Growth and Water

I’m certain this graph is of enormous importance in understanding long range water issues in the west. But I’m not entirely sure how.

It’s single family home starts in the  Phoenix (blue) and Las Vegas (red) metro areas over the last decade:

Phoenix, Las Vegas home starts

Phoenix, Las Vegas home starts, courtesy St. Louis Fed

What you see here is the housing bubble bursting. Adam Nagourney did a nice job in the New York Times last week of explaining what this means in Nevada, where demographers say population is actually declining – a remarkable fact for what on paper looked in the 2010 census like the fastest growing state in the country:

The state demographer, Jeff Hardcastle, estimated that Nevada had lost more than 90,000 people since July 2008, and expects the decline to continue through next year. He said that before 2007, Nevada had been the top-growing state for most of the past 20 years.

The Economist jumped in with stark employment figures:

Depopulation in Nevada would be particularly unpleasant given the housing overhang in the state that has already driven home prices in Las Vegas down by nealry 60%. Further population exits would increase supply relative to demand, generate more price drops and potentially more defaults. Of course, falling prices could ultimately lead to a new influx of residents attracted by cheap housing. But the adjustment process will be difficult, and the new Nevada economic model will look very different from the old one.

Phoenix also has seen a drop in its civilian work force, though not nearly as great in percentage terms as Las Vegas. But this all leaves me wondering about water. In the short term, it buys breathing room. But in the long term, what will the economic model look like, and what does that imply for future water demand?


  1. It’s especially important because many political leaders in this part of the world (and the boosters who fund them) believe that returning to the economic drivers from that 2002 – 2007 period are the Holy Grail of policy-making. Negative externalities be damned!

  2. When I see graphs like this, I have thoughts similar to Chris’s thoughts about externalities.
    I also have mathematical thoughts. I wonder how the change in housing starts depends on new jobs, changes in patterns of tourism, government funding, …. These changes, in math speak, are partial derivatives of housing starts with respect to …
    Without knowing the partial derivatives, essentially the underlying economic forces for a city, it is hard to predict a future.
    For instance, Las Vegas will not be a place where people buy cheap housing if there are no jobs for the people who bought the cheap housing.
    So, for me to start to understand the graph, I need the underlying factors that led to the graph. The graph itself does not contain the information that would allow me to make more than superficial comments such as ‘We lost the game because they scored more points than we did. We needed better defense.’

  3. I have written on this topic (short version: Water used to expand; overexpansion leads to shortage)

    More here:

    and here…

    The end of abundance: How water bureaucrats created and destroyed the southern California oasis in Water Alternatives 2(3): 350-369
    Abstract: This paper describes how water bureaucrats shaped Southern California’s urban development and put the region on a path of unsustainable growth. This path was popular and successful until the supply shocks of the 60s, 70s and 80s made shortage increasingly likely. The drought of 1987–1991 revealed that the norms and institutions of abundance were ineffective in scarcity. Ever since then, Southern California has teetered on the edge of shortage and economic and social disruption. Despite the risks of business as usual, water bureaucrats, politicians and developers continue to defend a status quo management strategy that serves their interests but not those of citizens. Professional norms, control of the discourse, and insulation from outside pressure slow or inhibit the adoption of management techniques suitable to scarcity. Pressure from increasing population and politically and environmentally destabilised supplies promise to make rupture more likely and more costly.

  4. What is interesting to me is that growth either slowing or going negative may give some breathing room, but the revenue models used by many water agencies actually depend upon growth to fund infra projects and maintenance.

    So on the one hand the strain on ecosystems might be lessened in the short term, but the strain on human built systems may be increased.

    Back to the learning curve point again. All of humanity doesn’t seem to move up the learning curve when it comes to the built environment…



    P.S.: happy new year!

  5. @Dano — correct, but only by accident. It’s possible to design “sustainable growth” water policies (find total demand X, then auction new permits to stay within that limit, allowing builders to offset new demand by reducing existing inefficiency), but they are not used.

    Because politicians like campaign contributions and do not like saying “no.”

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