Possible new restrictions on water use for the Colorado River could have major implications across seven states, but the fast-growing suburbs of Phoenix are at a special disadvantage.

Later this year, the federal government’s plan to break a deadlock between seven states that draw water from the Colorado River will update the century-old laws that govern water use in the Southwest.

Those laws require sort of a first-come, first-served priority for the states, tribes, and Mexican municipalities with rights to the river. Arizona‘s stake is junior to the rights of others like Colorado and Nevada.

Arizona leaders sharply criticized the plans, which reportedly could entail as much as 20% reduction in use for that state and the other parts of the “lower basin,” which use water from the drying-up reservoirs in Lake Powell and Lake Mead.

“Phoenix has spent decades planning for a moment like this, and is prepared to use less Colorado River water, but it is wrong to lay a disproportionate share of the burden on Arizona,” Phoenix Mayor Kate Gallego said.

“Upper basin” states, which rely primarily on the Colorado River’s headwaters and tributaries, might not face such a strong restriction.

But in Arizona, cities have been planning for potential reductions for years, Tom Buschatzke, director of the state’s Department of Water Resources, said in June. And they will have some leeway to determine how water is used. But inevitably, cities must cut water use.

While he doesn’t expect widespread restrictions on tap water use, outdoor water restrictions are a possibility. And the state is already looking more closely at development of water-hungry projects like data centers.

“We have to take some pretty serious action,” he warned. “It means we’re going to have to take additional reductions; it’s one tool that we have that’s certain.”

How the city could change

Benji Edelstein, assistant professor of economics at Loyola University Chicago, has studied how water scarcity impacts home values, based on examples in Colorado. He found water impact fees lead to smaller lots and more water-conscious home and yard design.

But that doesn’t necessarily translate to cheaper living. Water fees and costs can be significant, eating into homeowners’ budgets. And large-scale mandated reductions are more likely to stifle the pace of homebuilding. At a minimum, they will change the kind of housing built in those areas to favor more water-efficient design.

“We know we have this structural deficit of housing and only a few places in the U.S. with elastic housing supply,” Edelstein said. “Las Vegas, Phoenix, Denver, these areas have built a lot of housing over the past few years to absorb the demand. If we make that harder to do, we certainly can expect that to drive affordability challenges.”

Two decades of water scarcity have changed the cities. Green lawns are less common in the region, for instance. But the states each have an incentive to preserve their own economic growth. Further cuts could endanger those efforts.

Edelstein also noted that water issues aren’t limited to the Southwest. Chicago must manage the replacement of 400,000 lead pipes. Washington, D.C., just dealt with the collapse of a sewer line that sent sewage into the Potomac River. Water issues are becoming more ubiquitous nationwide.

“It’s not necessarily a barrier to development,” Edelstein said. “But depending on how utilities change their policy around impact fees, that might incentivize policies that change the type of housing.”

Phoenix anticipates changes, future gains

Neil Brooks, a Phoenix-based realtor of 27 years with Brooks Residential Group, said water is no new issue. And depending on how the state reacts, it could ultimately benefit the housing market.

When talking to potential homebuyers outside the area, he said the complicated politics of water come up. New housing developments must have 100-year plans for water supply. That can complicate some new builds.

“People in Arizona that own houses, they’re not going to turn the faucet on one day and there’s no water,” Brooks said. “The biggest issue is going to be the cost of water. Water’s going to get more expensive. Electricity is going to get more expensive.”

Ultimately, the issue is about water allocation. The Colorado River supplies water and hydroelectric power to 40 million people, and waters 5 million acres of farmland along the river. Brooks said the changes might ultimately push the state toward supporting more housing instead of water-hungry agriculture uses.

Arizona has been shifting away from agriculture and toward a more tech-centered economy thanks to new investments from chip makers TSMC and Intel, eyeing its proximity between California and Mexico.

“Arizona is still a great up-and-coming state,” Brooks said. “We can’t build the houses fast enough and we’re working on allocating the water in a way that we can continue building homes for the next 50, 100 years.”

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Each week on The Download, Inman’s Christy Murdock takes a deeper look at the top-read stories of the week to give you what you’ll need to meet Monday head-on. This week: Everything you know about commissions is poised to change as NAR reaches a massive $418 million settlement.

Well folks, if you thought you were going to slide on into the weekend without the commission question rearing its ugly head, you were sadly mistaken. Everyone, from agents to consumers to the stock market, is buzzing from the news that NAR has agreed to a settlement in Sitzer | Burnett and the host of so-called copycat seller commission lawsuits that followed its Halloween verdict.

NEW INTEL RESULTS: ARE YOU CONSIDERING AREA?

In addition to the cash layout of $418 million over the next four years, NAR has agreed to new rules around offers of compensation which are poised to take effect in mid-July.

In a move that promises to change nearly everything about the way agents operate, and the way clients buy and sell homes, The National Association of Realtors has agreed to settle the deluge of commission lawsuits.

NAR is set to pay $418 million in damages over the next four years and has agreed to multiple reforms as part of the settlement, the group said Friday. Among these, NAR said it would agree not to create rules that allow listing agents to set compensation for buyer brokers. In addition, offers of compensation would no longer be displayed in the multiple listing services.

27% of agents are now considering joining trade group AREA: Intel

Ahead of the National Association of Realtors’ commission settlements Friday, some agents are reevaluating their memberships and considering the American Real Estate Association instead.