Why is Austin Housing so Expensive?

Living in Austin is so much more expensive than other parts of Texas because Austin housing costs way more than other Texas cities like Dallas-Fort Worth, San Antonio and Houston.  Forbes reports on how Austin’s complex regulatory environment and continued history of allowing neighborhood groups control over what is built has made the city increasingly unaffordable.

First the facts:  The median home value in the Austin Metro is $254,500 and the median home price in the city proper makes it the 2nd most expensive place to buy a home in Texas.  The median home price has increased by $80,000 since 2011.  This is happening at the same time that median home values in Dallas-Fort Worth, San Antonio, and Houston have all stayed at or below the national median home price of $187,300.  So what accounts for the difference?

It certainly isn’t income, Austin’s tech industry or solely the fact that lots of people are moving to Austin.  Dallas is near the top of the list for business relocation and Houston is near the top for energy and health.  Both cities have many more Fortune 500 companies than Austin, and Dallas and Houston’s household income is about $59,000 while Austin’s is $63,572.  So household income is very similar, as is education level.  

It boils down to governance style.  Austin’s super-liberal environment has led the city to impose onerous limits on new projects, limiting density in neighborhoods.  All of Austin is primarily zoned single-family, which limits the ability to add apartments or denser housing stock.  Austin only had under 10,000 permits annually between 2008 and 2012.  A local real estate group estimates that Austin needs to add 15,000 units a year just to keep up with all the people moving to Austin.

By contrast, Houston, with its lack of a zoning code, added between 21,000 and 28,000 permits annually between 2008 and 2012, a number that was above 50,000 pre-recession.  Dallas-Fort Worth had 14,000 to 18,000 the same time period, with the number double or triple that before the recession.

What effect has the lack of new inventory had on Austin’s rental market?  If apartment projects no longer had to contend with Austin’s current average regulatory delay of 223 days and instead were approved within the 120 days they are supposed to be approved, renters could see their rent decrease 4-5%.  That averages out to $60 per month or $720 a year in the heart of the city.  

A researcher in 2006 found that Austin’s onerous regulations cause housing to be overpriced by 7%.  Unfortunately regulations have only gotten worse since that report was written.

However it’s not just regulatory practices that create extraordinary delays for Austin developers who want to build housing.  Neighborhood Groups, in particular the Austin Neighborhoods Council, which is a consortium of neighborhood groups across the city, tend to protest any new development and aren’t shy about going to City Council and speaking out against new construction.

The result of this “government-induced scarcity”, which stands in direct contrast to the hands-off approach by governments in pretty much every other Texas city, has caused rents to skyrocket.  Between 2004 and 2013, the average rent in Austin increased by 50%, despite income only increasing  9%.  

So what’s the solution to this housing crisis that’s making it harder and harder to live in Austin?  The city hopes that CodeNext, a City of Austin process that involves Austin’s residents, business community, and civic institutions in the process to change Austin’s building code will make it easier to build new housing.  

Another way to help make Austin more affordable is to get involved yourself.  The Code Next process has had very little input from renters, and most neighborhood associations are dominated by homeowners.  So find your neighborhood association, attend meetings, and help shape what you want your little slice of Austin to look like.  

You can also email City Council and let them know the concerns and opinions you have as a renter.  Or go one step further and attend a meeting and sign up to speak.  Austin is everyone’s city and all citizens should have a chance to make their voice heard.

Trying to find an apartment in Austin in our hot rental market?  Give Apartment Experts South a call today at 512-416-8100.  We can help find Austin affordable housing in your budget and we have up-to-the-minute knowledge of vacancies, rent, and move-in specials.  Best of all, our services are absolutely free!  

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