Ag-to-Urban Enters Its Second Phase on September 12
Arizona’s Agriculture to Urban program has been operating for roughly a year, and a change taking effect on September 12, 2026 addresses the objection that came up most often in its first months.
A short recap for owners who have not looked closely at it. SB1611, effective September 26, 2025, created a voluntary path for holders of Irrigation Grandfathered Rights in the Phoenix and Pinal Active Management Areas. An eligible owner relinquishes irrigation rights on the parcel and receives Groundwater Savings Credits in return. Those credits can be applied toward the physical availability requirement of the state’s 100-year Assured Water Supply program, which is the gate that residential development has to clear.
The program moved from law to practice quickly. On December 9, 2025, the state announced the first issuance of credits, to Forestar Real Estate Group for a project in Buckeye. The numbers attached to that approval are worth repeating: an annual reduction of more than 437 million gallons, roughly 80 percent below the parcel’s historic agricultural use, and enough water to serve 825 new homes. The application was processed in 45 business days.
The problem the new law fixes
The gap in the original design was timing. Relinquishing irrigation rights is the first step, but an Assured Water Supply determination does not arrive the same week. That left an owner with fallow ground, no irrigation right and no approval in hand, for an indefinite stretch.
SB1335, effective September 12, 2026, creates Temporary Permits that allow an applicant to continue irrigating for up to two years while the Assured Water Supply approval is secured. In plain terms, the farm can keep operating through the entitlement window rather than going dark while the file moves.
For anyone weighing the program against the cost of taking acreage out of production, that is a material change to the arithmetic.
What the program does not do
Two points get lost in the enthusiasm, and both matter to anyone underwriting a parcel on this basis.
Groundwater Savings Credits satisfy the physical availability test only. The Arizona Department of Water Resources is explicit that the remaining Assured Water Supply criteria still apply in full: legal availability, continuous availability, financial capability, water quality, and consistency with the management goal and plan. A credit issuance is not an approval.
The program also carries conditions rather than being a simple exchange. Conservation measures must be implemented, model review is required, and restrictions apply to well location and water usage. Owners who relinquish an irrigation right retain a restoration option, but only while the associated credits have not been pledged to an Assured Water Supply certificate or designation. Once pledged, that door closes.
Why this shapes land values in the Phoenix and Pinal AMAs
The practical effect of Ag-to-Urban is to give certain agricultural parcels a route to residential entitlement that was previously blocked by water availability alone. That does not make every farm a development site. Location, infrastructure and municipal appetite still govern. What it does is remove a single binding constraint from a specific category of ground, and constrained supply responds sharply when a constraint lifts.
Owners of irrigated acreage in the two AMAs should understand where their parcel sits relative to this program before making any decision about sale, lease renewal or continued operation. The credits are tied to the irrigation right and to the land. The value of that combination has changed twice in twelve months, and it changed again this month.
If you hold farmland in the Phoenix or Pinal Active Management Areas and have not evaluated it against the program, that is a conversation worth having before the next crop cycle commits you.
Sources: Arizona Department of Water Resources, Agriculture to Urban program materials; Office of the Arizona Governor, December 9, 2025 announcement. SB1611 effective September 26, 2025; SB1335 effective September 12, 2026.
