At Phoenix’s Far Edge, a Housing Boom Grasps for Water

BUCKEYE, Ariz. – Beneath the exhausting Sonoran sun, an hour’s drive west of Phoenix, heavy machines are methodically scraping the desert bare.

Where mesquite and saguaro once stood, the former Douglas Ranch is being graded and platted in the first phase of a national real estate developer’s gargantuan plan that foresees, in the next few decades, as many as 100,000 new homes to shelter 300,000 people. In late October 2024, dozens of trees, salvaged from the land and potted as if they had just arrived from the nursery, watched over the quiet construction zone.

This remote site in western Maricopa County, between the stark White Tank Mountains and frequently dry Hassayampa River, is the location of Teravalis, the largest master planned community in Arizona and one of the largest in the country. It is part of a constellation of roughly two dozen master planned communities in the area – with names like Tartesso, Festival Ranch, Sun City Festival, and Sun Valley – that could propel upstart Buckeye in the coming decades to one of the largest cities in the Southwest. Buckeye planning documents anticipate a city population later this century between 1 million to 1.5 million if all the master planned communities are fully built out.

The Phoenix metro area is expanding ever outward, riding the decades-long wave of a nationwide redistribution of people toward warmer, sunnier states. That population growth – the state added nearly 1.2 million people in the last 15 years – has driven up home prices and pushed single-family home buyers into lands farther removed from the center. Buckeye is about as far removed as it currently gets.

All the while, the state’s water supply has declined. The Colorado River, shrinking due to a warming climate, has been in shortage condition since 2022, a situation that has cut Arizona’s allocation from the river by at least 18% annually. Groundwater, which has nurtured Buckeye to this point, is no longer sufficient for new growth in the area, the state says. Arizona Department of Water Resources decisions in 2023 about groundwater availability in the region sent shockwaves through the housing industry, halting new subdivisions in Buckeye and certain other locations around Phoenix that would have used local groundwater. The decisions affected only proposed developments that had not yet received permits to pump groundwater.

“We’re in an era of limits,” Tom Buschatzke, director of the Arizona Department of Water Resources, reiterated during a January 16, 2025, meeting to discuss new policies that could unlock homebuilding in the area. The Arizona Municipal Water Users Association echoed that sentiment weeks earlier: “Arizona’s future is not secure if we continue to depend only on groundwater.”

The Home Builders Association of Central Arizona, an influential trade group, reckons that 200,000 homes in the greater Phoenix area for which builders thought they had sufficient water are now in limbo. On January 22, 2025, the association announced a lawsuit against the state over its restrictions on groundwater use that have held up home construction.

Howard Hughes Holdings, the national real estate company that is developing the 37,000-acre Teravalis site, has secured water for only the first 8,500 homes, some of which are scheduled to be ready by next year. Where will the rest of the water come from? Deals could be made with nearby tribal nations to lease their senior rights. Ag land could be bulldozed and the water given over to housing. Wastewater can be cleaned up and reused. Groundwater could be pumped from designated “transport” basins from which water can be moved outside its natural watershed. Many options are on the table – even a farfetched pipeline carrying desalinated water from Mexico – but they require delicate political negotiation, wads of money, or both.

The exurban growth is a clash between Old Arizona, with its cotton fields and cattle ranches, and New Arizona’s subdivisions and silicon chip manufacturers. In Buckeye, the two eras often occupy adjacent parcels, each representing different ways of irrigating the Arizona Dream. Behind all the political maneuvering is one overriding question: How should Arizona’s limited water be used?

Growing Pains

Until this century, Buckeye was a tiny farm town known for its cotton fields and rodeo. Its story since then has been one of audacious growth. In the last 25 years, the number of residents has climbed from roughly 8,000 to now almost 120,000. And that’s just the start.

The Buckeye Planning Area, designated by the city, encompasses 639 square miles. Phoenix, by comparison, spreads across 519 square miles. Not all of the Planning Area is within the current Buckeye city limits, but city officials do anticipate that those lands, prior to development, will be incorporated in order for them to access city services. At present, just 15% of the Planning Area is developed and the city boundaries are a patchwork of annexations.

“Water and infrastructure are really the two most significant challenges I think that we have moving forward,” said Eric Orsborn, mayor of Buckeye.

Orsborn, an enthusiastic municipal booster who owns a construction business, knows the importance of the homebuilders. “You’re the fuel that helps us grow,” Orsborn told a representative from the Home Builders Association of Central Arizona at a Buckeye City Council meeting on October 15, 2024.

To understand the current brouhaha over housing development, turn back the clock 45 years. At the time, groundwater extraction was so rampant that the land surface was sinking and wells were going dry. The state needed to rein in its use. Lawmakers did so through the Groundwater Management Act of 1980, which established four “active management areas,” or AMAs, in which groundwater would be regulated. Now there are seven AMAs. Municipalities in the AMAs could become “designated water providers” if they proved a 100-year renewable supply of water such as treated wastewater or a surface water source like the Salt River or Colorado River, which began to be delivered to the Phoenix area via the Central Arizona Project canal in 1985.

Buckeye, because it still relies almost exclusively on groundwater, is one of the few cities in the Phoenix AMA that is not a designated provider. This has consequences. The city’s three water providers pump groundwater and residents pay the Central Arizona Groundwater Replenishment District, a state-created agency, to recharge a portion of that pumping. Meanwhile, commercial and industrial users, which are not subjected to the same groundwater restrictions as residential customers, are allowed to build and pump without replenishment. The city has recently welcomed distribution centers from the retailers Five Below and Walmart. But Buckeye is not allowed to pump more groundwater to serve new outlying subdivisions. Instead, master planned communities like Teravalis that are located in an AMA are responsible for securing their own water and proving a 100-year renewable supply. This is called a certificate of assured water supply.

Until recently, local groundwater sufficed for these certificates. Howard Hughes will be using groundwater for Floreo, the 8,500-unit first phase of Teravalis that is now under construction. But at the moment water supply for the rest of the project and for other projects around it in the Hassayampa basin are in doubt because of a state determination in 2023 that local groundwater is insufficient and cannot be used for a certificate of assured water supply. The Home Builders Association of Central Arizona disputes the modeling that informed the decision, and filed a lawsuit on January 22 to reverse it.

In parallel, state lawmakers and water officials are attempting to promote workarounds that would appease homebuilders and cities like Buckeye and allow limited groundwater pumping in the short term, but also protect long-term groundwater sustainability in the AMAs.

One option, which has already been approved by the Gov. Katie Hobbs, provides places like Buckeye a way to become designated providers while still pumping groundwater in the interim. Buckeye leaders and representatives for the master planned communities objected to stipulations in the program that they felt required them to give up too much water for too little benefit. Buckeye has not taken an official position on the final rules.

The second consideration is a voluntary program to incentivize the conversion of farmland to housing. These discussions were initiated after Gov. Hobbs vetoed a bill on the topic last year because she felt the ideas needed more vetting. The intent is two-fold, said Tom Buschatzke of the Department of Water Resources: allow more housing to be built but also secure a long-term reduction in groundwater use by facilitating what has already been taking place in the state in the last century. The ag-to-urban concept would not help places like Teravalis, which is being built on desert land north of I-10, not former farmland. And there are still big unanswered questions about how much water could be given over to housing, how much would need to be replenished underground, which lands would qualify, and where the water could be used.

Grady Gammage Jr., a lawyer at the Phoenix-based firm Gammage & Burnham who works at the intersection of real estate development and water supply, called the current groundwater situation a “logjam.” In his view, what’s needed is a compromise that allows for some groundwater use now with an assurance to build the expensive infrastructure to bring in an alternative water source down the road to fill the gap.

“One of the things that I think somebody needs to take the lead in thinking about is the big picture infrastructure solutions,” Gammage Jr. said.

Those discussions will take some time because state officials do not want to rush the process, said Patrick Adams, the governor’s water policy adviser. “We want there to be consensus, bipartisan work, and really rigorous analysis on these pretty impactful water policy program changes.”

Water-Efficient Designs

What gets built determines water use. New housing developments in Arizona require less water than their predecessors because of landscaping changes, said Spencer Kamps, vice president of legislative affairs for the Home Builders Association of Central Arizona. Xeriscaping – employing desert-native vegetation – is the norm, both through changes in code and changes in culture. To mimic a lawn aesthetic, some homes in new subdivisions have patches of artificial turf in front of the house. But turf grass is out.

Outdoor use is the biggest factor for a residential development’s water footprint. The dry desert air vacuums moisture from the ground and turf grass lawns are relatively thirsty embellishments. Terry Lowe, Buckeye water director, said that about 60% of the city’s residential water is used outdoors.

Many new developments in the state share a defining trait: they are built atop former farm fields. The replacement of crops with cul-de-sacs has helped moderate water use, which is less today than in the mid-1950s, when only a million people lived in the state.

Howard Hughes is pitching Teravalis as a continuation of this trend toward environmentally conscious development, though it is being built in the desert, not on formerly irrigated fields. A slide deck for investors notes the company’s intention to be “one of the leading sustainable MPCs in the nation with a strong focus on environmental awareness and innovative technology.” Its promotional materials advertise water-efficiency goals of 35% below the state average water use per person. There will be limits on pool size and covers required to reduce evaporation when not in use. Wastewater will be reclaimed and recycled for park irrigation. Howard Hughes representatives declined to be interviewed for this story or to respond to written questions about their water use and development plans.

Achieving these goals requires help. Building decisions are a three-partner dance between developers, homebuilders, and municipalities. Developers like Howard Hughes are responsible for the big capital investments: buying land, acquiring water, and installing streets, sidewalks, and drainage. This is all the “horizontal” infrastructure.

Once these assets are in place, the “vertical” stage – homebuilding – can begin. Developers offer blocks of the platted land to established companies like Lennar, KB Home, Brightland, and Century Communities. These homebuilders follow local and state codes, as well as developer preferences, which can be stricter than code requires, Kamps said. In the case of Teravalis, Howard Hughes will set the water use goals and homebuilders will follow the lead.

That guidance from Howard Hughes is not yet available, according to one of the seven companies selected to build homes there. Jill Ebding of Courtland Communities said that Howard Hughes has not told them final water-efficiency design guidelines.

“We can submit a house plan with just four walls, a roof, and a foundation – here’s our floor plan,” Ebding said laughing. “But we haven’t set up anything with landscaping or anything additional like that.”

Will the designs in the Floreo phase of Teravalis be substantially different from what is already on the market? Ebding did not think so, at least not from Courtland Communities.

Road to Somewhere?

The road to Teravalis, at exit 109 from I-10, is named Sun Valley Parkway. Built by private investors in the late 1980s, the road was a lonely speculation that one day people would move here. Expected growth did not happen immediately. “It was like a road to nowhere that was great for biking, was great for truck driving schools going out and practicing and training,” Orsborn said about the parkway’s early years.

Sun Valley is still, by and large, a lonely road. Tartesso is out this way, at the southern end, closest to central Buckeye. At the northern end, where the road loops east around the White Tank Mountains in the direction of Phoenix, is Sun City Festival. In the middle, miles from any habitation, is the blank slate of Teravalis and the outlines, in planning documents, of a half dozen other master planned communities. Gammage Jr. said that, due to the vagaries of real estate development, not all the housing units approved by the city will ultimately be built. But many will.

Such growth has been the history of Arizona since statehood: defying watershed limits while engineering solutions to fill the supply gap. Cities, meanwhile, have expanded farther into the desert and tapped increasingly distant water sources. New water sources will not be cheap water sources. Knowing this, Orsborn looks at future growth as a challenge to be met step by step.

“We don’t have to solve water for the entire 1 million people today,” Orsborn said. “We can do this incrementally and come up with the water needs for the next 10 to 20 years.”

If local groundwater is no longer available, the next chapter of growth in Buckeye will have to come from a creative alignment of finance, policy, technological innovation, and deal making – the New Arizona mix that sees a road in the desert and thinks it can lead somewhere.

This story was produced by Circle of Blue, in partnership with The Water Desk at the University of Colorado Boulder’s Center for Environmental Journalism.