WATER POLITICS

But whether it is completed will depend in part on whether there is enough water for the people who would live, work and shop there. The Arizona Department of Water Resources is currently conducting a study of an underground basin to determine whether the groundwater supply is adequate to support the planned population for 100 years. 

Howard Hughes executives said they believe there is enough, but if state regulators determine otherwise, the developer could be forced to scale back its plans.

Arizona officials are awaiting results of the study. They said water availability is a major concern as they assess development plans statewide. “The growth will not go to zero, but it will have to go to where the water is,” said Tom Buschatzke, director of the Arizona Department of Water Resources.

In Arizona and other parts of the West, demand for new housing due to population shifts and shrinking water supplies from a decadeslong drought are increasingly coming into conflict. Developers such as Howard Hughes are making big investments at the same time regulators are applying more scrutiny to projects to ensure they won’t cause taps in surrounding communities to run dry.

“There just isn’t water to sustain millions and millions of new houses,” said Kathleen Ferris, senior research fellow at Arizona State University’s Kyl Center for Water Policy.

David O’Reilly, chief executive of Texas-based Howard Hughes, said the company will apply conservation techniques at Teravalis it is already using successfully in Nevada. Those include water recycling and drought-tolerant landscaping.

“We feel confident that there’s a road map here, that there’s a thoughtful way that we can develop that maintains and secures water,” he said in an interview. Other Howard Hughes executives said they have a water permit for the first village of 7,021 home sites and plan to secure approval for many of the rest over the next several years.

Water issues are popping up in development projects throughout the West. In Colorado, residential builders say a dispute between a Denver-area city and a nearby county over a water pipeline is delaying construction of new homes. In 2021, Oakley, Utah, passed a moratorium on new building permits that require a city water connection due to severe drought. 

Demand for more housing in Arizona is substantial, though it has slowed recently as interest rates have risen. Phoenix-area home prices rose 64% between January 2020 and September 2022 as more people moved there during the pandemic, according to S&P Dow Jones Indices, outpacing the nationwide 41% increase in the same period.

At the same time, the state has temporarily lost about one-fifth of its share from the Colorado River, as drought has shriveled the Southwest’s most important tributary. In response, farmers are relying more on underground aquifers, which state officials say can’t be easily refilled.

In areas such as Buckeye that rely primarily on groundwater, the pressure is substantial.

It sits in one of several “active management areas” the state established in 1980 to regulate water use around cities such as Phoenix and Tucson where development has been concentrated. In these areas, builders have to obtain a state certificate that demonstrates there will be a 100-year supply of water for new subdivisions they build, without drawing too much of the underlying groundwater.

A farm town of about 10,000 people 20 years ago, Buckeye has seen its population soar to 110,000, and it has approved developments that local officials say could push the total to one million over the next 50 years. Buckeye’s city limits have grown to the largest in Arizona at 600 square miles, encompassing untouched desert with giant saguaro cactuses as well as farmland and new subdivisions and strip malls.  

In 2021, the Department of Water Resources found deficiencies in applications for 100-year water plans on two developments in Buckeye. The agency cited concerns that the developments’ estimated groundwater demand likely wouldn’t be met considering existing uses and approvals.

“We are engaged with all stakeholders and are actively working to resolve this situation,” said Jim Zeumer, vice president of investor relations and corporate communications at PulteGroup Inc., which is planning both developments.

In the area where the Howard Hughes and the PulteGroup projects are located, there is about 1,600 feet of groundwater above the bedrock, compared with more than double that in places closer to Phoenix, said Marvin Glotfelty, a hydrogeologist based in Scottsdale, Ariz., who works on property development. The developers could import water, but that would be expensive, he said. 

Buckeye officials, citing past studies, say they believe there is more than enough groundwater in their city and that the state’s forecasts are too conservative. “The position the state is taking is somewhat halting our growth,” said Terry Lowe, water resources director for Buckeye. 

Mr. Buschatzke said Arizona is working to open up more supplies. The legislature this year authorized $1 billion in investments for everything from desalination plants to more recycling. Eventually, he said, those projects will help support more development. 

“But the way we work right now, we can’t approve until the water is there,” he said. “There’s not going to be a home built without water.”