To tackle high housing costs, Texas lawmakers push to build more homes

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As Texas contends with historically high home prices and rents, state legislators might try to ease the affordability crisis with proposals rooted in a simple idea: build more homes and costs will come down.

Texas lawmakers have introduced several bills this legislative session intended to speed up the construction of new houses and apartments. Some would allow builders to use less land to build single-family homes, help them get local permits faster and make it more difficult for neighborhood groups to block new housing projects.

For a Legislature that historically hasn’t treated housing affordability as a priority, these steps would represent a dramatic intervention — an indicator that high housing costs have become increasingly difficult to ignore and no part of the state has gone untouched.

“In years gone by, people might have looked at affordable housing and said, ‘Oh well, this is an issue just in the urban centers,’” said Sherri Greenberg, a former state representative who is now a fellow at the LBJ School of Public Affairs at the University of Texas at Austin. “That’s not true anymore.”

How exactly the debate over boosting housing construction will play out in the Legislature — if it picks up steam at all — remains to be seen. It has the potential to become a nasty fight between advocates of building more housing and neighborhood groups that are vehemently opposed. But it also could prove a rare bipartisan cause that attracts the support of both Democrats and Republicans.

Texas’ affordability crisis

A growing number of housing experts believe a nationwide shortage of homes and apartments of all kinds, coupled with high demand, has fueled huge jumps in housing costs.

Low-income households are feeling this shortage most acutely. Texas lost nearly half of its low-rent housing units in the last decade, making it even harder for low-income families to find housing they can afford. The state has one of the largest gaps in the nation between the number of households considered extremely low income and the number of available affordable homes, according to estimates from the National Low Income Housing Coalition. For every 100 extremely low-income households, there are 25 available rental units.

But the crisis is affecting households at nearly every income level, said Roger Arriaga, executive director of Texas Affiliation of Affordable Housing Providers.

“The issue of high price and high cost of housing has kind of gone up the income chain,” he said. “It’s not just those at the lowest end.”

Although Texas builds more homes than any other part of the country, there’s broad consensus among housing advocates, builders and real estate experts that the state simply isn’t building enough to keep up with its booming population and economic growth. In 2019, according to one estimate, Texas needed 330,000 more homes than it had — a shortage second only to California.

That need has grown in the last two years as hundreds of thousands of new residents flocked to the state. Millennials and corporate buyers looking to purchase homes drove up demand for a limited supply of housing and pushed home prices and rents in Texas to historic highs.

If housing construction doesn’t ramp up, some fear Texas — which is expected to gain nearly 1.6 million new residents by the end of the decade — could find itself in the same boat as New York and California: facing even higher home prices, forcing out residents who can’t pay them and losing its status as an affordable state, one of the main attractions for people and corporations to move here.

“Texas has made its economic development messaging around affordability,” said Steven Pedigo, director of the University of Texas at Austin’s LBJ Urban Lab. “The cost advantage is not there anymore.”

The state needs more housing to keep up with its job and economic growth, said Luke Nosek, PayPal co-founder and chair of Texans for Reasonable Solutions, a nonprofit pushing many of the initiatives that Republicans are calling for this session.

“Texas wins if the Legislature acts to allow builders to build more housing at a faster pace,” he said.

What’s on the table

Top GOP leaders’ go-to solution to the state’s housing affordability problems has usually been cutting the state’s property taxes, which are among the highest in the nation.

But Republicans are also considering other approaches this session. Alhough affordable housing is typically an issue championed by Democrats, this time Republicans are behind many of the housing construction bills under consideration — perhaps spurred by the huge jump in housing costs in nearly every part of the state over the past few years.

“We’re recognizing the obvious that we’re not as bad as [California and New York] and people are moving here,” said state Sen. Paul Bettencourt, a Houston Republican. “So these are issues that we need to take care of now and not wait and have the same problem run you over.”

One of Texas House Speaker Dade Phelan’s top legislative priorities is a market-friendly bill that would essentially speed up cities’ development review processes so homebuilders can erect new homes faster. Builders often complain it can take months for a city to approve permits for new homes.

“If it takes a long time to get a permit, then that’s more costs the developer has to absorb before he can actually start turning those lots into a home,” said Tray Bates, vice president of governmental affairs at Texas Realtors.

GOP lawmakers have filed other bills that would ease cities’ housing regulations and fees for developers. One proposal would force cities to loosen their rules on the construction of “accessory dwelling units” — sometimes referred to as “ADUs” or “granny flats” — in the backyards of single-family homes. Building more ADUs is seen as one solution to increase housing stock without drastically changing the makeup of neighborhoods.

Another bill targets “compatibility” requirements that limit a building’s height depending on how close it’s built to a single-family home — a proposal aimed squarely at such rules in Austin. Critics argue those requirements make it more difficult to build apartments next to single-family homes.

But perhaps the most notable — and potentially most transformative — proposal is a bill that would allow new homes to be built on smaller lots of land.

Most cities require that new homes sit on a particular amount of land, known as a minimum lot size. In some of Texas’ biggest cities, single-family homes must be built on fairly large lots of land, with minimum sizes that can range from 3,500 to 5,750 square feet. The practice stems in part from a cultural attachment to the idea of a house with a yard.

Large lot sizes have functioned as a way of entrenching racial segregation by putting some homes outside the reach of low-income families of color. They also encourage builders to construct more expensive housing to offset the cost of the land.

“Obviously, the bigger you make the lot, the more expensive the house is going to be, and the more expensive the land,” said Scott Norman, executive director of the Texas Association of Builders. “As a builder who’s trying to sell a house, you can’t put a tiny, inexpensive house on a very expensive piece of land. The economics don’t work.”

Urbanists say big lot sizes also discourage the kind of population density necessary to create walkable cities, accommodate public transit and fight climate change by limiting urban sprawl and car emissions.

Bills by Bettencourt and state Rep. Craig Goldman, a Fort Worth Republican, would override those lot sizes and require cities in counties with more than 300,000 residents — a portion of the state that includes more than 21 million people — to adopt a minimum lot size of 1,400 square feet for a single-family home, the standard in Houston but significantly smaller than in most other major urban areas.

Not every part of those counties would have to adopt a new minimum lot size. Homeowner associations, for example, would be allowed to opt out of the requirements.

Another Republican bill would create a state housing tax credit, which would supplement the federal tax credit program — the main way affordable rental housing gets built in Texas and around the country. The bill has been introduced in the past but hasn’t cleared the Legislature.

Democrats have their own proposals to boost the production of cheaper housing. State Rep. Armando Walle, a Houston Democrat, reintroduced a bill to set up a state fund to finance housing for middle-income workers like teachers, firefighters and health care workers.

Those workers have had an increasingly difficult time finding housing they can afford in major urban areas as costs have gone up and builders have focused on building homes for wealthier households. That housing shortage has forced middle-income workers to live further away from the city centers where their jobs are located and endure longer commutes.

But experts caution that none of the proposals are silver bullets for the state’s housing woes — and if they become law, it would likely take years for their effects to become visible.

“None of these bills are going to magically provide more housing,” said Matthew Festa, a land-use professor at ​​South Texas College of Law Houston. “What they’re going to do is allow people to build it if there’s demand for it.”

Political headwinds

Advocates believe the housing supply issue has the potential for broad bipartisan agreement this session. Many Democrats sympathize with proposals to make housing more affordable for low-income households. Republicans concerned about property rights and the state’s long-term economic viability could get on board.

But state Sen. Sarah Eckhardt, an Austin Democrat and former Travis County judge, is skeptical of a statewide, top-down approach to local housing regulations that doesn’t include cities’ input on how to boost production. She didn’t shut the door on adopting new standards, but she noted there are other ways the state could address housing affordability — like simply spending more on housing.

Texas, a state of more than 29.5 million people, ranked 49th in state spending on housing and community development as a share of its overall budget — just ahead of Nebraska, a state with less than 2 million residents. Nearly 98% of spending on housing in the state comes from local governments, according to a recent UT-Austin report using U.S. census data.

“If the state wants to come in and say that the cities have been doing it poorly, well, where the hell has the state been all this time?” Eckhardt said.

Whether cities speak out against state lawmakers’ proposals remains to be seen.

Smaller cities seeking to protect their zoning rules and housing regulations may oppose them, said Bennett Sandlin, executive director of the Texas Municipal League. But larger cities that have sought to boost their housing stock and density only to encounter stiff resistance from neighborhood groups could wind up at least quietly embracing the legislation.

A starker divide will be between proponents of more housing development and groups of neighbors who oppose it — often referred to as “NIMBYs,” an acronym for “Not in My Backyard” — typically on grounds that new housing will harm existing property values, spur car traffic and disrupt a neighborhood’s character.

Neighborhood groups regularly try to block new housing by protesting at local zoning and city council meetings. But as the state grows, some have gotten more aggressive. In Austin, a group of homeowners successfully sued to block an attempted 2018 overhaul of the city’s land development code, which hasn’t been updated since the 1980s, and recently sued the city again over policies intended to spur more housing development.

“There is a need for change, but there’s also people’s expectations when they’ve bought a house and built a neighborhood,” said Fred Lewis, an attorney who is part of that group of homeowners.

One bill seeks to make it harder for residents to block new developments from getting approval from local city councils — an idea likely to encounter irate resistance from those neighborhood groups.

When a property owner wants to rezone their land, state law requires that owners of neighboring properties are notified. If 20% of those owners protest the rezoning, city councils must gain a three-fourths supermajority in order to allow the zoning change. The bill would raise that threshold of owners to 50%.

The notion of simply allowing the construction of more market-rate housing has also drawn skepticism from low-income housing advocates, who fear doing so would accelerate gentrification and displacement in poorer neighborhoods if the Legislature doesn’t also try to build more housing aimed at low-income households and adopt stiffer protections for tenants.

“We can’t build or develop our way out of an affordable-housing crisis,” said Ben Martin, research director for Texas Housers, a research and advocacy group. “It certainly won’t solve decency and conditions, and it really won’t solve the profound fair-housing issues we have in the state of Texas.”

But a growing body of research shows that more construction of market-rate housing can slow increases in housing costs for households with lower incomes. That’s because higher-income households that can’t find housing that caters to them in a neighborhood wind up competing with lower-income households for the housing that does exist — which in turn drives up the cost of the existing housing stock.

“If we’re limiting housing, it's always going to hurt the people at the lower end of the spectrum the most,” said Greg Anderson, director of community affairs for Austin Habitat for Humanity. “So we have to come up with more policies that promote housing creation for everyone.”

While more housing for lower-income families is necessary, building more market-rate homes would also help loosen housing competition for everyone, said Arriaga with Texas Affiliation of Affordable Housing Providers.

“We need all of it,” he said. “At the end of day, the need is supply.”

Lucy Tompkins works for the Tribune as a housing and homelessness reporting fellow through The New York Times’ Headway Initiative, which is funded through grants from the Ford Foundation, the William and Flora Hewlett Foundation and the Stavros Niarchos Foundation (SNF), with Rockefeller Philanthropy Advisors serving as a fiscal sponsor.

Disclosure: The Texas Affiliation of Affordable Housing Providers, the Texas Association of Builders, Texas Realtors, the Texas Municipal League, the University of Texas at Austin and the LBJ School of Public Affairs have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.

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