Prioritize Western Water Grants that Support New Housing
Most Western states wisely require new housing developments to have an assured water supply, generally giving developers and communities three options to “create” new water for development: (1) build new storage and conveyance to capture unused water; (2) purchase and legally transfer water rights from an existing user; or (3) pursue “demand management” by lowering water use among existing users. Meanwhile, Section 40901 of the Infrastructure Investment and Jobs Act (IIJA) provides $8.3 billion over five years for the U.S. Bureau of Reclamation (USBR) to provide partial funding for projects involving water storage, water recycling and reuse, and water efficiency projects in Western states. The USBR should prioritize funding water projects for local governments that would expand the production of new housing in their service areas if given the water resources to do so.
Local governments in the West employ a variety of policies to ensure adequate water supply. In some places developers must pay water impact fees to connect to the public water system, while in others they must purchase and dedicate water rights to cities for approval of new housing. Alternatively, some places resort to building moratoriums to address insufficient water supplies. The cost of water for a new single-family home can exceed $60,000, a significant barrier to new construction in some places in the West.
Recommendations
- The Biden-Harris Administration should identify and work with USBR authorities who are interested in urban housing-water issues to build institutional support.
- Issue a directive similar to the directive aimed at the Department of Transportation to score grant proposals in part based on their ability to increase housing production in the applicant’s service area. Metrics that capture the ability to promote housing production might include:
- An objective measure of local water availability for an applicant, such as the 10-year average of water demand (the volume of treated and delivered water) and supply (average yield and a firm yield in their water portfolio).
- A subjective measure such as the estimated year in which projected water demand will exceed projected supply or a description of the local political concerns about growth and adequate water supply.
- Explicit information on how water savings will be used. For example, water savings could be stored in the local government’s “water bank” and given to affordable housing projects, or used to lower costs for private transit-oriented developments.
- Similar metrics as those in Department of Transportation applications, which include information on local policies to promote density.
- USBR should communicate goals and metrics to applicants, have applicants submit metrics as a part of grant applications, and favor grants using the metrics.
While there could be pushback from USBR authorities to using funding in pursuit of housing development, the IIJA statutory requirements (such as requiring that funding go to projects that increase water use efficiency or enhance water management) leave ample leeway for the Biden-Harris Administration to direct the USBR. Because demand management requires no legal change in water rights and limited investment in new infrastructure, targeting the USBR’s WaterSMART grants is likely the best place to start. Additionally, promoting demand management will likely have support from Western environmental groups with strong preferences against both building new infrastructure to divert water from rivers and “buy and dry,” where farmers fallow land and sell their water to cities.
Only $2.9 billion of the USBR funding in the IIJA has been allocated to date. Scoring grant proposals in part based on their ability to boost housing supply is a smart use of the remaining IIJA funds and future USBR funding.
This idea of merit originated from our Housing Ideas Challenge, in partnership with Learning Collider, National Zoning Atlas, and Cornell’s Legal Constructs Lab. Find additional ideas to address the housing shortage here.
Housing costs have ballooned, far outpacing the broader cost of living in the U.S. Addressing the housing crisis is a bipartisan issue.
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