Phoenix warns lawsuit could ‘unreasonably restrict’ cities’ powers Article originally posted on AZ Central on July 8, 2026 A lawsuit filed against Phoenix targeting a common tool used to develop affordable housing would “unreasonably restrict municipal property rights,” lawyers for the city said in a court filing asking the judge to dismiss the one of the counts in the lawsuit. The suit, filed by the Goldwater Institute on behalf of Bramley Paulin, a downtown Phoenix property owner, accuses Phoenix of breaking state law when it released a request for proposals for a development that was required to include affordable housing. Paulin has frequently hired the Goldwater Institute to represent him in suits against Phoenix, including others that challenge development incentives. Arizona is one of a few states that prohibits mandatory inclusionary zoning, meaning that generally, a city cannot require affordable housing to be included in a project as a condition of its approval. In the lawsuit, Phoenix is accused of mandatory inclusionary zoning by making affordable housing a requirement in the proposals. However, cities can offer incentives for developers that voluntarily adopt inclusionary zoning. In Phoenix’s request at the heart of the lawsuit, the city sought development for city-owned land in downtown Phoenix and put the solicitation out to developers seeking a mixed-use development that included affordable housing. The request does not mean the city has violated any prohibition on inclusionary zoning, Mark Stapp, executive director of the Master’s of Real Estate Development program at Arizona State University, said. “They aren’t acting as a regulatory body,” he said. “Cities are allowed to buy, sell, own and lease real property.” Stapp said the requirement for affordable housing to be included in a proposal functions as a deed restriction, which is an agreed-upon limit on how land can be used after a sale. Deed restrictions are legal in Arizona. The development agreement that was approved by Phoenix included a 40-year deed restriction that limited the primary use of the property to affordable housing, according to Phoenix’s motion filed with the court. The suit, filed in Maricopa County Superior Court, is the first of its kind in Arizona challenging cities’ abilities to require affordable housing in their requests, Tony Napolitano, senior attorney for the Goldwater Institute said in June. Cities frequently sell or lease property for specific purposes, like parks, schools and other uses, Scott Andersen and Richard Carpenter, attorneys representing Phoenix, said in the city’s filing. The Goldwater Institute’s interpretation of the issue would “hamstring Arizona municipalities’ ability to sell property for the furtherance of the public’s interests, including affordable housing,” they said in the motion to dismiss the count alleging illegal inclusionary zoning. The suit focuses on one development planned in Phoenix but could eliminate cities’ abilities to use city-owned land for affordable housing, if they are no longer able to require it in proposals they solicit. The development at the heart of the suit is a proposal by Pennrose, an affordable housing developer that responded to a city-issued request for proposals seeking a development that included affordable housing along with a mix of uses. Pennrose was deemed the successful respondent to the request, and the city entered into an agreement to sell the site to the developer for $1.5 million, which was later amended to $1.6 million. In exchange, Pennrose proposed a five-story, 64-unit affordable housing development. The project is supposed to be income-restricted, renting to people earning 60% of the area median income or below. The suit also alleges the sale violated the state’s “gift clause,” which prevents Arizona governments from transactions that do not provide equivalent public benefit. In this case, the suit alleges that the land was appraised for about $4.8 million, meaning it was sold for about $3.2 million less than its appraised value. The city’s motion did not address the gift clause allegation.