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If Texas wants to rein in its high housing costs, it needs more homes, Texas Comptroller Glenn Hegar’s office said Tuesday — the latest sign that the state’s high home prices and rents have become a growing concern for the state’s top officials.
Homebuilding in Texas didn’t keep up as the economy boomed and millions of new residents moved here over the past decade, the comptroller’s 26-page report found. That lag in homebuilding 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, especially in the state’s major metro areas — sending housing costs soaring, forcing many would-be first-time homebuyers out of the market and leaving more than half of the state’s tenants spending too much on rent.
Texas’ relatively low cost of living has been a major draw for new residents and relocating companies. But Texas could lose that affordability advantage if local and state officials don’t find some way to boost the state’s housing supply, particularly for lower- and middle-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 some more solutions, we're going to be in a crisis.”
Many Texans likely disagree. Ninety percent of Texans say that housing affordability is a problem where they live, according to a recent poll from the University of Houston and Texas Southern University.
Still, Hegar is the latest statewide official to signal unease about the state’s high housing costs. Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dade Phelan each have indicated that Texas lawmakers should tackle the state’s housing affordability challenges when they return to the Capitol next year.
More Texans are feeling the pressure from the state’s tight housing market. A recent report from Harvard University’s Joint Center for Housing Studies found that more Texas homeowners and renters than ever are struggling to keep a roof over their head.
Hegar’s report reflects a growing bipartisan policy consensus, bolstered by an expanding body of research, that the nation’s housing affordability woes stem from a shortage of homes. By various estimates, the U.S. needs millions more homes than it has.
Texas isn’t exempt from that shortage. The state builds 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 spurred by that demand have resulted in the construction of more expensive housing so builders can recoup the cost of the land.
Home prices rose faster in the 2010s than they did in the previous decade, the comptroller’s report said. That growth in home prices was only supercharged during the COVID-19 pandemic as the rise of remote work allowed workers from other states to relocate to Texas and what had been historically low interest rates fueled the homebuying market.
Texas didn’t build enough homes to keep up with population growth, particularly in its major metro 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 preceding the pandemic, the report said.
That led to depleted housing supply and higher prices as a result. Housing in Texas has reached its most unaffordable level since 1985, the comptroller’s office said Tuesday. There are few homes on the market that sell for prices that would be considered affordable for entry-level buyers.
The median sales price for a Texas home peaked at $340,000 in 2022 but has since hovered in 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 spikes in home prices between 2019 and 2023 — 73% and 66%, respectively. The Austin-Round Rock region, where the run-up in home prices was most apparent, saw home prices peak above $500,000 in 2022, but those prices have since fallen.
Higher interest rates, initiated by the Federal Reserve in a bid to tame high inflation, have compounded the problem — raising the price of admission for first-time homebuyers and encouraging homeowners who otherwise would have sold their homes to hold onto their lower-interest rate mortgages, exacerbating the shortage. Relatively high property taxes and rising homeowners insurance have contributed to the woes.
The comptroller’s report stops short of making explicit recommendations on what steps policymakers should take, but nodded to some potential solutions.
Among them: relaxing local laws that determine what kinds of housing can be built and where. Cities have laws called zoning regulations that determine how many homes can be built on a given lot and how much land is required in order to build a home.
Those regulations, housing advocates and critics say, drive up housing costs in part because they restrict how many homes can ultimately be built. Most of the residential land in Texas’ major cities only allows single-family homes to be built and forbids other kinds of homes like duplexes, fourplexes and smaller apartment buildings from being constructed.
Proposals to relax city zoning restrictions to allow more housing have often faced opposition from existing homeowners and neighborhood groups, who steadfastly oppose any changes they see as altering the single-family character of their neighborhoods.
The comptroller’s report nodded to recent zoning reforms enacted by the Austin City Council, typically a left-leaning body, to allow up to three homes to be built where previously only one home could.
State lawmakers have shown an appetite for relaxing cities’ zoning restrictions even after proposals to do so failed at the Texas Legislature last year. Patrick and Phelan have each instructed lawmakers to study potential zoning reforms ahead of next year’s legislative session. Conservative thought-leaders like the Texas Public Policy Foundation, an influential think tank, support getting rid of residential zoning restrictions.
There are additional ways for local and state officials to tackle housing affordability, the comptroller’s office said. State lawmakers, for example, could fund programs or incentives aimed at providing homes for low- and moderate-income families. Local governments could streamline their permitting processes in order to allow homes to be built more quickly, the report said.
Nicole Nosek — who heads Texans for Reasonable Solutions, an organization that pushed zoning reforms at the state level last year — proposed ideas to increase housing supply during a Tuesday breakfast meeting with the comptroller’s office, Texas Habitat for Humanity and the Austin Board of Realtors.
It should be easier to build homes in commercial areas, Nosek said, which many Texas cities don’t currently allow. The amount of land cities require single-family homes to be built upon, a requirement known as a minimum lot size, should also be reduced, she said.
Houston reduced its minimum lot size to 1,400 square feet, first in the city center in 1998 before the reform expanded to the rest of the city in 2013. That reform has resulted in tens of thousands of new homes built on smaller lots, research shows, a boom that housing advocates argue has kept Houston’s housing costs in check — especially compared with other large U.S. cities like Chicago, Los Angeles and New York City.
A bill to reduce cities’ minimum lot size requirements for single-family homes made it through the Texas Senate last year, but it died in the Texas House before it could come up for a vote.
Like California, Texas could find itself with exorbitant housing costs and residents fleeing to others states if it doesn’t figure out how to allow more homes to be built in its major urban areas, said Nosek, a California transplant herself.
“What you see in California, which is the ultimate cautionary tale, is when you don't allow more supply to come online to accommodate the growth in population, you're ultimately selecting who the losers are going to be,” Nosek said. “If you don't have housing to accommodate all of the employees and all of the growth that we're attracting, what's going to happen is … the people on the lowest rung of the ladder and even the middle class get driven out to other states.”
Whether Democratic legislators get on board with those ideas remains an open question. House Democrats led the charge to kill a bill to relax city rules in order to effectively make it easier to build accessory dwelling units — also called “granny flats” or ADUs — in the backyards of single-family homes. Republicans in the state Legislature in recent years have often sought to prevent officials in the state’s bluer urban areas from enacting progressive policies, culminating in a sweeping bill last year that aimed to forbid cities from making laws on a number of fronts. Democrats thus have largely shown suspicion toward any measure that appeared to sap authority from the state’s bluer urban areas.
But there appears to be a movement among Democrats to embrace zoning reform at some level. The Texas Democratic Party adopted a platform this summer that includes support for rolling back local zoning regulations that get in the way of adding more homes.
Disclosure: Texas A&M University, Texas Public Policy Foundation, Texas Southern University - Barbara Jordan-Mickey Leland School of Public Affairs and University of Houston 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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