to wait until Monday when Kaiser said the House plans to amend existing bills with the deal's language.

A lot of it could depend on what cities already enacted.

Tucson, for example, has adopted zoning allowing detached auxiliary dwelling units to be built alongside existing single-family homes. The new proposal will affect that rule, but it appears only slightly.

It does bar additional parking requirements to add an additional dwelling unit, for instance, while the Tucson code that went into effect in early 2022 waives parking just for homes near transit stops. As of December, the city had approved 24 casitas.

Phoenix is also eyeing zoning changes allowing backyard additions.

A second part of the proposal deals with apartment complexes near light rail and streetcar lines and will mainly affect Phoenix, Tempe, Mesa and Tucson, although Kaiser said the exact details are still in flux.

Under the plan, developers who agree to set aside a portion of the units as "affordable'' will be allowed to add additional apartments. That increased density is intended to reward developers for those lower-rent homes. All-affordable projects get a density increase as well.

"This is really turning into a great solution for infill, filling in our metro areas to the most efficient use possible,'' Kaiser said.

"And I think in light of the water announcement that came out last week, this is exactly what we should be focusing on, because we're not talking about massive subdivisions here,'' he said. "We're talking about filling in our existing metro areas, cities and towns, using our lands efficiently.''

Gov. Katie Hobbs and state water officials announced June 1 that a lack of adequate groundwater means new developments on the outskirts of metro Phoenix lacking an outside water source won’t win approval.

'Eliminated all the egregious parts'

Tucson City Councilmember Steve Kozachik said he can live with the deal, saying it is far better than Kaiser originally proposed that cities found unacceptable.

"It's apparent they have eliminated all the egregious parts that we objected to,'' he told Capitol Media Services after being briefed Friday on the plan. "So they heard us.''

Kozachik said the parts that differ from city policy, like how large auxiliary dwelling units can be, is not so major that it will harm neighborhoods.

Other than Tucson, Marana, Yuma, Lake Havasu City and Flagstaff, the municipalities to be covered by the overarching rules are in the metro Phoenix area or in fast-growing Pinal County. Several Phoenix-area communities have too few residents to be covered, including Paradise Valley, Guadalupe, Tolleson, El Mirage, Litchfield Park, Carefree, Cave Creek and Fountain Hills.

Three others, Southern Arizona’s Oro Valley, and Prescott and Prescott Valley north of Phoenix, could be subject to the rules within a few years if they continue growing as expected.

Many priced out of decent housing 

The stated goal is to boost the supply of affordable housing. 

The state's housing supply is overwhelmingly made up of single-family homes.

Builders are offering few options for starter or smaller homes while soaring rents have priced many retirees, single adults and low-income families out of decent housing. Developers complained about "NIMBY-ism'' — not in my back yard — and the "missing middle'' supply of small, affordable homes during testimony earlier this year.

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A provision tries to partially address — and blunt — the local opposition issue.

Under current law, a project approved by a city council must be brought back for review if 20% of nearby residents sign petitions opposing it. A supermajority council vote is now required for re-approval, but Kaiser said the change reverts that back to a simple majority.

And there are a couple of provisions unrelated to zoning. One gives Arizona residents priority for subsidized housing vouchers over out-of-state residents, some of whom have been state-shopping for open program slots and displacing local residents.

Kaiser argues that despite his bill not actually requiring developers to build affordable housing, small backyard homes, single-room occupancy units, and smaller lots for single homes or 2-, 3-, or 4-plexes will create cheaper options.

"All those things are affordable,'' he said. "All those things are less cost, and they're creating diversity of housing which we need,'' Kaiser continued, since "96% of our housing stock is single-family homes and only 4% is multifamily.''

Cities, meanwhile, have argued that eyeing them as the culprit for the state’s housing woes is misplaced. While they've agreed to changes, Ponder said they ultimately don't have control over builders who are sitting on more than 80,000 approved lots with an assured water supply and another 7,000 acres in the metro Phoenix core zoned for single- or multi-family developments that investors are simply holding onto while land prices rise.

Cities agreeing to override own zoning laws

At least part of the reason for the apparent acquiescence of cities to overriding their own zoning and building ordinances is political.

Cities, seeing the push for zoning preemption and bipartisan support at the Capitol, began advancing their own changes in the spring. Much of their counter-proposal ended up in the final deal.

"We weren't saying no, we were just saying not in the way that you're going about it,'' Ponder said. "And we ultimately got to (this) point thanks to Sen. Kaiser giving me the opportunity to sit down with him and work this stuff out.''

Kaiser’s original plan met with vociferous opposition from cities and towns and the League, all arguing that zoning is a quintessential local issue and the state should butt out. Also complaining were residents of established neighborhoods, who feared their local communities would be transformed by mandatory zoning changes.

It failed in the Senate on a bipartisan vote in February, but Kaiser revived it after breaking it into parts and ditching some provisions. Still, it stalled, awaiting negotiations that could get the cities on board.

Kaiser said he believes most of those neighborhood issues have been addressed, with most proposals still having to go through the local neighborhood planning process overseen by cities.

Backyard units will be limited to the same number of stories as the main home, with no more than half the square footage and a ban on using them as short-term rentals, said Ponder, the League lobbyist who worked out the deal's details with Kaiser.

Multiple states have approved or are pushing to allow auxiliary dwelling units as a way to address their own housing supply shortages, but there have been complaints from neighbors when new auxiliary dwelling units tower over their once-private backyards.

"What we didn’t want is a six-story ADU that overlooks a neighbor’s backyard,'' Ponder said. "I think that should alleviate the concerns of multiple accessory dwelling units on any single property and turning what was a single-family area into multi-family.''

'Everyone's a little bit unhappy'

Kaiser said although some cities and towns already allow some of the items in the bill, state legislation was necessary as others do not.

"So yes, some places are doing ADU’s,'' he said. "Some places are doing small lots already; some places do duplex-triplex. But this is kind of creating some nice statewide standards for what we need in those 50,000-plus population centers.''

He acknowledged that he got nowhere near what he hoped to get in his original proposal but said neither did the cities and towns.

"Working with them to find compromise is what the Legislature is all about, and that's what we did,'' Kaiser said. "I'm a little bit unhappy with what we got. They’re a little bit unhappy with what they gave up. So I think when everyone's a little bit unhappy, that's when you've got sort of a good bill.''

The legislation — it will be amended on to two existing bills awaiting House action, Senate Bills 1161 and 1163 — will move when lawmakers return Monday from a month-long recess called by the Republican majority after they passed a budget they negotiated with Hobbs, the Democratic governor.

The zoning proposal, a bill allowing Maricopa County to ask taxpayers to approve an extension of an existing transportation tax, and a renewed GOP push to ban cities from collecting rental taxes are among the items awaiting action.