There is not enough groundwater underneath the Phoenix metropolitan area to meet projected demands over the next century, a finding that could threaten the current home-building boom in outer suburbs that are among the fastest growing parts of the United States, according to an analysis of the groundwater supply released Thursday.

The report from the Arizona Department of Water Resources amounts to a chilling warning for the nation’s fifth largest-city, and a metropolitan area with more than 5 million people that has been a development hotspot for new residents and high-tech businesses alike. In Phoenix’s peripheral areas, subdivisions have spread through the desert on a massive scale and hundreds of thousands more homes are planned. The study means that plans for future housing developments that rely solely on groundwater – in outlying peripheral areas that have not yet verified their long-term water supply – could not move forward.

And as the climate gets hotter and drier in the West, and major water sources such as the Colorado River diminish, dwindling supplies of groundwater as outlined in the new report could portend a vastly different future than the one residents in the Southwest have come to expect.

A saguaro cactus sits next to the Teravalis planned community construction site in Buckeye, Ariz., in May. An analysis of the groundwater supply in the Phoenix area bodes ill for future housing developments that rely solely on groundwater.  Adriana Zehbrauskas/The Washington Post

The long-awaited report, announced by Gov. Katie Hobbs, projects that about 4 percent of the demand for groundwater, or 4.9 million acre-feet of water, will not be met over the next 100 years without further action.

The message of Thursday’s study, said Terry Goddard, a former Arizona attorney general and Phoenix mayor, is: “You’re living on borrowed water.”

“You need to be conscious of every drop,” he said. “You can’t build unless you know exactly where the water is coming from.”

To build a subdivision in much of Arizona, developers must show they have enough water to last 100 years. Phoenix and many of cities around it, such as Scottsdale, Mesa, Gilbert, and Goodyear, already have been designated by the state as having such “assured” water supplies that meet this threshold.

But many places in Phoenix’s outer ring that have been growing at a breakneck pace do not have these designations and this report has the potential to complicate future development in those areas.

In those areas – such as Queen Creek, Buckeye, and others – there is still an ample pipeline of roughly 80,000 homes that have been approved for future development. But new projects based solely on groundwater in such areas would not be able to get approval to build.

To solve this problem, the town of Queen Creek, east of Phoenix, has been racing to import water from elsewhere in the state in an attempt to secure future supplies and satisfy its rapid growth. The town spent $27 million to buy Colorado River water from a farm in far western Arizona, which it expects to start arriving this month. And it made another $30 million deal for groundwater rights from the Harquahala Valley – but that water is still a long way from being ready to deliver, said Paul Gardner, the town’s water resource director. And prices for these distant supplies are only going up.

Gardner said that Queen Creek has about 10,000 lots that are ready to build and won’t be impacted by any new assessments of the groundwater supply. But future projects, and a portion of current planned developments that don’t yet have their water certifications, could face problems, he said.

“You’re still looking out your backyard going … we’re building a lot of homes,'” Gardner said. “But if you’re the guy that doesn’t have it, yeah, that’s a big impact on you.”

He said there are five landowners in Queen Creek – with plans to build some 6,000 homes – who are in this situation.

One of them is Dan Reeb, a developer and sixth-generation Arizonan, who owns hundreds of acres in Queen Creek that has yet to be developed.

Reeb is optimistic about Phoenix’s long-term ability to manage its water shortages but he believes the cost will rise to secure these supplies – something that could add $15,000 to $25,000 to the price of a home on average.

“Arizona has gotten very good at stamping out four-bed, two-and-a-half bath, three-car garage [homes], and a great job to go with it,” Reeb said. But at a time of increasing water scarcity, “it’s not going to be as inexpensive and simple as it has been for the last 50 years of phenomenal growth.”

“I think Phoenix metro is going to add another million people here, believe it or not,” Reeb added. “Beyond that, it will start to become an issue.”

The Arizona Department of Water Resources has issued these types of findings before in other areas around Phoenix. In 2019, a study of Pinal County’s water management area, to the southeast of the city, found it was short 8 million acre-feet of groundwater, or about 10 percent of what was needed, to meet its demands over the next century. In January, Hobbs released another groundwater report that found a deficit over 100 years in an area west of Phoenix known as the Hassayampa sub-basin, which supplies the fast-growing Buckeye area. One acre-foot is about 326,000 gallons of water.

That determination has already resulted in major disruptions to the building industry, as large projects in these western suburbs have been halted until they can prove water supplies, according to building industry officials.

“We lost $1 billion,” said one Phoenix building industry official who spoke on the condition of anonymity to speak candidly. “We had planned for over 100,000 to 150,000 homes in the Hassayampa basin that are all on hold.”

Out in this swath of Sonoran desert, dotted with saguaro cactus and backed by rocky peaks, the fate of massive housing developments are now in question. The biggest, known as Teravalis, is expected to encompass some 100,000 homes spanning 37,000 acres. If built, it would become the state’s largest planned community.

But most of that property does not yet have the water approvals it needs to build.

Following the governor’s announcement on Thursday, a spokesperson for the developer, Howard Hughes Corp., said the company remained committed to the project, starting with the construction of roughly 7,000 homes for which it has received approval.

Buckeye, where the development is located, has jumped into the pricey water market. It recently struck an $80 million deal to purchase groundwater rights in a rural stretch of the state specifically designated for water transfers. And in response to the state’s January groundwater study, Buckeye issued a statement tamping down concern about its water supply

“Buckeye’s water future is secure,” the city said.

Arizona’s renewed focus on defending its 100-year water supply is putting pressure on cities in greater Phoenix to scrutinize development more closely.

“That’s what every city is grappling with,” said Mark Freeman, a farmer and city council member in Mesa, just east of Phoenix.

But the problem is not distributed evenly around the region. Cities have vastly different water portfolios, and rely to varying degrees on groundwater, the Colorado River, or surplus water stored in underground facilities, said Warren Tenney, executive director of the Arizona Municipal Water Users Association, which represents 10 Phoenix-area cities.

Cities in that network “have invested billions in water resources and water infrastructure so they’re not solely reliant on groundwater,” he said.

But newer communities on the outskirts of Phoenix sometimes have few other options besides sucking down the underground aquifers.

On Thursday, Hobbs was reassuring about the state of Phoenix’s water supply and its future prospects.

“We are not running out of water and we will not be running out of water,” she told a news conference, while adding that, “we have to close this gap and find efficiencies in our water use.”

The modeling that went into the new projections about the Phoenix water supply was based on data from more than 40,000 wells, as well as hundreds of tests of the aquifers and streamflow measurements. The modeling shows that groundwater levels under Phoenix are projected to fall by an average of 185 feet across the entire basin, with greater declines in peripheral areas and closer to mountains over the next century, according to Arizona Department of Water Resources officials who spoke on condition of anonymity to discuss the results.

Over the 100-year period, projected future outflows of groundwater exceed inflows by a factor of 1.4.

Such projections – and the strict state water rules about protecting a 100-year supply – help guide future development decisions to avoid major disruptions in the water supply to major urban areas.

Haley Paul, the policy director for Audubon Southwest in Arizona, said in an interview before the report was released that rules around long-term water supply are working as intended.

“I don’t think it’s stopping the growth, it’s being more dialed in with where growth could go,” Paul said. “You’re going to see a bit of tightening on that. Absent new water supplies, that is the limitation we face.”

Some water experts said the study makes clear the need for an updated groundwater code, with tightened controls on pumping and uniform statewide requirements ensuring that supplies that could one day be used to offset acute shortages aren’t squandered.

Experts also note that the gradual transition from agriculture to urban development – as Phoenix and its surroundings become more densely populated – comes with a degree of water savings as thirsty farms go out of production.

“We have to grow responsibly,” said Sharon Megdal, director of the Water Resources Research Center at the University of Arizona. “What these models are suggesting is the patterns of growth may change. It may push growth to some areas . . . [where] land costs are higher, other infrastructure costs may be higher.”

“But it’s part of our reality check, an appropriate one,” she said, “that we make sure for the people buying these homes that they are confident the water is there.”