I am skeptical that water will be anything more then a secondary limit on municipal growth in the Southwest for a number of reasons.
Although history has shown that big metros have deeper pockets than agricultural interests, and tend to win out in bidding wars for water, that dynamic is gradually changing.
In January 2026, Pitkin County, Colorado (read Aspen) spent $6.5 million to purchase the water rights from the Twin Lakes Reservoir and Canal Company, and the Fountain Mutual Ditch Company, and put the water thus acquired back into the Roaring Fork River to maintain minimum instream flows. This was water previously diverted to the Colorado Front Range.
That same country is also part of a large consortium of Western Slope interests that are seeking to purchase the pre-Compact water rights for the Shoshone hydro plant on the Colorado River, which will prevent further diversion of that water out of the Colorado River basin. This purchase is, predictably, being contested by Front Range real estate development interests.
On the eastern side of the Colorado Rockies, there is mounting resistance to any further buy-and-dry schemes in the Arkansas River basin, as the melon farmers around Rocky Ford notice what happened to agriculture in Crowley county immediately to the north, where water rights purchases by Colorado Springs, Pueblo and Aurora led to the collapse of the agricultural economy (the main economic driver in the Crowley County is now a prison). In the Republican River basin, downstream delivery obligations to Kansas have forced the fallowing of thousands of acres of formerly irrigated farmland, and the abandonment of Bonny Reservoir, precluding any water grab by Front Range cities. As for water in the Rio Grande basin, the situation is now so dire there that what was once the river now runs dry through Albuquerque for several months each summer. No extra water to be had there, either.
The bottom line is that future trans-basin diversions are going to be increasingly difficult to accomplish both hydrologically, economically and politically, and there is a progressively shrinking amount water to be had for cities which have relied on these. Future growth will instead be contingent on gradually putting all the farmers in eastern Colorado, along the Wasatch Front, and in the Casa Grande Valley out of business, which will be a progressively harder sell, as those folks still have some political connections within our current government. So we really do seem to be getting to a point where water will constrain growth, just as John Wesley Powell pointed out over 100 years ago. There are certainly gains to be had from more logical building codes, and water conservation initiatives such as xeriscape landscaping, but many current homeowners in greener western cities like Denver are not necessarily bought into the idea of giving up their nice yard simply for the sake of enabling developers to have additional water to fuel more suburban sprawl.
A recent NOAA analysis presented in an online seminar this past Monday came to the conclusion that the current Southwest mega-drought is likely to be with us for several more decades, driven largely by long-term cycles involving the Pacific ocean. If that turns out to be correct, then the era of rapid urban expansion in the West will truly be over. Stay tuned.