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Groundwater availability will limit development in the Phoenix area

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Officials in Arizona are limiting development in the Phoenix metro area due to a lack of groundwater. But the development party isn't over.

LEILA FADEL, HOST:

A state analysis says Phoenix doesn't have enough groundwater to sustain the metro area's rapid growth over the next century. But developers say, hang on, that's not the whole story. KJZZ's Katherine Davis-Young reports.

KATHERINE DAVIS-YOUNG, BYLINE: Sindy Ready has been a real estate agent in Arizona for more than 20 years. She's showing me a two-bedroom that just went on the market at $445,000. With demand like it's been, she expects she'll be able to sell it within a couple of weeks.

SINDY READY: They've redone the flooring, they've added crown molding, they've done painting and new shutters.

DAVIS-YOUNG: We're in the suburb of Surprise, about 45 minutes northwest of downtown Phoenix.

READY: This was kind of the outskirts of town, and, actually, now it's really not. It's just continuing to expand out west.

DAVIS-YOUNG: But there's some question now of how much more these suburbs will be allowed to expand. To build a house in most of Arizona, developers have to show there's enough water to last that property 100 years. But this month, Arizona's governor said groundwater in the Phoenix area may fall short within a century and announced the state would no longer approve construction in places where groundwater is the only option. Adam Baugh, a land use attorney here, says a New York Times article about the plan made some of his clients really nervous.

ADAM BAUGH: I think the first paragraph was like, looming trouble in the West, and the other one was, likely means the beginning of the end.

DAVIS-YOUNG: Baugh says water scarcity is a real concern in a desert megalopolis.

BAUGH: But it also doesn't mean the sky is falling.

DAVIS-YOUNG: The governor does not plan to cancel about 80,000 outstanding development projects across the Phoenix area and development in places with access to surface water or reclaimed water will be allowed to continue too. But most new home construction around metro Phoenix is happening at its far edges, where land is cheaper and suburbia meets raw desert.

MARK STAPP: Those are the areas where the groundwater issue is the most serious and pronounced.

DAVIS-YOUNG: Mark Stapp is a longtime developer who directs the real estate development program at Arizona State University. He predicts the limits will mean building will turn back inward, closer to Phoenix's core, since longer-established cities have more secure water portfolios.

STAPP: We're going to have to stop and think about how we're going to continue to develop.

DAVIS-YOUNG: But land use attorney Adam Baugh says shifting from continued suburban sprawl to infill development comes with its own challenges.

BAUGH: There's a built-in environment already. Neighbors around you, street limitations, drainage considerations, utility access - there's a reason why they're some of the last sites left over.

DAVIS-YOUNG: Baugh and Stapp both say the new groundwater policy doesn't require halting all construction. In fact, they say developers will have to find ways to keep building. Phoenix was America's second-fastest-growing city between 2020 and '21, and demand for housing statewide already outstrips supply by 270,000 units, according to the state government. Realtor Sindy Ready says it's one of the reasons home prices in metro Phoenix have recently been among the fastest-rising in the country.

READY: What's happened over the last five years is that we've had more buyers than we have property. That's really the reality of what we've been dealing with.

DAVIS-YOUNG: And she's not expecting news of Arizona's water troubles to scare those buyers away.

READY: I think people are always going to want to live in Arizona. We have sunshine. We have beautiful hiking trails and biking trails and golf and tennis.

DAVIS-YOUNG: She says the desert lifestyle continues to be a pretty easy sell.

For NPR News, I'm Katherine Davis-Young in Phoenix.