Wet growth: Effects of water policies on land use in the American West

Abstract

Rapid population growth and increasing water development costs have prompted many western governments to condition residential development approval on the adequacy of water supplies. We examine the effects of these regulations on housing supply in Colorado and New Mexico using fixed-effects panel regressions. Our findings suggest that price-based tools to ensure water availability may be a preferred regulatory alternative to quantity restrictions. Attempts to restrict groundwater basin access have not unambiguously corrected negative externalities related to growth. Meanwhile, Colorado cities' aggressive use of impact fees has facilitated water resource development, without limiting growth. © Blackwell Publishing, Inc. 2007.