Arizona governor slams the brakes on Phoenix development because it doesn't have enough water

• Arizona will halt approvals of new developments that don't plan for alternate water sources.
• The new rule applies to the Phoenix area, whose population just topped 5 million in 2022.
• The state is also under federal pressure to use less water from the Colorado River.

Developers who've been chasing the rapid population growth in Arizona during the Covid-19 pandemic just got a wrench thrown into their plans.

Last week, the state's new governor unveiled a plan to limit construction in areas around Phoenix after finding that the groundwater can't support the current pace of building, according to the Los Angeles Times. The move by Katie Hobbs, a Democrat, came alongside state projections that showed 4% of the demand for groundwater in the region over a period of 100 years can't be met under the current rules.

Under the new rule, tens of thousands of developments already approved won't be affected, according to the LA Times report. But regulators won't be approving new developments in areas around Phoenix that depend solely on groundwater supplies.

The restriction is the latest sign that years of chatter about the dwindling supply of freshwater  in the state — which is more than three-quarters arid or semi-arid — is turning into action. It also comes less than a month after Arizona, California, and Nevada negotiated an agreement to cut the amount of water they draw from the Colorado River by 3 million acre-feet, though the reductions fell far short of the more drastic cuts urged by the federal government. 

"We have to close this gap and find efficiencies for our water use, manage our aquifers wisely and increase our utilization of renewable supplies," Hobbs said at a news conference, referring to water imported from the Colorado River or other sources, according to the LA Times.

Developers have descended upon Phoenix in recent years to meet and capitalize on the region's growth. The Phoenix-Mesa-Chandler area had the third-fastest rate of growth among the 10 most populous US cities in the year through July 2022, as nearly 73,000 new residents put its population over the 5 million mark, according to the Census Bureau.

By early 2022, Phoenix led the nation in developments of new rental homes with 52 communities under construction, double that of the Houston metro, the region with the second most build-to-rent projects. Building was so prolific that the new supply was on track to exceed demand, according to John Burns Real Estate Consulting.

Arizona has already been critical of grandiose developments, including a plan to build homes for more than 800,000 people in the White Tank Mountains an hour's drive west of Phoenix. In January, Gov. Hobbs said a study of the project showed that it will require water sources other than groundwater.