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More homeowners and renters in Texas are struggling with high housing costs — and the state’s high housing prices have potentially put the dream of owning a home out of reach for a growing number of families.
That’s according to a new report from Harvard University’s Joint Center for Housing Studies, which also reveals that housing prices and rents remain much higher than they were before the COVID-19 pandemic. Texas’ real estate market has cooled amid high interest rates after sharp increases sparked by the state’s recent red-hot economic growth. So potential buyers now need to earn more money than ever to purchase a home in major urban areas of Texas. The number of homeowners and renters in Texas struggling to keep a roof over their heads is also now at an all-time high.
“The costs of purchasing a home have left homeownership out of reach for all but the most advantaged households,” said Daniel McCue, a senior research associate at the center.
Texas housing price growth has significantly outpaced income growth, pricing many households out of the market and virtually erasing the state’s once-heralded housing affordability.
It is now common that buyers must earn at least six figures to purchase a home in large urban areas where the state’s employment opportunities are largely concentrated. A family must earn more than $100,000 if they want to purchase a typical home in the Houston and Dallas-Fort Worth areas, according to the center. In the Austin area, a buyer must earn more than $140,000 to afford a home at the median sales price.
Renters have less and less flexibility to save money for a future down payment and make the transition to homeownership. A record 2.1 million renter households – more than half of those in the state – are “cost-burdened,” meaning they spend more than 30% of their income on rent and utilities public. Of those, nearly 1.1 million spend at least half of their income on rent and utilities, meaning they “severely” face high costs.
Homeowners have also felt the effects of rising home insurance and high property taxes. Nearly a quarter of the state’s 6.9 million homeowner households spend too much money on housing, according to the Harvard analysis.
The state’s high housing costs and shortage of affordable housing for the poorest Texans fueled a 12% increase in homelessness last year, according to federal estimates. More than 27,000 Texans did not have a permanent roof over their heads in 2023, according to an annual estimate of the number of people experiencing homelessness. About 11,700 Texans were left homeless, meaning they slept in their cars, under bridges or in other places unfit for human habitation.
Yet in some areas of the state, the cost of housing is falling.
Housing prices in Austin, where a typical home was worth more than half a million dollars at the height of the state’s pandemic-era housing market, have fallen for 16 straight months, according to Zillow data. San Antonio has also seen housing prices decline for months.
High interest rates have significantly slowed the pace of home purchasing, helping to drive down housing prices. This slowdown has allowed homes to stay on the market for longer periods than during the highly competitive days of the real estate market amid the pandemic and has boosted the supply of homes available to potential buyers. A larger supply means buyers have more leverage to negotiate lower prices with sellers.
“Buyers still face high housing prices and, of course, mortgage rates,” said Clare Knapp, housing economist for the Austin Board of Realtors. “But with this increase in active registrations, they actually have more negotiating power. So it definitely gives them a boost in a tougher environment.
At the same time, according to the Harvard report, high interest rates and housing prices discouraged homeowners who otherwise might have put their homes on the market from forgoing their low interest rates, fueling the shortage of available housing in the country.
Steady job growth has also kept property prices high. In places like Houston and Dallas-Fort Worth, which saw housing prices fall last year, prices have started to rise again.
“It’s really difficult for you to see a significant correction in prices,” said Luis Torres, senior business economist at the Federal Reserve Bank of Dallas.
Soaring rents, driven by the state’s strong economic growth, are putting record pressure on tenants. But an apartment construction boom not seen since the 1980s has given them at least some temporary relief from rising rents.
Asking rents have fallen over the past year in the Austin, Dallas-Fort Worth, Houston and San Antonio areas, figures from MRI ApartmentData show, as new apartments open and compel existing landlords to compete to keep new tenants.
“For renters, it’s a better situation,” said Bruce McClenny, industry director at MRI ApartmentData. “It doesn’t make up for all of this crazy rent growth that we saw in ’21 and ’22. But it’s starting to make a difference.”
It’s only a matter of time before rents rise again, according to the Harvard report. Builders have backed away from new projects due to high borrowing costs and landowners seeing lower rental revenue growth and increased operating costs like homeowners insurance, payroll and property taxes. At the same time, the state’s steady economic growth, coupled with growth in the number of Gen Z households, will ensure that demand for apartments remains strong. McClenny said larger rent increases like those seen in 2022 could return by the end of next year after tens of thousands of apartments under construction in the state’s major metro areas come online .
The state’s supply of cheap housing still remains at risk, housing experts say. Texas has lost hundreds of thousands of low-cost rental units over the past decade, exacerbating an already severe shortage of affordable housing for low-income families.
The state had about 753,000 housing units with rents below $600 at the start of the last decade. As the state’s economy boomed and demand for rental housing increased, this supply declined as landlords simply raised rents or renovated their properties to attract higher-income tenants.
By 2022, the supply of cheap rental housing had fallen to less than half a million units.
Housing experts expect an increasing number of these homes to disappear in the coming years. Dallas lacks about 33,000 affordable housing units for families earning 50% or less of the area median income, according to an analysis by the Dallas-based Child Poverty Action Lab. This shortage is expected to reach more than 80,000 people by the end of the decade, the organization predicts.
The Dallas-Fort Worth area “has been and will likely continue to be a very dynamic housing market that makes (naturally occurring affordable housing) more vulnerable,” said Ashley Flores, the organization’s housing manager.
Local and state leaders are increasingly trying to solve the state’s housing affordability crisis.
Texas lawmakers, including some of the state’s top Republicans, have increasingly signaled they plan to combat the crisis by relaxing municipal rules that determine what type of housing can be built and where. Housing advocates are increasingly targeting urban zoning restrictions, such as the amount of land a single-family home must sit on and the number of homes that can be built on a given lot, as one of the root causes of the country’s affordability problems. These rules, they say, have limited the number of homes that can be built and have consequently led to higher housing costs.
“In many ways, current zoning laws do not reflect the wishes of the people,” McCue said. “So it’s good to see them again.”
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