August 27, 2024

Texas Comptroller Glenn Hegar Releases Study on State’s Housing Affordability Challenge

(AUSTIN) — Texas Comptroller Glenn Hegar announced today his agency’s Housing Affordability Challenge (PDF) report, which examines the factors contributing to the housing affordability crisis across the U.S., how the crisis is affecting Texans and how the state is faring in comparison to the rest of the country.

“Texans continue to suffer from elevated prices and high interest rates that put significant upward pressures on the costs of borrowing and home ownership, and so this report covers an immediate issue,” Hegar said. “Simply put, our state, which is generally well regarded for its low cost of living, is facing the pressures of a decline in housing affordability as our population and demand for housing continue to rise. Since 2008, Texas has been the No. 1 state for new building permits for privately owned housing units. However, the state’s population, particularly in the major metropolitan areas, is growing at a quicker pace than housing is being built.”

The Housing Affordability Challenge report includes these key findings:

1) Affording a home is increasingly difficult in Texas and the U.S.

• Between 2021 and 2023, the U.S. experienced its fast­est-ever deterioration in housing affordability, largely due to the surge in home prices and rapidly rising interest rates.
• Median home prices in Texas rose by 40 percent between 2019 and 2023, according to data from Texas A&M University’s Texas Real Estate Research Center. After a period of rapidly rising inflation rates, mortgage rates rose to a 23-year high of 7.79 percent in October 2023.

2) Finding the right balance of building enough housing and having enough housing supply available is difficult. Signs point to an underinvestment in housing in the state.

• Years of underinvestment in the U.S. housing supply exacerbated housing price pressures following the 2007-2008 financial crisis. Though build­ing permits in Texas fell substantially following the financial crisis, the decline was less pronounced com­pared with other states. Texas’ building permits have led all other states since the financial crisis.
• In 2023, Texas was 306,000 homes short of what was needed, according to an analysis by Up for Growth, a nonprofit organization that focuses on housing poli­cy.
• Lack of investment is particularly harmful to lower- and middle-income buyers, and first-time buyers.

3) Lack of affordability entails more than rising housing costs and mortgage rates.

• Other costs associated with owning a home have risen sharply. Average homeowners’ insurance rates in Texas, for example, rose by 6.9 percent in 2021 and 11.8 percent in 2022.
• Factors such as interest rates and an individual’s personal credit score, associated with the cost of borrowing for a home purchase, can serve as a barrier for many prospective buyers.

4) Amending regulation and zoning codes and ordinances offers opportunities to ease affordability crunch.

• While there is bipartisan support to build more housing and improve affordability at the federal, state and local lev­els, leaders disagree how to get it done.
• They often propose to relax zoning regulations. Zon­ing determines the type of housing that can be built in certain locations. Some argue these zoning regulations drive up home prices and rents by limiting housing development in areas where people most want to live.
• Alternatively, as many view housing to be both a consumption good and an investment, there are those who staunchly oppose zoning regulations near existing homes for fear that it would impact the neighborhood structure and even possibly negatively affect property values. 

“Lawmakers have taken critical steps in recent years to lower the overall cost of home ownership by reducing the property tax burden on Texans, and we are making progress as a state toward lowering artificial barriers and removing regulations that limit or inhibit home building,” Hegar said. “But this issue remains daunting and key to our continued overall economic health. My office will continue to work with legislators to provide support as they work to address this issue and prepare bills for the upcoming legislative session.”