Texas built more homes than any other state in the country last year; it’s been a top state for housing starts for years. More often than not, the question is whether Dallas or Houston will build more homes in a given year, Zonda’s chief economist, Ali Wolf, told Fortune. (Dallas was the winner last year, she said.) Texas’ housing game is so strong that last year, its top three markets by housing starts built 300% more homes than California’s. That’s even though those metropolitan areas (Dallas, Houston, and Austin) have an 11% smaller population than their California counterparts, according to data collected by Zonda and shared with Fortune.
When it comes to building homes, California and Texas are polar opposites. California, despite having one the most extreme housing crises in the country, builds a lot less, and part of the reason comes down to sheer developable land.
Most markets in Texas, unlike California, aren’t “bumping up against oceans or mountains,” Wolf said. And as Texas’ population expands as more and more people move to the state, developers respond by building more homes to meet demand. They can do so in part because Texas is light on regulation and considered development-friendly.
“It’s migration, employment, accessibility to land, better regulation, easier regulation,” Wolf said, explaining why and how Texas is building so much. “I would say it’s still more affordable to get a home built in Texas, too.”
It’s cheaper to build in Texas because costs associated with local policies and regulations are fewer and land is less expensive, but that’s not to say the cost to build hasn’t gone up. It has, especially since the pandemic. “The increased demand kind of pushed up the cost of housing in general,” Wolf said. “But then it was the increase of demand that fueled more home building, that pushed up land prices, that pushed up material costs.”
The average home value in Dallas is slightly higher than $300,000, according to Zillow. At the onset of the pandemic, it was nearly $218,000. So yes, the cost of housing has gone up. But the Dallas metropolitan area built roughly 42,500 homes last year, and as of the fourth quarter, its housing starts rose 5% from the same period a year earlier. Houston built 35,600 homes last year, and its housing starts increased 36% year-over-year as of the fourth quarter. Austin developed 15,500 homes, and as of the fourth quarter, its new residential construction jumped 25% on an annual basis. To compare, California’s top three metropolitan areas by housing starts, including Riverside, Sacramento, and Los Angeles, built a total of 23,400 homes last year.
Riverside, which is considered one of the more affordable cities in southern California, still has an average home value above $600,000. In Texas, Austin is the only city with an average home value anywhere near that, at around $525,000.
“If you look at some of the parts of the country that are building far fewer homes than you would think, often it comes down to zoning and entitlement rules,” Wolf said. It’s not easy to build homes in California; there’s opposition at all ends, through NIMBY-ism, or not-in-my-backyard behavior, and the local policies they use to their advantage. And, as Wolf pointed out, there’s also not much developable land or room to sprawl. Los Angeles is already a drive until you qualify metropolitan area. But it’s infill development that is needed and almost always opposed despite the state’s massive population (although it has recently declined).
It’s much simpler to build in Texas and it has the physical room to do so—just think about Houston, a city that’s free of zoning. That’s not to say land-use regulation and growth control are perfect in Texas—there are workarounds to somewhat regulate development, and some housing policy analysts fear that these Sunbelt boomtowns might not be able to build enough homes to keep up with their population growth in the future, as they mostly have.
Still, “if a developer sees an opportunity, or sees a need to build more homes, it’s a lot easier to get that done when the government isn’t telling you no, versus in some other states where homebuilders and developers are fighting with city officials on a regular basis,” Wolf explained, adding, “if they could build more homes in L.A., I think they would, if they could get past the regulatory environment.”
Apart from Los Angeles, consider San Francisco. The San Francisco metropolitan area built 2,340 homes last year, according to the data. Housing starts were actually down 5% in the fourth quarter of last year, compared to the same period a year earlier. Everyone…
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