Sep 8, 2022 - Real Estate

How Arizona's water situation could affect its housing growth

Illustration of a leaky faucet with a drop of water in the shape of a house

Illustration: Sarah Grillo/Axios

Tom Buschatzke, director of Arizona Department of Water Resources (ADWR), tells Axios that the state has enough water to meet its housing growth, though "it's probably not obvious."

  • Yes, but: That doesn't mean homebuilding in the Valley won't face new restrictions in the near future.

The big picture: The most populous cities in the Phoenix area are all part of the ADWR's Assured Water Supply Program.

  • Phoenix, Tempe and others are heavily reliant on the Salt River Project, which hasn't been impacted by the drought.
  • Other municipalities, that don't have access to the same resources are part of the Central Arizona Groundwater Replenishment District (CAGRD), which replaces groundwater with other sources.

Yes, and: There are other sources of water that cities could tap into for housing growth, and others could be on the way.

  • Queen Creek is moving forward with a plan to buy water from Colorado River farmland, which Buschatzke said could be an option for other cities.
  • There are basins and other non-groundwater supplies such as the Harquahala Basin, west of the Valley, though it has issues with agriculture-related nitrate concentrations that must be addressed.
  • The newly empowered Water Infrastructure Finance Authority (WIFA) board will have $1.2 billion over the next three years to fund projects, including desalination, that could bring new supplies to the state.

The other side: That doesn't mean water availability isn't a problem.

  • Warren Tenney, executive director of the Arizona Municipal Water Users Association, believes it could hinder where future growth occurs.

What they're saying: "I don't think it will actually be a problem that slows housing development because there are many solutions out there. … [But] it's definitely going to have a price impact," said Sarah Porter, director of the Kyl Center for Water Policy at ASU's Morrison Institute for Public policy.

  • The Kyl Center also has concerns about the CAGRD's long-term sustainability.

What's next: In most of Arizona's urban areas, subdivisions must demonstrate to ADWR that they have at least a 100-year water supply, and last year the agency barred subdivisions in Pinal County from using groundwater to meet that benchmark.

  • Buschatzke tells Axios that similar restrictions will eventually occur in Phoenix and four other parts of the state designated as "active management areas," though he wouldn't say when that might occur.
  • An analysis that will determine whether that will be necessary in the Phoenix area is expected to be completed by early 2023.

Some people have a more pessimistic view, believing the water situation will hinder future housing growth.

  • State Rep. Regina Cobb (R) tells Axios that Arizona is "over-allocated at this point."
  • Spencer Kamps, a lobbyist for the Home Builders Association of Central Arizona, says it's impossible to say what effect the looming Colorado River cuts will have on housing until we see what the final agreement looks like.

Of note: Agriculture uses about 72% of Arizona's water, according to Buschatzke.

  • Officials in Buckeye and Queen Creek noted that much of their new growth switches agricultural land to housing.

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