Report: Local Regulations Harm Poorest Texans Seeking Housing

Local regulations from city governments in Texas are harming the state’s poor who are seeking housing.

The Texas mantra of lower taxes and limited government has no doubt inspired the “Texas Miracle” and generated the Texas Model for others to follow. But, the Lone Star State’s municipal governments stand in the way of further growth — often harming its poorest citizens in the process.

A new report published by the Austin-based Texas Public Policy Foundation argues that municipal governments are perfectly positioned to inflate the costs of residential development and redevelopment, often to the tune of 25 percent of the unit sale price. The combination of ever-expanding zoning codes and unmitigated impact fees can reduce or scrap altogether construction plans in a time when low to mid-range housing supply is becoming pinched. Without new legislation to further protect property rights, the report argues that the working poor and middle classes will increasingly bear the brunt of these government costs.

“Zoning and permitting regimes delay construction, require unnecessary changes to the building design, and increase the final sale price,” report author Kathleen Hunker notes. “Unless city governments peel back their zoning codes, Texans will continue to struggle to secure a good home for their families.”

A variety of factors placed the state on an emerging path toward a supply shortage in affordable, “starter” housing, according to the report. From 2010 to 2014, Texas welcomed 1.8 million new residents whose median incomes rose 9.1% during the same period. Concurrently, the average sale price for a home sought out by low or middle income buyers rose from $148,000 to $184,000. Prospective renters saw a monthly cost of $647 in 2010 to $735 four years later. Aside from supply and demand forces seen with economic growth, the report argues that prices could have been reduced an average 25 percent if municipalities were kept in check. If left unchanged, onerous local regulation could risk making the construction or retrofitting of homes below the price point of $200,000 largely unprofitable.

The report contends that an inverse relationship exists between municipalities with complex zoning codes and their respective housing affordability rates. Residents in Dallas are less likely to get reasonable housing as developers contend with 40 types of zoning districts (18 of which are residential), compared to Houston’s zero. A cost of living ranking system by FIXr offers further credence to this claim, finding that a young family of three with a household income of $74,000 is likely to find that at least 90% of homes in Houston are in their price range, compared to 40% in Dallas.

A separate challenge presented by municipal overreach comes in the form of impact fees imposed on developers. These fees are reasonable in theory as political jurisdictions should expect some level of compensation for the costs associated with damages to infrastructure during the construction process. The report argues that the line between necessary cleanup reimbursement and pocket lining is too easily blurred under current regulations and case law. A single 2013 fee ordinance in San Antonio created a $2,600 expense per single family home built, compared to $1,600 before the rule change. Likewise, new apartment building costs rose under this ordnance from $1,600 per acre to $4,600. All of these costs are eventually left with the consumer.

Predictably, the Obama Administration has recently argued that the rise in housing costs affecting middle and low-income Americans is due in considerable part to enduring discrimination, decades after the Fair Housing Act was signed. In July 2015, the U.S. Department of Housing and Urban Development enacted a new rule, Affirmatively Furthering Fair Housing, which not only requires local jurisdictions to generate demographic surveys, but explanations for why disparities may exist for protected classes. Failure to comply with the rule could result in a loss of federal funding or other legal actions.

The Texas Public Policy Foundation presses for a different route focused in Austin. The report claims that legislative reforms should focus on requiring zoning authorities to provide their own impact assessments as they affect property owners and developers. As impact fees are concerned, municipalities should bear a burden of proof to justify fee amounts. In all cases, parties would be better served with improved appeals systems where code interpretations are at odds.

Logan Churchwell is a founding member of the Breitbart Texas team. You can follow him on Twitter @LCChurchwell.