Must Housing Development Slow in Parched Arizona?
No! Convert Farmland into Housing and "Water Scarcity" Vanishes!!
Arizona home builders face an emerging new regulatory challenge. Local authorities do not believe that there is enough water in their parched state to supply water to the new housing development. Are there limits to growth? The WSJ explores this point today.
Suppose that new housing is not built because of fears of “scarcity”. In this case, both real estate developers will lose and the people who wanted to live in new housing in Arizona will lose. Limiting housing supply raises local home prices and incumbent home owners gain from introducing a “barrier to entry”. Are these stake holders driving the “limits to growth” dialogue?
As an eternal optimist and as a free market thinker, permit me to offer a proposal. Did you know that farmers in Arizona consume roughly 70% of local water? Google was kind enough to provide some facts about how this water is used.
From this link you will see that Arizona farmers used 275,000 acres for Hay Alfalfa. Why does this matter? This piece claims that it takes 5 inches of water to grow a ton of alfalfa. This piece says the same thing. There are 326,000 gallons in an acre foot.
So, suppose that all 275,000 acres of alfalfa are turned into Arizona housing. This will “save” 275,000*5*326,000 gallons of water.
The average household uses roughly 150 gallons of water per day.
We are now ready for some algebra!
Suppose that the 275,000 acres of alfalfa are all converted into housing in Arizona. How many new homes could be built so that aggregate water consumption per yer does not rise?
X*365*150 = 275000*5*326000
Where X = the number of new homes that can be built such that aggregate water demand does not increase.
The right side of this equation represents the water savings by eliminating Alfalfa growing in Arizona.
Suppose that 2 homes are built per acre on the Alfalfa land. This would mean that 275,000*2 = 550,000 new homes would be built.
If each of these new homes consumes 200 gallons per day, then aggregate residential demand for water from the new homes will equal;
550000*200*365 = 40.15 billion gallons of water
This is a fraction of the “saved water” that equals 275000*5*326000 gallons.
I conclude with an easy change in land use zoning rules that Arizona can easily adapt. The Alfalfa farmers would be delighted to sell their land and their water rights to the real estate developers.
The rise of WFH means that there is demand for this farm land to be converted into housing. Read my 2022 Going Remote book.
This example of how to use markets to adapt to climate change risk is a key theme of my 2021 book.
The anticipation of scarcity should trigger an examination of how to use market forces to adapt to the challenge. Let markets work!!