Can Texans afford to live here? Let’s talk housing affordability.
This is a preview of our Texas 2036 newsletter where we bring data to the conversation on housing affordability in the Lone Star State. To receive this weekly look at our work, sign up here.
Our data-rooted approach to housing affordability
The Federal Open Market Committee of the Board of Governors of the Federal Reserve System meets today and expectations are that they will announce that interest rates will go down from current levels.
This could bring some relief for both homeowners and homebuyers, but many experts believe lower prices for existing housing might not be quick in coming.
So what is the state of housing affordability in Texas? And what can we do to ensure that more Texans can achieve the American dream of homeownership? We looked at the data to find out…
Are housing prices THROUGH THE ROOF?
Median home prices in Texas rose by 40% between 2019 and 2023, according to data from Texas A&M University’s Texas Real Estate Research Center.
After a period of rapidly rising inflation rates, mortgage rates rose to a 23-year high of 7.79% in October 2023. Homeownership is the least affordable it’s ever been, reflecting increased home prices, interest rates, insurance and taxes.
To buy a median-priced home in the Dallas-Fort Worth metropolitan area, a family needs to make $116,238. To buy a median-priced home in the Austin metropolitan area, a family needs to make $143,628.
Texas 2036 talks affordable housing at TribFest
Earlier this month, Texas 2036 Executive Vice President A.J. Rodriguez joined Austin City Council Member Vanessa Fuentes, Real Estate Council of Austin Vice President of Advocacy Alina Carnahan and UT-Austin LBJ School Prof. Steven Pedigo to discuss the future of housing affordability at the “Through the Roof” panel on Sept. 7 at TribFest in Austin.
The panel discussed the many ways that cities across Texas are tackling the challenge of housing affordability in ways that make sense locally. “Best practices,” A.J. said, “should be adopted by other cities.”
Housing affordability: Is the Texas Miracle at risk?
Housing affordability has long been one of Texas’ greatest competitive advantages — but that advantage is at risk.
The required income for homeownership 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
Low cost housing is hard to find for Texans, Comptroller says
According to Texas Comptroller Glenn Hegar, that’s having an impact on our economic reputation.
“Simply put, our state, which is generally well regarded for its low cost of living, is facing the pressures of a decline in housing affordability as our population and demand for housing continue to rise,” Hegar said in August.
In its recent report, “The Housing Affordability Challenge,” the Office of the Comptroller noted that urban households are increasingly saddled with the cost burden of spending at least 30% of their income on housing.
In 2022, almost 36% of urban households were burdened by housing costs, according to the Comptroller’s report, as compared to 24% of rural households.
Where are housing prices rising the fastest in 2024? Here’s the surprising answer… While housing tends to be more expensive in big cities like Austin, Houston and Dallas, that’s not where prices have risen the fastest in the past year.
In Austin, where the median house price is highest in the state, prices actually fell by over 3% from the spring of 2023 to the spring of 2024.
Where are prices rising the fastest?
📈 Midland: +6%
📈 San Angelo: +8.4%
📈 Abilene: +11.1%
📈 Odessa: +11.7%
Supply vs. demand: Texas housing today
Housing inventory in Texas is at the highest level in over five years and has more than recovered from the drop following the COVID-19 pandemic. In August, there were over 114,000 homes available in Texas.
Source: Federal Reserve Bank of St. Louis
But demand continues to exceed the available supply.
Texas home production was short by 306,000 — second only to California — according to the latest data from Up for Growth, a national, nonprofit network advocating for evidence-based policies to address housing affordability.
Source: Up For Growth
What options do state lawmakers have?
While state lawmakers cannot change interest rates, they do have some policy options to help ease housing prices by removing barriers to increased supply.
A way to encourage increased supply is to reduce minimum lot and house sizes so families don’t have to buy more land or materials than they need.
- A reduction in Houston’s minimum lot size requirement led to the construction of 34,000 townhomes from 2007-2020, providing family-sized homes in the city’s urban core at lower prices.
- As of this spring, Houston’s housing prices are among the most affordable of the nation’s 20 largest cities, 17.8% below the national average.
Another potential fix? Reform the valid petition process, which allows a small group of homeowners to stand in the way of land use reform efforts.
In the end, housing affordability is both an infrastructure and economic development issue statewide and one that is worthy of statewide solutions.
Coming Soon… Texas 2036 is launching research into the impacts of construction and density — including allowing more homes on smaller lots — on city and county tax revenues, as well as a local government’s ability to fund its infrastructure. Stay tuned!
