Five issues could be key to solving Texas’ housing affordability woes

By Alexandra Hart and Rual Alonzo, The Texas Standsad | March 3, 2023

We’ve reached the 50-day mark of the 88th legislative session. One of the biggest topics of discussion this year has been what to do with the state’s $32.7 billion budget surplus– and ideas abound about how it should be spent.

One area that has Texans feeling a major financial squeeze is housing. That’s true across the state: urban, suburban and rural. In a brief for the Legislature, experts from the University of Texas at Austin have identified five key issues affecting housing affordability in the state – and what can be done to address them.

Professors Steven Pedigo, Sherri Greenberg, and Jake Wegmann joined Texas Standard to discuss the five key issues:

Negative effects of local regulations on market rate and affordable housing supply

One of the main takeaways from the discussions leading up to the publication of the brief centered on the lack of housing options in places where people most wanted to live. While there is a great deal of land available in Texas, Wegmann says, there is difficulty in building in places where there’s most demand.

“You know, where there’s the most demand for housing that’s close to a lot of jobs, that has good transportation options and good amenities like high-quality schools and parks and convenient shopping and all those sorts of things,” Wegmann said. “Those are exactly the types of places where it’s the hardest to build new housing.”

Greenberg pointed out that certain local regulations, such as compatibility standards – what you can build and where – and permitting processes are contributing to the problem, though there have been bills filed this legislative session to start addressing them. But that’s not all.

“I think a third one would be minimum lot sizes,” Greenberg said. “And this has to do with how big a piece of land has to be – a lot has to be – to build a house on.”

Lack of sufficient funding to support the development of affordable housing

When it comes to funding allocation for affordable housing, Pedigo said Texas ranks poorly – 49th in the country, just ahead of Nebraska – with less than 1% of the state budget going toward housing and community development efforts. But there are options the state could tap into to begin closing that gap.

“One of the things that we note in the insights is that the state does own a lot of publicly available land, and that is, as you can imagine, an opportunity for possible development,” Pedigo said.

Greenberg further pointed out that another large reason funding allocation for affordable housing can be considered lacking is that it’s almost entirely left up to the local level – cities and counties – and these communities aren’t seeing the kind of funding that some of similar size might see in other states.

“If you look at, for instance, the cost of housing in Milwaukee on one end and, you know, San Francisco in the other, we’re on the San Francisco trajectory, not the Milwaukee trajectory,” Greenberg said.

Issues with statewide regulation of affordable housing programs

Among the observations made by the team were issues involving statewide regulations. Density regulations, or the number of housing units on a given area of land, is one example Pedigo highlighted in particular.

“Part of the challenge in the state of Texas is that some of our cities … we’ve haven’t updated our land-use policies in quite a while,” Pedigo said.

And while he said Texas doesn’t like to do a lot of mandates, he said the Legislature could think about regulations in a way that incentivize “some of our local jurisdictions to actually think about density or at least go back and reevaluate their land-use codes to make the opportunity for development easier in our communities.”

Issues affecting households receiving housing support

Those is search of finding affordable housing do have options to assist, such as housing choice vouchers (HCVs). However, the researchers found that there remain hurdles even with these programs.

Wegmann pointed out one such issue is who qualifies for such vouchers. He said that nationwide, only about 1 out of 4 or 5 who earn at the rate to potentially qualify for a voucher is able to actually get one, and that the share is likely similar in Texas.

“So, you know, there’s just way more demand for those housing choice vouchers than there are available,” Wegmann said.

Greenberg added that the “use it or lose it” nature of such vouchers also puts those who qualify in difficult situations should the landlord reject them.

“So you have a situation frequently, in fact, where someone is finally able to get a voucher and then they cannot use it because they either can’t find affordable housing at all or what they find, the landlords will not accept the voucher and then they lose the voucher,” Greenberg said.

Property tax exemptions and public benefits

Lastly, property taxes – which have often been the center of discussion among the governor, lieutenant governor and House speaker amid a budget surplus this legislative session – have a role to play in widening accessibility to affordable housing.

One issue the researchers raised is whether lowing the property tax burden for landlords would pass the expense on to renters. But overall, while the researchers noted that the talk around property taxes signaled action would likely come this session, it wouldn’t be the defining factor in addressing the overall issue of affordability.

“I think the thing that Jake and Sherri and I and all the folks that came around to talk about this research and these action items as it relates to the Legislature, is that’s just one policy lever – that there are lots of things that the state needs to be thinking about if we’re really going to address the affordable housing issue in the state of Texas,” Pedigo said. “Property tax alleviation alone is not going to solve our problem.”