How can we make housing more affordable?

This is a preview of our Texas 2036 newsletter recapping our blueprint to make housing more affordable across Texas. To receive this weekly look at our work, sign up here.

Texas’ Housing Crisis: What Needs to Change?

For decades, Texas’ affordable housing has been one of the state’s greatest economic advantages, attracting families and businesses alike. But rising home prices, a growing shortage of housing units and restrictive land-use policies now threaten that advantage.

Our new Texas 2036 Housing Blueprint outlines the policies needed to fix this crisis before it worsens, threatening generations of Texans’ ability to achieve the American Dream.

The Problem: A Housing Market Under Strain

Home prices are rising fast. Median home prices in Texas have jumped nearly 40% since 2019, outpacing income growth and making homeownership increasingly unattainable.

• Texas has a housing supply problem, not just a demand problem. Texas needs 320,000 additional housing units to meet market demand.
• But restrictive land-use policies — like minimum lot and house size requirements, zoning restrictions and parking mandates — are slowing down construction.
• Did you know? What you need to earn to buy a house in Texas has risen 167% over the past decade.

Required Income for Home Ownership in Texas (2014-2024)
20% down payment, 30% of income

Source: Texas A&M University Texas Real Estate Research Center

A Potential Solution:
Eliminate Minimum Home Sizes

Some Texas towns require houses to have minimum square footages, sometimes as high as 1,500 or 2,000 square feet, which set a higher floor on home prices and prevent the construction of more affordable starter homes.

Many think of the Sears kit house as what we associate with the concept of a starter home:

🏡 However, homes like these could not be built in many Texas cities, due to minimum house size requirements.

What’s driving the housing crisis in Texas?

Several factors are contributing to the current housing challenges, including:

• Historically low housing inventory coupled with a decade of rising home prices.
• Rising interest rates, which have roughly doubled since 2021, making home payments less affordable.
• Soaring home insurance premiums, which grew 23.3% in Texas in 2023.
• Elevated inflation, impacting individuals’ purchasing power and making it harder to save for a down payment.
• The “lock-in effect,” where homeowners with low mortgage interest rates are reluctant to sell, further reducing available inventory.
• The lack of “missing middle” housing. Some housing types like duplexes, townhomes or small apartment buildings are prohibited by existing land use regulations.
  • These home types fill a market gap between high-density apartment complexes and detached single family homes and could infuse the market with more affordable options for a broader range of incomes and household sizes.

Is This Crisis Just in Texas’ Urban Centers?

While housing affordability challenges are often associated with Texas’ major metro areas like Austin, Dallas and Houston, the crisis is not just an urban problem. Many smaller cities and rural communities are also struggling with these same issues.

Housing Cost Burden, Urban vs. Rural Areas, 2022

Source: U.S. Census Bureau, 2022 American Community Survey 1-Year Estimates, Table ID: s2503; Texas Comptroller of Public Accounts analysis

• Rapid price increases in mid-sized cities: Home prices have surged 51% in Waco, 57% in College Station and 34% in Lubbock — matching or even exceeding price jumps in major metros.
• Limited options in smaller towns: Across Texas, smaller communities face a shortage of affordable homes due to a lack of new construction, aging housing stock and zoning rules that limit the development of diverse housing types.

Without action, these trends could make homeownership and rental affordability unsustainable across Texas.

Land Use: What Is It and Why It Matters

Restrictive land use and exclusionary zoning artificially limit housing development, preventing Texas from building enough homes in high-demand areas. As a result:

• Developed lot availability has declined 42% since 2015.
• Land prices continue to outpace home prices, further driving costs up.

The American Enterprise Institute’s Land Price and Land Share Indicators map shows just how much zoning and land-use restrictions are inflating housing costs across Texas.

Source: American Enterprise Institute

What role does the private sector play in addressing housing issues?

Businesses, developers and community leaders can:

• Innovate by building smaller homes, townhouses and using new materials to lower construction costs.
• Invest in infrastructure and rehabilitate existing homes to increase supply.
• Advocate for policies that encourage diverse housing types to serve all Texans.

How Can the Texas Legislature Help?

The Texas Legislature has a unique opportunity to modernize land-use policies, encourage innovation in housing development and expand the housing supply, such as:

1. Reform zoning laws to allow more housing types

• Reduce minimum lot size requirements to allow more homes to be built on available land.
• Permit “missing middle” housing (duplexes, triplexes, townhomes and small apartment buildings) in more areas.
• Expand accessory dwelling units (ADUs) (like garage apartments or backyard cottages) as a by-right use on single-family lots.

Do you agree or disagree that homeowners should have the right to build an additional home, such as a garage apartment or tiny home, on their own property?

Source: 8th Texas Voter Poll, 2024

2. Streamline land use and permitting processes

• Limit the “tyrant’s veto” by reforming the valid petition process, which allows a small group of neighbors to block new housing.
• Make it easier for developers to convert underutilized commercial properties into housing.
• Reduce bureaucratic delays and excessive fees for housing permits and zoning changes.
• Encourage faith-based organizations and nonprofits to build housing on underutilized land.

3. Eliminate outdated and costly building regulations

• Remove parking minimums that require developers to build more parking than is necessary, driving up costs.
• Allow single-stair apartment buildings to be built in Texas, enabling small-scale, multi-family developments.
  • What are they? Single-stair buildings are small-scale, multi-family housing units that are generally built with a small number of apartments per floor, all served by a single stairwell.
  • Used widely across the globe, they have a limited presence in the U.S. due to restrictions imposed by the International Building Code — a model design and building code used almost exclusively here.

4. Monitor and improve housing policies

• Require statewide tracking of housing supply and affordability metrics to guide future policymaking.
• Study the impact of land-use restrictions on housing costs and economic development.

Coming Soon: Our Housing Density Study

Texas 2036 and UT-Austin are studying the relationship between housing typology, neighborhood design and municipal budgets in three Texas cities.

We’ll be rolling out our complete findings in the coming weeks, but early results indicate that medium- and high-density neighborhoods are net positive contributors to a city’s fiscal health.

🏠 Why’s that? We find that it’s mostly due to a high-density neighborhood’s relatively low demand on city infrastructure.

The Bottom Line: Let’s Keep Homeownership Within Reach

If Texas fails to address its housing affordability crisis, the state risks losing one of its biggest draws: a low cost of living. That could slow economic growth, make it harder for businesses to attract workers, and put homeownership out of reach for more Texans.

Fortunately, the state has an opportunity to keep homeownership within reach, sustain economic growth and maintain its pro-business reputation by addressing these issues today.

Let us know what you think!

What tops your to-do list for making Texas housing more affordable? Tell us about it.