By Ethan Faverino |
As Arizona lawmakers prepare to convene for the 2026 legislative session, a leading nonpartisan think tank is warning of a demanding agenda driven by fiscal discipline, persistent housing shortages, and critical water policy decisions.
Katie Ratlief, Executive Director of the Common Sense Institute (CSI), emphasized the need for urgent action from the Legislature and Governor Katie Hobbs to address these issues. In a recent report by The Center Square, Ratlief highlighted that the session will require decisive leadership to tackle spending trends, affordability barriers, and the state’s long-term water security.
Arizona’s budget has expanded significantly over the past decade, rising from approximately $10 billion to nearly $18 billion, with $6 billion of that increase occurring in just the last five years. Ratlief urged policymakers to rein in spending increases and reassess recent commitments to determine whether they remain necessary, warning against expenditures outpacing economic growth.
Housing affordability remains a top concern for CSI Arizona, with the latest quarterly report underscoring ongoing challenges despite some cooling in the market. The average home price stands at $426,164—$53,400 more expensive than pre-pandemic trends—leaving households facing high costs amid elevated mortgage rates.
According to CSI Senior Economist and Research Analyst Zachary Milne, Arizonans now need to work more than 64 hours per month, at the average wage, just to afford a typical home payment, significantly up from the historical average of 45 hours.
Real-time estimates show an instantaneous housing shortfall of 52,846 units in Q2 2025, a 6.9% improvement from the revised 56,812 units in 2024. Arizona faces a cumulative housing deficit of 121,334 units, as of 2024, reflecting years of inadequate construction relative to population growth.
Ratlief believes the housing shortfall is not the result of state policy but of holdups originating within cities, noting that local governments control permitting, building codes, and enforcement—factors that can significantly slow housing development.
CSI revealed that most Arizona counties—including Maricopa, with a projected deficit of 34,737 units—are falling behind demand. Even with recent improvements in permitting, Maricopa County is still building thousands of units short of what is needed annually.
Water policy will also dominate discussions this legislative session, as ongoing negotiations over the Colorado River allocations approach a pivotal February 14, 2026, deadline set by the U.S. Department of the Interior.
This is viewed as likely the final opportunity for the seven basin states to reach a consensus agreement on sharing the river’s water before current operating guidelines expire at the end of the year. With Arizona’s unique constitutional requirement, any agreement reached will require legislative approval, setting the stage for intense debate in the 2026 session. Ratlief indicated that if states finalize a deal, the Legislature will debate and vote on authorizing the Department of Water Resources to sign on, potentially shaping Arizona’s water future for decades.
Ethan Faverino is a reporter for AZ Free News. You can send him news tips using this link.
