Insufficient water resources should cause a halt in new building, but the dumb asses in the construction industry won't hear of it. Neither will the politicians who want the property tax revenue. Water rights in Idaho put an effective limit on development. If you don't have sufficient water rights to cover the number of proposed new housing units, you can't get a permit to build. That's a key reason why Idaho is so sparsely populated. We have been in an extended period of drought that has put the water rights of "senior" holders ahead of "junior" holders. Parts of the "Magic Valley" area were threatened with water cutoffs earlier this year. There is constant bickering over use of surface water and subsurface water.
What you say is entirely correct, which is why I’m for eliminating all but very specific immigration. We cannot “conserve” our way forward in oil, electrical capacity, water, etc as long as we’re adding 1.something million new people every year to the US population.
Water rights in Idaho haven’t put a big crimp on construction; what has happened is that the water rights battle royal upstream (ie, between the farmers upstream on the Snake and the downstream users) have effectively pulled away a LOT of previous water rights in the Twin Falls and then Boise/Nampa areas. That’s what has kept development down, IMO.
The second key reason why Idaho, Northern Nevada, Utah, Wyoming, et al are sparsely populated is that many of their towns/cities are land-scarce as well as water scarce. The BLM/USFS controls so much land that buildable land is in short supply.
BTW — senior water rights always come ahead of junior water rights. That’s the very definition of the term in the law - when there is enough water to go around, then everyone gets their full allocation. When there isn’t enough water to go around, the irrigation masters are charged by the state with cutting off the junior irrigators first, then working their way up the seniority. Most all water law in the west is based on “first in use, first in right.”