The success of Texas’ approach to housing deregulation is likely to be watched closely by other states, after the bipartisan 21st Century ROAD to Housing Act became federal law earlier this year, encouraging states and localities to ease local zoning requirements. 

The Republican-led state also demonstrates that housing remains one of the few areas where achieving bipartisan support is possible in an increasingly antagonistic political climate.

America’s Housing Affordability Crisis

America, like much of the West, is facing soaring housing prices, which have had a deleterious impact on everything from fertility to the economy.

A recent report from the White House says the housing affordability crunch is nearing what it describes as “historic severity”. It estimates that the United States needs around 10 million additional housing units to meet current demand, with other estimates putting the shortfall at around four million to five million homes.

Texas, America’s second-largest state by landmass and population, is facing the issue along with the rest of the country. According to one oft-cited study, the number of homes the state needs has risen from just over 100,000 in 2012 to 320,000 a decade later, driven in part by the state’s economic boom.

However, while increased prosperity explains why greater numbers of people moved to the region, it does not explain why the market did not respond to housing demand with increased supply. 

A variety of causes have been identified as driving the crisis. Among the most commonly cited are strict building and zoning regulations that make it difficult to build at a sufficient scale and a not-in-my-backyard (NIMBY) mentality among lawmakers and homeowners that inhibits change.

Whatever the cause, it was becoming increasingly clear to lawmakers that they needed to act before Texas faced the kind of affordability crisis afflicting America’s most populous state, California. As the head of the Texas Association of Business, Glenn Hamer, put it: “Nothing short of the American Dream is at stake.”

Targeted Deregulation

Policy proposals aimed at reforming the state’s housing laws were first put forward in 2023 without making much headway, quietly dying in the Texas Legislature, the state's lawmaking body.

Opposition came from politicians and neighborhood groups who argued zoning reforms would reduce the power of cities and local governments to determine who could build and where.

However, last year, Republican and Democratic lawmakers united to introduce a slew of housing reforms, including cutting local regulations to allow more homes to be built and empowering cities to pursue policies that boost housing construction.

For instance, SB 840 has led to an increase in multifamily units. It also appears to be aiding the construction of more affordable apartments, despite the fact that lawmakers did not require developers to build affordable housing units. 

Such projects frequently meet with local resistance, but, as has happened in Austin, rents have fallen amid an apartment building boom, improving housing access for lower-income families.

Meanwhile, a separate bill overriding city zoning rules to allow smaller homes on smaller lots has improved the affordability of family homes. This piece of legislation, Senate Bill 15, has seen 2,800 homes move forward in Dallas, Plano and El Paso. This followed the success of similar smaller-lot reforms in the city of Houston, which researchers and housing advocates argue helped contain the city’s home prices.

https://twitter.com/GovHotWheels_TX/status/2083290712234164387

Bipartisan YIMBY Support

One of the keys to Texas’ current success has been the work of a bipartisan coalition of housing advocacy groups, ranging from free-market conservatives to social justice liberals.

These yes-in-my-backyard (YIMBY) activists, largely led by the pro-housing lobby group Texans for Reasonable Solutions, were careful to draw up proposals that would be more likely to gain support from both Democrats and Republicans, all the while avoiding incurring the ire of the NIMBYs.

To attract Republicans, the coalition emphasized that the slate of bills would cut local regulations and red tape to free the market to address the problem; to attract Democrats, it emphasized how the proposals would make housing more affordable and accessible for lower-income residents.

Meanwhile, to deter NIMBY opposition, the coalition designed proposals that did not target existing neighborhoods, where the possibility of more homes being built nearby can meet with heavy opposition from existing homeowners.

This has not meant that the new laws have passed without any opposition. A number of cities have introduced legislation critics say is aimed at thwarting the application process or making it unviable for developers to build in their neighborhoods.

But the overall success thus far has emboldened housing advocates, who are hoping to lobby for further easing of zoning restrictions, such as allowing the building of granny flats in people’s backyards.

Federal Housing Act

The reforms adopted by the Texas Legislature and the bipartisan support they have received are reflective of a national trend, symbolized by the passage through the US Senate and House of Representatives of the Housing Act.

This act, which was backed by both Republicans and Democrats, balances deregulation efforts that remove outdated federal regulatory barriers with the introduction of new restrictions on the purchasing of single-family homes by institutional investors. 

The fact that America’s two main political parties were willing to join forces on the issue in an otherwise highly polarized environment indicates how serious the problem is.

But less than a month after the bill became law on 11 July, housing advocates and charities are already calling for the federal government to go further.

What many of them are calling for – laws requiring localities to offer greater flexibility for the creation of apartment buildings and smaller single-family homes – are the types of changes being pursued by Texas, as well as other states such as Minnesota.

The success or failure of the Lone Star State’s housing laws will no doubt be closely monitored by legislators and advocates alike to see if they offer a glimmer of hope that America can turn its housing crisis around.