Texas faces a need for hundreds of thousands of homes to address its housing shortage

If Texas wants to control its high housing costs, it needs more homes, Texas Comptroller Glenn Hegar’s office said Tuesday — the latest sign that high home prices and rents in the state have become a growing concern for officials. of high rank of the state.

Home building in Texas has not kept pace as the economy has grown and millions of new residents have moved here over the past decade, the comptroller’s 26-page report found. That homebuilding lag has left the state with a deep housing shortage: Texas needs 306,000 more homes than it has, according to one estimate cited in the report.

That shortage has fueled competition for a limited supply of housing, particularly in the state’s large metropolitan areas — driving up housing costs, forcing many would-be homebuyers out of the market and leaving more than half of the state’s renters to spend too much. on rent.

The relatively low cost of living in Texas has been a major draw for new residents and relocating businesses. But Texas could lose that affordability advantage if state and local officials don’t find a way to increase the state’s housing supply, especially for low- and moderate-income families, Hegar said.

“Is it a crisis today? I wouldn’t call it a crisis,” Hegar said in an interview with The Texas Tribune. “But if we don’t find more solutions, we’re going to be in a crisis.”

Many Texans probably disagree. Ninety percent of Texans say housing affordability is a problem where they live, according to a recent survey from the University of Houston and Texas Southern University.

Still, Hegar is the latest national official to signal unease about the state’s high housing costs. Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dade Phelan each indicated that Texas lawmakers should address the state’s housing affordability challenges when they return to the Capitol next year.

More Texans are feeling the pinch from the state’s tight housing market. A recent report by Harvard University’s Joint Center for Housing Studies found that more homeowners and renters in Texas than ever are struggling to keep a roof over their heads.

Hegar’s report reflects a growing bipartisan policy consensus, backed by an expanding body of research, that the nation’s housing affordability problems stem from a lack of homes. By various estimates, the US needs millions more homes than it has.

Texas is not exempt from this shortage. The state is building more homes than other large states like New York and California. But it hasn’t built enough to keep up with demand spurred by the state’s growing economy and population. Higher land costs, driven by this demand, have resulted in more expensive housing being built so that builders can recoup the cost of the land.

Home prices rose faster in the 2010s than in the previous decade, the comptroller’s report said. This increase in home prices was only supercharged during the COVID-19 pandemic, as the rise of remote work allowed workers from other states to move to Texas, and what had been historically low interest rates fueled the market buying houses.

Texas has not been building enough homes to keep up with population growth, particularly in its major metropolitan areas, the comptroller’s report found. Nearly 225,000 people moved to Texas from other states between 2021 and 2022, a faster pace than in any year before the pandemic, the report said.

This has led to a depletion of housing supply and, as a result, higher prices. Texas housing has reached its most unaffordable level since 1985, the comptroller’s office announced Tuesday. There are few homes on the market that sell at prices that would be considered affordable for entry-level buyers.

The median sales price for a home in Texas peaked at $340,000 in 2022, but has since fallen within that range, data from the Texas Real Estate Research Center at Texas A&M University show. Places like the Brownsville-Harlingen and Sherman-Denison areas saw dramatic home price increases between 2019 and 2023 — 73 percent and 66 percent, respectively. The Austin-Round Rock region, where home price growth was most pronounced, saw home prices peak above $500,000 in 2022, but those prices have since declined.

Higher interest rates, initiated by the Federal Reserve in an attempt to tame high inflation, have exacerbated the problem – raising the price of admission for first-time home buyers and encouraging homeowners who would otherwise have sold their homes to keep their interest smaller. mortgages, exacerbating the deficit. Relatively high property taxes and rising homeowners insurance have contributed to the problems.

The comptroller’s report doesn’t make explicit recommendations about what steps politicians should take, but it nodded toward some potential solutions.

Among them: relaxing local laws that determine what types of housing can be built and where. Cities have laws called zoning ordinances that determine how many homes can be built on a given lot and how much land is needed to build a home.

Those regulations, housing advocates and critics say, drive up housing costs in part because they limit how many homes can ultimately be built. Most residential lots in large Texas cities only allow the construction of single-family homes and prohibit the construction of other types of housing such as duplexes, fourplexes, and smaller apartment buildings.

Proposals to relax the city’s zoning restrictions to allow more housing have often faced opposition from existing homeowners and neighborhood groups, who strongly oppose any changes they see as altering the single-family character of their neighborhoods .

The comptroller’s report cites recent zoning reforms passed by the Austin City Council, typically a left-leaning body, to allow up to three houses to be built where only one house could be built before.

State lawmakers have shown an appetite for loosening city zoning restrictions even after proposals to do so failed in the Texas Legislature last year. Patrick and Phelan each instructed lawmakers to study potential zoning reforms before next year’s legislative session. Conservative thought leaders such as the Texas Public Policy Foundation, an influential think tank, support removing residential zoning restrictions.

There are additional ways for state and local officials to address housing affordability, the comptroller’s office said. State lawmakers, for example, could fund programs or incentives designed to provide housing to low- and moderate-income families. Local authorities could streamline their permitting processes to allow homes to be built more quickly, the report said.

Nicole Nosek — who heads Texans for Reasonable Solutions, an organization that pushed for statewide zoning reforms last year — proposed ideas to increase housing supply during a breakfast meeting Tuesday with the comptroller’s office, Texas Habitat for Humanity and the Austin Board of Realtors.

It should be easier to build homes in commercial zones, Nosek said, which many Texas cities don’t currently allow. The amount of city land on which single-family homes can be built, a requirement known as the minimum lot size, should also be reduced, she said.

Houston lowered its minimum lot size to 1,400 square feet, first downtown in 1998, before the reform expanded to the rest of the city in 2013. That reform led to tens of thousands of new homes being built on larger lots. small, research shows, a boom that housing advocates say has kept housing costs in check in Houston — especially compared to other major U.S. cities like Chicago, Los Angeles and New York City.

A bill to reduce cities’ minimum lot size requirements for single-family homes passed the Texas Senate last year but died in the Texas House before it could be voted on.

Like California, Texas could face skyrocketing housing costs and residents fleeing to other states if it doesn’t figure out how to allow more homes to be built in its major urban areas, said Nosek, herself a transplant from California.

“What you’re seeing in California, which is the ultimate cautionary tale, is when you don’t allow more supply to come online to handle population growth, you ultimately select who the losers are going to be,” Nosek said. “If you don’t have housing that accommodates all the employees and all the growth that we’re attracting, what’s going to happen is … people on the bottom rung of the ladder and even the middle class will be pushed elsewhere. state.”

Whether Democratic lawmakers are on board with these ideas remains an open question. House Democrats led the charge to kill a bill to relax city rules to effectively make it easier to build accessory dwelling units — also called “grandparent apartments,” or ADUs — in backyards of single-family homes. Republicans in the state Legislature in recent years have often sought to block officials in the state’s bluer urban areas from enacting progressive policies, culminating in a sweeping bill last year aimed at barring cities from legislating on multiple fronts. Democrats were thus largely suspicious of any measure that appeared to erode the authority of the state’s bluer urban areas.

But there appears to be a movement among Democrats to pass zoning reform at some level. The Texas Democratic Party adopted a platform this summer that includes support for overturning local zoning regulations that prevent more homes from being added.

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This story was originally published by The Texas Tribune and distributed through a partnership with The Associated Press.

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