The 2016 movie version of The Big Short, Michael Lewis's 2010 best-selling non-fiction account of a handful of quirky contrarians who bet against the housing and financial market bubble of 2008 and won, ended with a teaser.

While the movie does a great job explaining how Michael Burry was able to make nearly $1 billion betting against the housing market in 2008, it left many viewers very puzzled about a completely different issue – the last line of the movie, printed on a placard, is:

'Michael Burry is focusing all of his trading on one commodity: Water.'

Fast forward to now. Burry's prescience when it came to the credit and housing bubble seems to have carried into one of the present, near- and long-term future's lightning rod issues once again. And it's top of mind now, although, just like the housing bubble in 2007 or so, more people are talking about it than doing anything about it. Per an analysis from Finmasters on Burry's latter-day fixation by Dillon Jacobs:

We often spout off the fact that 70% of the Earth’s surface is covered in water – something we probably all learned in kindergarten. While this is true, freshwater – the kind we care about – actually only represents 2.5% of that amount.

On top of that, only 1% of our freshwater is easily accessible, with most of the other 99% trapped in glaciers and snowfields. In the end, only 0.007% of the planet’s water is actually available to fuel and feed the world’s 7 billion people.

The six states of Arizona, California, Colorado, New Mexico, Nevada, and Utah are forecast to grow in population by about 15 million people between 2020 and 2040, and four of them rank in the top 10 in U.S. population growth rates. What's more, four of the states – Arizona, California, Nevada, and Colorado – are epicenters for some of the most accelerated growth for single-family build-to-rent communities. With much more to come.

But look.

Water supplies for drinking, agriculture, residential, and commercial use are already a "gorilla in the room" issue in planning, zoning, and land-use permitting and approvals meetings in these states and beyond. Stories like this one come every day, across news, information, and social channels.

Two of the largest reservoirs in America, which provide water and electricity to millions, are in danger of reaching ‘dead pool status.’ A result of the climate crisis and overconsumption of water, experts say.

Lake Mead, in Nevada and Arizona, and Lake Powell, in Utah and Arizona, are currently at their lowest levels ever. ‘Dead pool’ status would mean the water level in the dams was so low it could no longer flow downstream and power the hydroelectric power stations.

The Lake Mead reservoir, which is the largest artificial body of water in America, was created in the 1930s by the construction of the Hoover Dam, an engineering masterpiece. Lake Powell, the second largest, was created in the 1960s, with the construction of the Glen Canyon Dam.

“The conditions in the American west, which we're seeing around the Colorado River basin, have been so dry for more than 20 years that we're no longer speaking of a drought,” said Lis Mullin Bernhardt, an ecosystems expert at the United Nations Environment Programme (UNEP), “We refer to it as “aridification” - a new very dry normal.”

Lake Mead and Lake Powell, which is created by the Glen Canyon Dam, not only provide water and electricity to tens of millions in Nevada, Arizona, California, Wyoming, Colorado, New Mexico and Mexico, but they also provide irrigation water for agriculture. Experts warn that as the crisis deepens, water cuts will need to be introduced, but this may not be enough.

Says an August 2022 article from Scientific American:

It’s so bad that scientists say the ongoing drought in the western United States marks the region’s driest 22-year stretch in more than 1,200 years.

The Builder's Daily's friend and advisor, SLC Advisors principal Scott Cox, who toils everyday on the policy, zoning, and developmental frontlines on this issue has noted the residential planning implications here:

There are three main weapons against development (not to minimize schools, NIMBYs, etc.):

• Traffic/Greenhouse Gases. We’ve struggled with traffic studies, and in California your environmental impact report has to address GHG emissions. Lest you chuckle at those goofy Californians, I think it’s a coming attraction in your state. Carbon neutral can be tackled – expensively – by moving to a net zero development. But you really can’t go net zero on traffic, so one option is buying GHG credits. Expensive, but doable.
• Fire. Increasingly, the weapon of choice to stop development. Not just the wildland/urban interface, but even grass fires. See Boulder. But it is possible to mitigate through materials, defensible space, shelter-in-place back-up facilities, multiple community exits, etc. Which is not meant to minimize the emotional appeal of a parent saying “our roads are already clogged; you’ll kill us in a fire evacuation with more people.” But there are solutions if you can move past emotions.
• Water. Water becomes the ultimate weapon. As noted, before, it’s expensive to acquire and to move and has all kinds of technical limitations to both. You can’t just solve it with a big check. And even if it grates, you can see the logic and appeal of neighbors saying, “my well isn’t producing and I have to drill a new one, and you’re going to let these guys build 1,000 homes???” or, “We’re on every third day water restrictions and you want more homes?????”

Recently, as part of annual Climate Week NYC and the United Nations General Assembly meeting in New York, Kohler senior VP-Human Resources, Stewardship and Sustainability Laura Kohler hosted a discussion with leaders from Skidmore, Owings & Merrill, FXCollaborative, and Drake/Anderson about how manufacturers, architects, and designers can better work together to prioritize progress against environmental goals, including water conservation, while also reaching and influencing end-consumers to make more environmentally sustainable choices.

Kohler environmental sustainability leaders also participated in conversations with like-minded individuals from across sectors to discuss solutions, the need for action—especially concerning water—and how we can better engage our stakeholders to drive results.

Among their take-away action items:

• Use data and technology to unlock business leadership
• Catapult water to the forefront of the conversation
• Influence the influencers

As Scott Cox writes:

Like other entitlement and infrastructure issues, it takes some commitment and change from all to come to a solution. Charging $25,000-plus tap fees or more – when homeowners who do not even have water meters continue to exist – makes no sense.

More and more, it will be the most critical part of your due diligence.

A friend sent us a link to this article, with tongue only partly in cheek as to the surreality of the story.

Who are we taking to water court in these cases if beavers move in?” he asked. “It seems to me beavers would probably have the most senior water rights of anyone in the state.”

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