Houston Strategies

Forbes on Houston's winning formula for affordability, housing supply, and urban density

This week I'd like to talk about a couple of Scott Beyer's great pieces in Forbes.  The first is "Houston, Dallas & New York City: America's Great 3-Way Housing Supply Race".  Conclusion:

"These statistics are glaring, and show that the urban housing affordability crisis, and its solution, is far simpler than many pundits suspect. In their ongoing quest to satisfy their anti-growth biases, they've settled on demand-side responses (read: government subsidies) that ignore or worsen the fundamental problem of under-supply; while they continue to blame various third party boogeymen, including developers, landlords, Airbnb hosts, techies, hipsters, Asian families buying second homes, and migrants in general. 

But, again, the Census data sheds light on the actual nature of the issue: some metros in America are building a LOT of housing. Other metros may think they are, but actually are not. And housing prices within given metros are either stabilizing or skyrocketing based on this decision. While it's not clear just how many units metros like San Francisco need to reach market equilibrium, it's obviously more than 10,000 per year, given that the population is growing by 60,000 people annually. Meanwhile, only 3 of these major destination metros are issuing truly significant permit numbers, and only two of them--Dallas and Houston--are doing so without tacking on a bunch of added regulatory costs. Not coincidentally, they're also America's two leading affordability success stories, growing by the largest raw population numbers, yet maintaining some of the cheapest housing."

What's our secret sauce to affordable housing supply and how did it come to be? I suspect a big part of it is state law strictly limiting the land-use powers of counties (from Texas’ historical independent rancher/farmer/cowboy culture of “keep government off my back”), so unincorporated counties outside of cities are pretty unregulated.  That, in turn, puts competitive pressure on incorporated cities to not put much regulation on developers, or they will simply drive them outside the city limits – and cities certainly want that increased property tax increment from development. Texas being a sales and property tax state without an income tax is probably also a driver of developer friendliness – it’s how cities and counties increase their revenue. Finally, state law on MUDs (municipal utility districts) makes it easy for a large-scale neighborhood developer to borrow money for greenfield infrastructure in unincorporated counties (water, sewer, drainage, streets) to be paid off by taxes inside that district.  I recently met with a New Zealand official visiting Houston to learn about the MUD system to see what he could bring back to NZ to help alleviate their unaffordable housing crisis with new supply, and they're looking very seriously at implementing something similar over there.

Looking at the big picture, I’d say we have a country founded on individual liberty and freedom that somehow created a culturally-accepted loophole that government can put as many restrictions as they like on what you do with your land with no penalty or cost to them. Texas has simply embraced the country’s original principles more fully than most states.

Scott's second Forbes article is "Houston Or Portland: Which City Is Doing Urban Density Better?" with this great conclusion:

"So which metro area--Houston or Portland--is doing urban density better? In the objective sense, Houston is, by fitting in more people. Subjectively, it depends on one's tastes. Portland's dedication to historic preservation, low-rise, so-called tasteful development, and pedestrian orientation is indeed charming. The core area feels like a slightly bigger version of an antiquated liberal arts college town, where the pace of life is slow and the people are intentionally offbeat. The fact that this sits amid the backdrop of cloudy skies and evergreen-covered hills gives the place an ethereal quality. 

Houston, meanwhile, is too busy urbanizing to even try and achieve this pretension. It is building upward, outward, and everything in-between--and is doing so rapidly and unapologetically, with the metro area population increasing since 2010 by 852,054, compared to 208,946 in Portland. This has made Houston, inside and outside of its core, a completely different place than Portland: more grandiose, vertical, diverse, global, monied and in your face. Indeed, there is an extent to which Houston, with its large gleaming skyscrapers and overt street-level multiculturalism, almost makes Portland feel like a cow town. 

This is not to say that one is obligated to like--much less live in--either Houston or Portland. But it does make a statement about markets versus planning, in respect to urbanization. If people want cities--as many Americans seem to--they should embrace growth, markets and deregulation; it they want "towns", they should embrace planning, regulation and a collaborative process that allows community interests to navel-gaze about every last land-use decision. 

I certainly know what type of place I'd rather live in."

Hear, hear!

Labels: affordability, density, development, growth, home affordability, land-use regulation, smart growth, zoning

posted by Tory Gattis @ 6:02 PM