Arizona, California, and Nevada have proposed a high-stakes plan to conserve 3.2 million acre-feet of Colorado River water through 2026. While the goal is to stabilize the West’s most vital waterway, the deal signals a permanent shift for the region’s real estate: The era of water-unlimited growth is officially over.
“We’ve been used to a world in which there’s unlimited supply, and now we’re not in that world anymore,” says Laurie Schoeman, founder at Housing for a Changing Climate and a former senior housing adviser to the White House under the Biden administration.
Her warning comes at a time when few are connecting the dots between the ongoing Colorado River negotiations and the implications they hold for the housing market, which experts like Schoeman say could be substantial.
“When you suggest that you can develop housing without an assured water supply, you are really critically impacting the ability for that housing to be sustainable,” she says. “Building homes in the desert without an assured water supply is not a responsible use of municipal, state, or bank dollars.”
This month, local officials in Kearny, AZ—a small town of under 2,000 people just 85 miles from Phoenix—announced the city could run out of water by July, after its allotment from the Gila River was cut by 80%.
“It’s a life and death problem,” Curtis Stacy, Kearny’s mayor said last month—and it could offer a grim preview of what’s to come for the rest of Arizona as its most vital water supply hangs in limbo.
What’s in the new plan?
The new proposal is the result of nearly four years of intense negotiations among the seven basin states and Mexico. Much of the contention has centered on the Lower Basin’s water consumption—a problem made more complicated by its meteoric population growth.
When the river’s rights were settled in 1963, Arizona’s population was just 1.6 million; today, it exceeds 7.5 million.
That growth shows no sign of slowing, either. Arizona and California have issued more residential building permits since 2020 than any other Colorado River Basin states, according to data from Realtor.com®.
That’s part of the reason why Lower Basin states initially resisted deeper reductions, though their latest proposal marks a pivot toward more aggressive conservation. Under the plan, California would slash its Colorado River usage by roughly 13% in 2027 and 2028, with Arizona and Nevada committing to even steeper cutbacks.
“With this proposal, the Lower Basin is putting forth real action to stabilize water supply along the Colorado River,” JB Hamby, chairman of the Colorado River Board of California, said in a statement. “We’re putting forward additional measurable water contributions for the system. Without that, the system will continue to decline.”
To put the scale of the plan into perspective, the promised savings—roughly 1.6 million acre-feet annually—is about half of what the entire Upper Division (Colorado, New Mexico, Utah, and Wyoming) used in 2021.
Already, many are pointing to agriculture to make some of the biggest cuts, as the industry uses as much as three-quarters of the river’s water supply. But Schoeman says more comprehensive changes are needed.
“I think that all too often we just resort to looking at the biggest water consumer, which in many parts of the country [is agriculture], and just say, ‘Well, they’ve got to cut and cut,’” she says. “I think we need to have a clear-eyed look at what each sector is actually using.”
How water rights are already redrawing the map
And housing is certainly one of those sectors. In Arizona, the fight over the state’s 100-Year Assured Water Supply (AWS) rule shows why real estate is part of the water cut conversation—even if no one is saying that part out loud yet.
The regulation was designed to prevent reckless development that leaves households stranded, and requires developers to prove a century of water availability before building.
But an inability to do so has already led to a pullback in groundwater-dependent suburbs like Buckeye, Goodyear, and Queen Creek, according to Arif Gasilov, a partner at Gasilov Group, a sustainability and ESG consultancy.
“Since 2023, new subdivisions in Maricopa County that depend on unreplenished groundwater can’t get AWS certificates, and developers in the west Phoenix metro are pivoting to infill or buying existing water rights,” he explains. “This is adding significant costs per lot as developers compete for limited water rights.”
Schoeman also sees this as posing a future challenge for developers looking to build in these regions.
“One of the challenges is dealing with the water shortage means that housing developers are not going to be able to quickly pull permits and quickly get around this issue, because there are no real alternatives being put in front of them,” she explains.
While a judge struck down a state moratorium on new groundwater-reliant subdivisions in April 2026, the reprieve for developers and homebuyers will be short-lived if water scarcity continues to get priced into the market in other ways.
Permanent solution or a short-term patch?
While the new water-saving plan provides a temporary reprieve for the river’s reservoirs, there has already been a fundamental shift in the financial reality for residents.
“For most people in the Phoenix area, for any homeowner, they should expect their water and wastewater bills to go up faster than the rate of inflation for the foreseeable future,” Brett Fleck, water resources adviser for the city of Peoria, told Realtor.com in January.
Gasilov says he’s seeing a similar shift in Nevada.
While Henderson and North Las Vegas continue to grow, the Southern Nevada Water Authority has had to spend a significant amount on infrastructure—like Lake Mead’s third intake—to keep water flowing.
“Infrastructure investments of that sort tend to show up in water rates, which then shows up in housing costs,” Gasilov warns.
Beyond utility rates, both Schoeman and Gasilov see a future where insurers and mortgage lenders start pricing in water scarcity to the market.
“The way I see it, homebuyers in Phoenix don’t check Lake Mead levels before making an offer. But insurers, lenders, and appraisers are starting to,” Gasilov says. “Right now it’s mostly a development constraint, but within five years it can very well become a pricing signal.”
That’s why Schoeman believes the solution to the region’s housing needs cannot be found by looking back at the river.
“The solution is not to just take less water,” she says. “There must be a more active effort by both municipalities, by the state leadership, to work with developers to try to figure out a way to meet that 100-Year Assured Water Supply regulation, which cannot be changed.”
As the federal government reviews this short-term plan to meet 2028 water goals, the future of the Colorado River remains a moving target. In the meantime, billboards across the Arizona desert continue to offer a simple warning: “Water is life, don’t waste it.”
