Rye lawns are kept pretty short. Mind you they thrive in cooler months and don't require daily water like Bermuda in the late spring through early fall. There is an Augustine grass with a wider blade that is less thirsty. Lots of folks put that grass in and end up disliking it for the look and feel.
I come from Northern California where water can be VERY expensive. From my view, water in Arizona is CHEAP by comparison. Until water becomes actually EXPENSIVE in AZ there won't be incentive to cut back or take out lawns.
Phoenix Metro is a strange "city". There are over 250 golf courses just in Phoenix. I think around 800 in the state. That is a lot of grass to be watered Everyday!!! Many, many housing developments are built around the golf courses. I have never heard of lawn installations being prohibited for private residences. In some "green" minds/ venues it's discouraged but not prohibited. In fact some homeowner associations (HOA's) REQUIRE that if you have a front yard lawn you MUST overseed with Winter Rye. Letting your Bermuda go brown for the winter IS prohibited. Some desert xeriscape HOAs however, do not allow lawns but not many. There is a somewhat quiet movement to suggest that the golf courses go "links" style. This would reduce the total grass area by about 50%. Links style is when the green grass is maintained only at the tee box, a few "landing" areas and the putting greens. Of the courses I've played, I've never seen one transition to "links style".
I can imagine that someday lawns MAY be prohibited if population grows. Frankly, I can't see it growing much in the near future... we can't sell the foreclosed homes that are available. The good news re foreclosures is that the lawns are neglected and the swimming pools empty.
Also, I believe Arizona agriculture uses vastly more water than the business or residential uses so reducing the number of residential lawns could be inconsequential to overall usage.
http://www.azwater.gov/AzDWR/S...
Granted, lawns are common, a luxury, and wasteful but, I think it would be counterproductive to ban them, overall. Until all the golf courses go "links" the residents might cause a stink, to say the least.
Most AZ water comes from CAP (Central Arizona Project)
http://www.cap-az.com/ and the managed aquifers
http://www.cap-az.com/operatio.... Rainfall annual average is around 7 inches... as I remember.