Droughts are changing the way we live here in California — and the housing market is no exception.

California’s last drought, taking place over the span of 2012-2016, was one of the longest and most intense on record. For example, the state’s snowpack hit a historic low in 2015 with snowpack at just 5% of what is experienced in a typical year. Parts of SoCal experienced their driest periods since the 1400s, as interpreted by the geological record. These years also saw record-high temperatures, according to the California Department of Water Resources (DWR).

In 2021, much of Northern and Central California is once again under drought emergency orders. These counties include, among others:

  • Contra Costa;
  • Fresno;
  • Kern;
  • Monterey;
  • Sacramento;
  • San Luis Obispo;
  • San Mateo;
  • Santa Barbara;
  • Santa Clara; and
  • Santa Cruz.

Driving the drought are both:

  • below-average precipitation experienced since 2019; and
  • warmer-than-average temperatures, which have dried up reservoirs and streams at a rapid pace.

As conditions are not yet improving, experts anticipate the drought to only get worse in 2022.

In response, Governor Newsom has called on Californians to voluntarily reduce their water usage by 15% from 2020. For reference, water usage declined 21% from 2013-2016, during the state’s last drought. It has since inched back up to 16% below 2013 levels, but the overall improvement shows that many of the changes residents made — such as installing drought-resistant landscaping and investing in water-saving appliances — have had lasting impacts. But in order to prevent wildfires and protect California’s farmlands, natural habitats and our drinking water, water usage will need to be limited even further.

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Build it and they will use water

California is a bustling state, with an economy to rival the size of most countries. In fact, if California were its own country, it would rank fifth in terms of gross domestic product (GDP).

With that enormous economy comes a huge population, nearing 40 million as of 2019, and 14.4 million housing units, according to the U.S. Census.

But the worsening impacts of our state’s severe droughts begs the question: how can our state keep growing, if we continue to run out of water?

In areas where severe droughts combined with a lack of resources have decimated local economies, government officials are answering: we can’t.

Small Southwestern towns in Utah and Arizona have already begun limiting development due to water shortages. For example, to build on the arid land between Phoenix and Tucson, Arizona, developers need to prove new homes will be able to access a water source for at least 100 years before they receive approval for new development. Since the area has little groundwater left, this challenge has proven mostly impossible for developers.

Here in California, the Marin Municipal Water District is considering enacting a ban on new water hookups, which is another way of saying prohibiting new development. It enacted similar bans and overcame a legal challenge to remain in place during 1973-1978 and 1989-1993. [Swanson v. Marin Municipal Water District (1976) 56 CA3d 512]

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Half a million California homes at high wildfire risk

The future of communities will come down to water

Where in California droughts will have the most impact will depend on each county’s water sources. For example, Los Angeles County receives one-third as much rainfall each year as Mendocino County. This math suggest that LA would be the first to fall under drought conditions. But in 2021, the opposite has occurred, with Mendocino (along with Sonoma) the first counties to come under Governor Newsom’s drought declaration. As of the end of August 2021, LA is still drought-free.

It turns out, the bigger difference than rainfall is all the extra water that LA receives each year, from three different aqueducts and from a recycled water system, as explained by CalMatters. If counties want to continue supplying adequate water for their residents, they will need to invest creativity and money into finding that water.

Of course, water has always been a political issue. After all, who’s to say it’s fair that Los Angeles gets to drain water from Northern California to support its ever-growing population?

California’s water wars have waged for over a century, with no “fair” end in sight. Even as small towns at the origin of LA’s aqueducts dry up and wither, LA continues to grow.

What California’s constant battle over water tells us is:

  • the issue of water is never going away; and
  • areas with the most money, resources and existing infrastructure will be better poised to survive as climate change worsens the water crisis in a state already prone to drought.

And the future of housing comes down to water

During the 2012-2016 drought, real estate professionals got used to doing things a bit differently, and signs point to a return to some of these quirky ways of selling property during a water shortage.

For example, listings in California are ten times more likely to feature drought-resistant home features in a listing than properties in other states. Common terms found in these listings include:

  • drought resistant;
  • drought tolerant;
  • drip irrigation; and
  • low flow, according to Zillow.

In 2021, listings in drought-burdened areas are beginning to tout their own water-saving features, such as additional water storage systems and access to freshwater springs.

For rural housing markets, it will be do-or-die in the coming years. Do: meaning, installing water tanks, water recycling systems and other drought-resistant features. Or, die: meaning, move to Los Angeles, which has infrastructure already in place.

This do-or-die dynamic will play out at the national level, too. Our state, which has grown into a country-sized economy, will face economic extinction if it doesn’t get a handle on its water issues. That’s because growth is essential for economic success. How will our state’s bustling metros continue to attract employers if they can’t offer any housing? And how will we build more housing without water?

Already, these two notions are competing for significance across the state. California’s water shortage is rivaled only by its lack of housing, which has led to extremely low for-sale inventory, low rental vacancies and some of the highest costs of living in the nation.

The dual issues of water and housing are momentous to California’s future economic progress. Legislative action and, yes — money — are needed to solve both the housing and water shortages. If we make these issues priorities in the coming years, California’s economy, housing market and population will continue to grow and thrive.

If not, Hollywood has a primer for the future of California’s water wars: Mad Max.

Related article:

Real estate disaster scenario Part I: Drought