Housing affordability has become a key factor determining whether rising-star states like Texas will continue to grow. No surprise, then, that employers and advocates alike have called for housing reforms in Texas this legislative session. And lawmakers have responded, introducing legislation that would have far-reaching effects on housing supply across the state.
Low housing costs have been one of the key reasons for Texas’s present boom, but that advantage may wane if legislators don’t enact housing reforms. According to Zillow, the cost of housing in the state has almost doubled since 2015, with the burden weighing heavily on the average worker. The blame for the lack of “missing middle” workforce housing options falls squarely on Texas’s restrictive land-use laws. By loosening these laws, Texas can expand the housing supply and make homes more affordable for everyone.
One of the most important laws in this context is the state’s onerous minimum lot-size regulations. These rules require that each residential property be built on a lot of a certain minimum size, sometimes an acre or more, like that of West Lake Hills, where the median home price is almost $3 million (by comparison, the median income in Texas is $55,441). The Texas legislature is considering a law to override local minimum lot-size regulations in certain areas.
Minimum lot-size requirements have had the unintended consequence of restricting the supply of housing and driving up prices. Smaller but affordable homes were once part of the American Dream: In the 1940s, over 70 percent of Americans had homes of 1,400 square feet or smaller; today, that figure is only 8 percent. The median square footage of American homes is now 2,276 square feet.
A second much-needed reform involves permit streamlining, the subject of another law proposed in the Texas legislature. For developers, time is money, and when the permit process is drawn out for months or even years, the delay gets reflected in higher home prices and rents. In Austin, for example, research demonstrates that a four-month delay in permitting adds 5 percent to the final rent of apartments. One high-volume builder said that a four-week delay adds $1,200 to the price of a home, on average. Considering that every $1,000 increase in a house’s cost prices out 140,436 American families, permitting reform is a vital component of housing affordability.
Streamlining construction of Accessory Dwelling Units (ADUs), another proposal making its way through the Texas legislature, has had remarkable success in boosting housing supply in other parts of the country, including New Hampshire and Utah. In one city, ADU construction has outpaced the construction of single-family homes. In cities like Austin, where the median family home price is $542,500, teachers struggle to afford housing; over 70 percent of Austin Independent School District employees spend more than a third of their income on housing. ADUs provide additional opportunities for workers like teachers to live in the communities they serve. Additionally, ADUs can help senior citizens keep living with their families, especially the 72 percent of middle-income seniors who will struggle to afford assisted-living costs in the coming years.
Along with these areas of reform, the Texas legislature could also consider opening commercial areas to residential development, as other states are trying to do. Florida Senate President Kathleen Passidomo is championing SB 102, which would allow more homes in commercial areas. She says the bill “provides new avenues for solutions in zoning, encouraging more mixed-use developments in latent commercial areas, and enhanced public access to information about expedited permitting and public property that may be suitable for workforce housing.” As remote work becomes more common and commercial offices sit empty, states can take advantage of the trend by letting developers convert existing structures into new residential units. Salt Lake City, Utah, has rezoned commercial buildings to residential use, with at least four building conversions having taken place, adding hundreds if not thousands of new units.
Restrictive land-use laws are not only hurtful to the middle class; they’re a threat to Texas’s rising economic power. Housing policy in San Francisco and California as a whole provides a master class in how to shrink an economy and price the middle class out of the labor force. Texas lawmakers should continue their search for policies that would avoid that fate.
Photo by Tamir Kalifa/Getty Images