As Texans struggle with housing costs, cities look for new ways to spur more home construction

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DALLAS — Home prices are out of reach for first-time homebuyers. Sky-high rents are squeezing tenants. As the state’s housing affordability crisis escalates, leaders of Texas’ biggest cities are increasingly reaching the same conclusion: Their cities need more homes.

Texas home prices and rents hit record highs in recent years as the state’s economy boomed, millions of people moved here and millennials entered the homebuying market in full force. But the number of homes in the state hasn’t kept pace with the crushing demand spurred by the rapid growth — a key culprit, experts say, in what drove housing costs sky high.

Local leaders are becoming more transparent regarding the necessity of constructing additional housing in their cities. Failure to do so may result in limited affordability for future residents.

During a panel at the Texas Tribune Festival, Dallas Mayor Eric Johnson stated that by increasing the availability of housing, the price would naturally decrease due to its abundance. This, in turn, would alleviate its scarcity and prevent people from charging exorbitant prices. However, the mayor acknowledged the challenge of ensuring that Dallas remains affordable for middle- and lower-income individuals, as the city continues to attract more people due to its growing desirability.

From Austin to Fort Worth, local officials are eyeing proposals to blunt their city’s rampant unaffordability by loosening local regulations that housing advocates say get in the way of allowing more homes to be built. It’s a solution increasingly embraced by local and state policymakers across the country, and even the most recent three presidential administrations, as a key step, though not the only one, to solving the nation’s housing affordability crisis.

Texas cities are primarily characterized by single-family neighborhoods, which is a result of their historical development and a strong cultural preference for spacious properties with one home per lot. In numerous major Texas cities, a significant portion of the designated residential land is exclusively reserved for single-family housing.

Any push to allow denser housing in traditional single-family neighborhoods will undoubtedly encounter stiff and vocal opposition from homeowners and neighborhood groups, who often complain that such housing construction would disrupt their neighborhood’s character. In 2020, for instance, a group of Austin homeowners successfully killed a push by city officials to relax zoning restrictions. They now want to end a set of city housing reforms that encourage denser housing, including a successful affordable housing program.

There’s plenty of skepticism that allowing the market to add more homes could blunt rising housing costs and fears that it would fuel gentrification and displacement in low-income communities, though research shows such reforms may protect those communities. Critics also believe such attempts would do little more than boost developers’ profits.

“Amnesia has allowed some creative profiteers to rebrand trickle-down policies as a housing solution,” said Carmen Llanes Pulido, executive director of Go Austin/Vamos Austin, a community health coalition. “And half of progressive Austin is hoodwinked.”

However, city policymakers are now recognizing that their exclusive focus on traditional single-family homes, to the detriment of other housing options, is now causing them problems as their regions struggle to accommodate the overwhelming housing demand experienced in recent years.

Dallas City Council member Chad West stated that in order to accommodate housing for essential workers such as teachers, healthcare professionals, postal workers, firefighters, and police officers, we need to reconsider the concept of single-family neighborhoods, which I believe is necessary for our cities.

Cities are considering various ideas to increase the availability of housing. These ideas include reducing the land space required for homes in cities and permitting the construction of duplexes and fourplexes in single-family neighborhoods. There is a growing push to allow developers to build a wider range of housing options, bridging the gap between traditional single-family homes and large apartment complexes. Supporters and housing experts believe that implementing these changes would increase the number of homes available for sale, which would help stabilize housing prices. This would provide prospective first-time buyers with a better chance of owning a home and offer tenants some relief from high monthly rent payments.

Fort Worth Mayor Mattie Parker stated that housing affordability does not have a singular perfect solution. With the city’s ongoing growth, her focus lies in establishing a well-balanced combination of strategies that can generate long-lasting effects.

The “missing middle”

Home prices in Texas’ largest metro areas rose so much in the last several years that the typical for-sale home is out-of-reach for most families living there, according to figures from the National Association of Home Builders.

And as rents surged during the pandemic, more tenants had a tougher time paying for other necessities. Roughly half of renters in the state’s major urban areas spend more than 30% of their income on keeping a roof over their heads, according to the Joint Center for Housing Studies at Harvard University. These “cost-burdened” renters spend so much on housing that it’s crowding out other necessary household expenses like child care, groceries and transportation — and making it more difficult for renters to become homeowners.

Ashley Flores, senior director at the Dallas nonprofit Child Poverty Action Lab, stated that facing the need to spend excessively on rent makes it increasingly challenging to accumulate savings for homeownership. Furthermore, it becomes even more difficult to save for a down payment and cover other expenses related to purchasing a home.

Cities are exploring the option of addressing the affordability crisis by embracing the concept of “missing middle” housing. This term encompasses housing types such as duplexes, fourplexes, and small apartment buildings, which bridge the gap between single-family homes and mid-rise apartment complexes.

Texas builds a lot of single-family homes and larger apartment complexes, but not as much in between — even as housing permits during the pandemic era hit levels not seen since the 1980s. Permits for duplexes, triplexes and fourplexes, for example, steadily ticked up in the last decade, data from the Texas Real Estate Research Center at Texas A&M University show, but still only made up less than 3% of the state’s permitting activity from 2020 to 2022.

Efforts are being made by authorities in Austin, Dallas, and Houston to facilitate the construction of housing in traditionally single-family neighborhoods, while simultaneously preserving the distinct character of these communities.

According to Jake Wegmann, an associate professor at the University of Texas at Austin’s School of Architecture who specializes in housing affordability, their primary goal is to develop affordable housing that is reasonably priced and accessible to ordinary individuals. However, it should still maintain the appearance of a typical house, without drastically diverging from the neighborhood’s overall aesthetic.

In the epicenter of the state’s affordability crisis, Austin officials want to allow up to three housing units to be built nearly anywhere single-family homes are currently allowed. If the city allows more homes to be built on lots that currently only allow one home, proponents argue, the cost of the land would spread across multiple households, thus lowering the overall cost of the homes on that land.

Dallas and Fort Worth officials, situated three hours north on Interstate 35, are currently grappling with the challenge of increasing housing availability in response to soaring housing costs. Over the past ten years, the Dallas-Fort Worth region has emerged as a dominant force in the economy and established itself as one of the fastest-growing metropolitan areas in the country.

As the region experienced significant growth, housing costs saw a corresponding increase. Prior to the onset of the COVID-19 pandemic, data from Texas A&M indicated that the average home in Dallas-Fort Worth was priced at less than $300,000. However, during the peak of the state’s thriving housing market last year, the median sales price surged by over 60%, surpassing $400,000. Subsequently, the market has cooled down due to elevated interest rates, but the median home price in the area remains 50% higher than pre-pandemic levels.

Renters, too, have felt the pinch. Typical rents in the Dallas-Fort Worth region are more than 30% higher than they were before the pandemic, Zillow data shows, hovering at $1,850 a month.

The economic growth of the region could be at risk if the high housing costs are not addressed.

Parker, the mayor of Fort Worth, expressed concern about the city’s rapid growth and emphasized the importance of affordable housing and accessible paths to homeownership. Recognizing that the skilled workforce necessary for the city’s success may be at stake, he emphasized the need for immediate implementation of solutions to address the increasing housing demands.

One reason for the run-up in costs, housing advocates and real estate experts say, is that the Dallas-Fort Worth region hasn’t built enough homes to keep up with its job growth. Homebuilding plummeted across the country in the years after the housing crash of 2008, and Dallas-Fort Worth was no exception. In Dallas, there were about as many housing units built in the 2010s as in the 2000s, despite 10 times more population growth than in the previous decade, a recent Child Poverty Action Lab found.

According to Flores, the construction industry has been struggling to recover from the impact of the Great Recession for the past decade.

That pace of building has left the region with a dire shortage of housing that’s at least partially responsible for its higher home prices and rents, experts say. By one estimate, the Dallas-Fort Worth metro area needed more than 85,000 housing units than it had in 2019 — before the region added more than 200,000 households over the pandemic. Low-income renters feel the housing shortage most acutely as they compete with higher-income households for limited rental stock, Flores said.

Dallas may soon emulate Austin’s approach to address its housing shortage caused by rising costs. Council member West, who represents Oak Cliff neighborhood in north Dallas, intends to present a proposal that permits the construction of duplexes, triplexes, and fourplexes in areas zoned for single-family homes across the city. West believes that allowing such increased density is crucial in averting a situation where Dallas becomes entirely unaffordable.

West stated that the fundamental economic principle is that when the supply increases, prices tend to stabilize or decrease. In order to avoid transforming the entire city into a wealthy suburb like Highland Park, he emphasized the importance of embracing a slight increase in density.

Thirty minutes west of Dallas, officials in Fort Worth have also broached the idea of encouraging more abundant housing. City officials there are exploring how to encourage developers to build housing with anywhere from four to 100 units — housing that’s technically allowed under Fort Worth’s zoning code.

D.J. Harrell, the director of development services in Fort Worth, stated that the city is experiencing an annual growth of about 20,000 individuals. Harrell emphasized the necessity of finding innovative housing solutions to prevent further escalation in home prices.

Even Houston, the most affordable large city in the country, is trying to allow more homes to be built as home prices and rents grow out of reach for its residents. In late September, the Houston City Council sought to allow more “missing middle” housing by loosening city restrictions to make it easier for developers to build three to eight housing units on a given lot. The council also voted to allow larger accessory dwelling units — also known as ADUs, garage apartments or “granny flats” — in the backyards of single-family homes. They also passed rules designed to promote developments in which smaller single-family homes surround a shared courtyard.

According to Suvidha Bandi, principal planner at Houston’s planning and development department, this allows for increased possibilities in property development and offers a diverse range of housing options at various price ranges. It ultimately makes housing more affordable for individuals with different income levels.

Smaller lots, more homes 

In addition to the possibility of permitting more “missing middle” housing, policymakers in Austin and Dallas are also contemplating the reduction of minimum lot sizes for single-family homes. This refers to the amount of land that these cities obligate for the placement of such homes.

A proposal carried by Austin City Council member Leslie Pool would reduce the minimum lot size in the city’s three most common single-family zoning categories. The minimums for those tiers currently range from 5,750 square feet to nearly a quarter of an acre. Pool’s proposal would reduce the minimum for all three to 2,500 square feet. In Dallas, West would like to see the minimum lot size decreased to 1,500. The thinking goes that buying a home won’t be as expensive if homebuyers don’t have to purchase as much land along with it.

Adam Perdue, a research economist at the Texas Real Estate Research Center at Texas A&M University, pointed out that if people are compelled to utilize larger areas of land per housing unit, it inevitably leads to an escalation in the cost per housing unit.

According to real estate experts and housing advocates, if the minimum lot size is reduced, it would facilitate the construction of more houses on smaller areas of land. In Dallas, for instance, the city regulations often result in homes being built on 7,500 square feet of land. Nathaniel Barrett, a developer in Dallas, stated that implementing West’s proposal to decrease the minimum lot size would create an opportunity for the construction of additional homes.

According to Barrett, “By implementing a minimum lot size of 1,500 square feet, the potential to accommodate five houses in the same space as one house arises. Consequently, the amount of available land would be multiplied by five.”

Cities are under the gun to figure out ways to relax restrictions on what kind of housing can be built and where — and not just because of the affordability crisis. Texas lawmakers considered relaxing cities’ zoning restrictions earlier this year, though those efforts died quietly at the tumultuous end of the Texas Legislature’s regular session in May. And city officials, already pummeled by years of attacks from the state government about local authority, fear the Legislature will finish the job when they convene again in two years.

However, there is also an increasing group of individuals who are actively advocating for cities to implement zoning reform in order to facilitate the construction of more housing. Over the past few weeks, numerous housing advocates in Austin and Dallas organized public rallies to express their support for the development of additional housing, including affordable units subsidized by the government.

Adam Lamont, a Dallas middle school teacher who co-leads the organization Dallas Neighbors for Housing alongside his wife, has witnessed a significant surge in support for a straightforward reason: the soaring housing expenses that have become impossible to overlook.

Lamont mentioned that Dallas used to be considered quite affordable five years ago. However, over the course of these past five years, much of that affordability has significantly diminished.

Disclosure: Texas A&M University and University of Texas at Austin 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.