Texas’ housing shortage is getting worse, report says

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Texas has a deep housing shortage that’s driving up home prices and rents. And it’s getting worse.

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

That shortage illustrates how Texas, which builds more homes than any other state, has struggled in the last decade to build enough homes to meet demand amid its economic boom. The problem undergirds the state’s housing affordability woes. Home prices and rents in the state’s major metropolitan regions have skyrocketed owing to increased competition for a limited supply of homes.

“While Texas has been building a lot of housing overall, in many places, it just has not been enough to keep up with demand in the state and people moving in from out of state,” said David Garcia, Up For Growth’s policy director.

Texas isn’t alone. A nationwide shortage of homes has driven up housing costs across the U.S. and has been discussed heavily in this year’s presidential race. In its latest report, Up For Growth said the country needs 3.8 million homes to ease its housing affordability problem, slightly less than in previous years.

In many of Texas’ biggest urban areas, the shortage worsened. It grew in the Houston, Dallas-Fort Worth, San Antonio and McAllen regions, according to Up For Growth — even as many those places greenlit the construction of more homes than they did prior to the COVID-19 pandemic.

Much of that housing growth came in the form of building more detached single-family homes in outlying suburban areas, Garcia noted —the way Texas has traditionally managed to keep housing costs at bay. But the limits of that approach have become increasingly apparent amid the state’s high population growth, he said.

“In many places in Texas, you see the limits of how only outward expansion cannot meet the full demands of the housing market,” Garcia said.

Other places in Texas, like El Paso, saw their housing shortage ease.

An apartment construction boom in the Austin-Round Rock region helped the region beat back its housing shortage by nearly a third. The boom injected tens of thousands of new apartments into the market, forcing rents to fall for 16 months straight. The region still needs nearly 24,000 homes, the report found — about 11,000 less than it needed the previous year.

Though the nation’s housing shortage eased in 2022, that trend likely won’t persist for long, Garcia said. For one, apartment builders have scaled back new projects amid higher financing costs, despite strong housing demand. The effects of that decline — namely higher housing costs thanks to a tighter market — will be felt after the last of the apartments that broke ground during the boom open their doors.

Policymakers across all levels of government need to act to stem the shortage, housing advocates and experts say. State and federal officials need to significantly spend more on helping low-income families who can’t find affordable housing on the market, they argue.

Housing advocates have also sought to change local restrictions on what kinds of homes can be built and where. Those rules, known as zoning regulations, effectively limit how many homes can be built and lead to higher housing costs, they argue.

Texas’ largest cities make it relatively easy to build detached single-family homes and allow them in practically every area designated for residential use. But a Texas Tribune analysis shows cities have largely cordoned off those areas from the kinds of denser, cheaper homes that would help them ease their shortage more quickly, like townhomes, duplexes and smaller apartment buildings. Cities also leave aside comparatively little land to build those kinds of homes or larger apartment buildings.

Loosening those rules and allowing more types of housing to be built can help cities add more homes and rein in housing costs, research shows.

Doing so has been politically difficult. While a group of housing activists has recently fought for such reforms in Texas, they face resistance from existing homeowners and neighborhood groups that oppose those kinds of changes.

It’s likely Texas lawmakers will tackle the state’s housing affordability crisis when they convene in Austin next year. A key issue will likely be whether the state or cities should make the rules on 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 “an expectation that every community needs to be pulling their weight.”

“Otherwise, you have some cities who are working in good faith, and then others who just aren’t,” Garcia said.