NoCo Real Estate Summit: Water drives home prices, but can be controlled

Builders of new homes in Northern Colorado spend more than $236,000 per acre to bring water to their developments. Land prices, in comparison, are about $40,000 per acre.

Buyers of new homes will spend about 10% of their purchase price on water alone.

Water and development experts say that the escalating price of water — now $62,500 per share of Colorado Big Thompson water — continues to push home prices into unaffordable ranges, particularly for first-time home buyers and those in service-related professions.

Water as a price driver along the northern Front Range was the lead-off topic at the Northern Colorado Real Estate Summit, a virtual event this year hosted by BizWest.

Reagan Waskom, director of the Colorado Water Center at Colorado State University, moderated a panel discussion that included a home developer, a water attorney, a landscape design expert and a water engineering consultant.

The takeaway from their discussion: Water helps drive the escalating costs and availability of housing in the region, but there are ways to reduce water use — which could result in reduced governmental requirements for water allocation for new housing developments.

Patrick McMeekin, vice president of land development for Hartford Homes, said CBT water, most of which is already allocated for urban use, causes prices of other sources of water to escalate as well. An average single-family home in a Hartford development requires about .45 acre feet of water. Because a share of CBT water delivers only .7 acre feet, not a full acre foot, raw water accounts for $40,178 of the cost of an average Hartford home, he said.

CBT water is the preferred source of water for development because it is already available for multiple uses without having to go through water court, said Geoff Williamson, special counsel with Berg Hill Greenleaf Ruscitti LLP, a Boulder law firm.

In Colorado, he said, water rights are for a particular time for a particular use and at a particular place of diversion. To change a water use from agricultural to municipal requires a water-court decree. Other water-right owners from the same source may object to the change because of impacts they face. Ag water, for example, is not fully consumed by its first user but much, maybe 80%, goes downstream and is used by others.

Both Kim Perry, vice president of community design for McWhinney, and Nate Hines, principal of Hines Inc., an irrigation consultant, said overuse of water for outdoor purposes contributes to the problem that builders and homebuyers face.

As much as 70% of water dedicated for home-development projects ends up being used on landscape. “This puts us in a unique position. If we can crack this, if we can dramatically reduce water use, the cost savings will more than pay for the effort,” Hines said.

He said studies over numerous markets show that 50% of sites studied overwater by as much as 200%. And even when native plants are used, “70% of native landscapes die because of overwatering.”

The tools to control water use already exist in many irrigation systems — they’ve been there for decades, he said — but aren’t used. Users set their systems and never look at them again, he said.

“There’s a real demand for understanding how to manage these irrigation systems,” he said. Users and developers who come up with low-water-use plans will likely see cities willing to lower rates and reduce water allocation requirements.

Perry said the incentives for developers to use water more efficiently can be enormous. “There is 10 times more cost to turf than with native landscapes,” she said.

She said McWhinney has several test plots within the Chapungu Sculpture Park at Centerra to determine which grasses perform best in the Northern Colorado climate.

Reducing water use requires behavioral shifts, she said. She said tiered water rates, reduction in use of chemicals, appropriate use of turf, and landscaping companies that understand new approaches are needed to accomplish reduction in use of water.

Panel members all spoke to how incentives, whether financial or regulatory, can help change how much water is used.

“If you want to let water run down the street, maybe that goes into a higher rate,” Perry said.

Hines said incentives to install smart irrigation systems are needed. McMeekin said cities need to catch up with builders. “Dedication [of water] policies need to change to match the homes now being built,” he said.

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