Texas housing shortage worsens, report says

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Texas is experiencing a severe housing shortage, causing home prices and rents to rise. And it’s getting worse.

Texas will need about 320,000 more homes than it had in 2022, up from about 306,000 the previous year, according to an estimate released Wednesday by housing policy organization Up For Growth.

The shortage illustrates how Texas, which builds more homes than any other state, has struggled over the past decade to build enough homes to meet demand amid an economic boom. This problem is at the heart of the state’s housing affordability problems. Home prices and rents in the state’s major metropolitan areas have skyrocketed as competition for a limited supply of homes increases.

“While there is a lot of housing being built in Texas overall, in many places there is simply not enough to meet the demand in the state and people moving from other states,” said David Garcia, policy director for Up For Growth.

Texas is not alone. A nationwide shortage of homes has driven up U.S. housing costs and has been widely discussed in this year’s presidential race. In its latest report, Up For Growth says the country needs 3.8 million homes to tackle its housing affordability problem, down slightly from previous years.

In many of Texas’ largest urban areas, shortages have worsened. It’s grown in the Houston, Dallas-Fort Worth, San Antonio and McAllen regions — even as many of those places have greenlit more homes than before the COVID-19 pandemic, according to Up For Growth.

Much of that housing growth has come from building more detached single-family homes in outlying suburban areas, Garcia said, which is how Texas has traditionally been able to keep housing costs in check. But the limitations of that approach are becoming increasingly clear given the state’s high population growth rate, he said.

“In many places in Texas, you’re seeing limits that outward expansion alone can’t meet all the needs of the housing market,” Garcia said.

Elsewhere in Texas, such as El Paso, housing shortages have eased.

A housing boom in the Austin-Round Rock area has helped the region reduce its housing shortage by nearly a third. The boom brought tens of thousands of new apartments onto the market, causing rents to fall for 16 straight months. The report says the region still needs about 24,000 homes, about 11,000 fewer than it needed last year.

Although the nation’s housing shortage eased in 2022, the trend likely won’t continue for long, Garcia said. First, apartment developers have curtailed new projects due to higher financing costs, despite strong demand for housing. The effects of this downturn – higher home values ​​due to a tighter market – will be felt after the last of the boom’s apartments opens its doors.

Policymakers at all levels of government must take action to stop the shortage, housing advocates and experts say. They argue that state and federal officials need to spend significantly more to help low-income families who can’t find affordable housing on the market.

Housing advocates have also sought to change local restrictions on what homes can be built and where. These rules, known as zoning regulations, effectively limit the number of homes that can be built and drive up housing costs, they argue.

The largest cities in Texas make detached single-family homes relatively easy to build and allow them to be built in virtually every zone zoned for residential use. But a Texas Tribune analysis shows that cities have largely kept those areas away from denser, cheaper housing that would help them more quickly address the housing shortage, such as townhouses, duplexes and small apartment buildings. Cities also leave relatively little land available for the construction of such houses or larger apartment buildings.

Loosening these rules and allowing more types of housing to be built could help cities build more homes and lower housing costs, research shows.

This was politically difficult to do. While a group of housing activists have recently fought for such reforms in Texas, they are facing resistance from existing homeowners and local groups who oppose these types of changes.

It’s likely Texas lawmakers will address the state’s housing affordability crisis when they convene in Austin next year. A key question will likely be whether states or cities should set rules about where homes can be built.

Cities should still retain some control over how to address the crisis “based on the needs of their community,” Garcia said, but the state can set “the expectation that each community should shoulder its own burden.”

“Otherwise, there are cities that are working in good faith, and there are others that are just not working,” Garcia said.