Why is Building Slowing Down in America’s Boomtowns?
Texas has long been America’s poster child for more affordable housing, thanks to its minimal regulations and abundant land. However, this hasn’t prevented Texas cities like Austin from developing the same cost pressures as California’s metro areas, which built far less over the past 50 years. While regulations and topography account for a significant portion of the rising costs, a recent study also finds that all growing metropolitan regions experience similar cost escalations, regardless of the state’s regulatory reputation. They exhaust cheap suburban land, reach commuting distance limits, and face expensive urban construction requirements.
In “Houston, You Have a Problem: How Large Cities Accommodate More Housing,” Anthony W. Orlando and Christian L. Redfearn tracked where developers built housing across eight major metropolitan areas from 1970 to 2010. Their analysis explains why even pro-development Texas now faces similar affordability challenges to those in California.
Key Takeaways:
- Cheap suburban land has been exhausted: Austin’s share of neighborhoods with fewer than 50 homes per square mile dropped from 55.7% in 1970 to 10.6% today, while Houston’s share fell from 32.6% to 5.5%, forcing builders to turn to more expensive apartment construction that requires elevators and reinforced foundations.
- The distance from downtown shifts from a positive to a negative predictor for construction: Distance from city centers shifted from a factor that encouraged new housing development in the 1980s to discouraging it by 2010-2015 across all eight metros, as suburban expansion hit practical commuting limits.
- Property owners in desirable areas resist development, regardless of state politics. Both Texas and California metros exhibit remarkably similar neighborhood transition rates (e.g., dense suburbs progressing into more urban areas) despite having different reputations for regulation. Existing owners can afford to resist change, which raises land assembly costs, potentially resulting in premiums of up to 40% in dense areas.
The researchers used the Neighborhood Change Database to track the location of new housing construction within eight metropolitan areas, following identical Census tract boundaries from 1970 to 2010. To test whether Texas metros and California metros follow similar development patterns, they measured net housing completions at varying distances from downtown and at different density levels. This reveals whether spatial development patterns converge as metros mature or remain distinct. Three additional reasons drive universal cost increases as metros mature:
- Once empty land is consumed, it inevitably leads to more expensive construction methods. Austin exemplifies this universal pattern, starting in 1970 with 55.7% of neighborhoods having fewer than 50 housing units per square mile—areas suitable for simple suburban construction on empty lots. Only 10.6% remained at that low density in 2015. California cities followed this identical trajectory. For example, Los Angeles went from 5.3% to 2.4% low-density neighborhoods, while San Diego declined from 16.1% to 4.0%. This forces builders away from basic wood-frame houses toward apartment construction, requiring expensive substructure elements, such as reinforced concrete foundations, and other costly mandates, including basement parking. Complex services, including elevators, fire suppression systems, and commercial-grade plumbing, are also required. Prevailing wage requirements, which commonly apply to urban apartments, also increase construction costs by over 8%.
- Workers are reluctant to accept long commutes, creating natural boundaries for development. Houston’s suburban rings expanded outward through the 1990s, then new supply returned to inner suburbs, while far suburb growth slowed dramatically between 2000 and 2010. Their analysis reveals this pattern across all metros: the distance from downtown shifted from predicting more housing construction (a positive coefficient of 96.96 in the 1980s) to predicting less construction (a negative coefficient of -16.89 by 2010-2015). This reversal occurs when commuting times reach worker tolerance limits, making distant land economically less viable for home construction..
- Desirable neighborhoods develop resistance to new development. The authors find that land-use regulation becomes more restrictive as neighborhoods gain desirable amenities and property values rise, causing the normal city growth process to break down. They tracked how neighborhoods “graduate” from rural to suburban to urban densities as they add housing. The most unmistakable evidence appears in dense suburban neighborhoods transitioning to urban densities. In California, 16.1% of these areas made this transition in the 1970s, but only 2.9% do so now. In Texas, 18.8% transitioned in the 1970s, compared to just 3.4% today. This represents neighborhoods that already have substantial housing and no longer choose to add apartments to accommodate more residents. This breakdown occurs regardless of state policies, as existing residents in desirable areas use local laws and approval processes to maintain exclusive access.
The authors demonstrate that Texas and California metros exhibit similar development patterns, suggesting that spatial constraints interact with land-use regulations as cost drivers. Both regions encounter higher urban construction costs, commuting limits, and local resistance challenges as they mature. For policymakers, this research suggests the need to lower the costs of apartment construction, expand infrastructure to extend viable development areas, and streamline local restrictions as metros inevitably transition from suburban to urban development phases.
Photo by Curtis Adams: https://www.pexels.com/photo/photo-of-houses-during-daytime-3571200/