How Houston maintains affordable housing

ScreenHunter_03 Aug. 26 08.53

By Leith van Onselen

I have written previously how Houston’s deregulated and innovative urban planning system has succeeded in providing Houstonians with housing that is among the most affordable in the Western world.

As explained here, the secret rests in the way that Houston:

  1. Enables a plentiful supply of affordable land for housing and operates speedy housing approval processes; and
  2. Ensures housing-related infrastucture is adequately financed and provided in order to support the provision of affordable housing.

As a result, Houston housing has for decades remained affordable, even during the recent US housing bubble:

ScreenHunter_04 Aug. 26 09.00
ScreenHunter_05 Aug. 26 09.00

And this affordability has come despite very high population growth:

ScreenHunter_06 Aug. 26 09.02

Higher than average income growth:

ScreenHunter_07 Aug. 26 09.03

Below average unemployment:

ScreenHunter_02 Aug. 26 08.24

And easy access to credit.

Over the weekend, Reuters published an interesting article explaining the building boom taking place in Houston and how investors and speculators are staying away since there is minimal opportunity for capital gains:

Houston, a sprawling 8,778-square-mile metropolis, has no zoning restrictions, a fact that has some investors including New York-based GreenOak Real Estate Advisors, looking elsewhere to buy.

Owners in areas where building is constrained can reap big rewards when demand for space rises, fueling rent spikes of sometimes 20 percent. That rarely happens in Houston, where developers can easily build.

“When you’re dealing with a market like Houston, there’s nothing to hold developers back,” Ryan Severino, Reis senior economist said. “You can literally can go next door and put up a building.”

This is an important point. When developable land is plentiful and there are minimal regulatory restrictions on development, incentives to speculate and land bank are reduced significantly, since a rival developer always has the ability to build elsewhere or further afield. As a result, land/house prices are kept in check, investor activity focuses more on yield (rather than speculative capital growth), and ‘panic buying’ from first home buyers is non-existent since they always expect affordable homes to be available.

This is why freeing-up the supply-side of the housing market, predominantly via rules giving land owners and developers the “right to build” on unused land (subject to environmental concerns), is key to achieveing a more affordable and stable housing market.

[email protected]

Unconventional Economist
Latest posts by Unconventional Economist (see all)


  1. What about urban sprawl? How sustainable is their urban design going to be with increasing fuel prices?

    • RRichard,

      Your concern about sustainability is laudable, but your comment here relies on the idea that a city with no urban sprawl is sustainable. This idea is demonstrably false.

      • RRichard. You assume that most Houstonians commute to the central CBD for work. This is false. Employment in Houston is highly decentralised, meaning that people tend to live near where they work, reducing average commute times.

        Decentralisation is one of the big benefits from liberal zoning and cheap land. It is urban consolidation policies like growth boundaries and restrictive zoning that increases congestion, average commute times, and makes housing less affordable.

        • Agreed. But better to overcome such concerns with petrol taxes and the like rather than via blunt policies that artificially restrict the urban footprint. Economics 101.

          It is also true that Texans on average drive bigger cars than elsewhere in the US. Probably has something to do with them having high disposable incomes, in part due to low housing costs. Another reason for increasing petrol taxes.

      • It is also common sense that a city with a low, flat curve on a graph representing house prices, and highly dispersed employment, is going to be one in which it is easiest for households and jobs to sort into relatively efficient locations to each other. It is cities with unaffordable housing where there is a phenomenon surrounding people being “priced out” into very long commutes.

        I frankly doubt the veracity of data sources that claim that cities like Houston and Atlanta have the worst average commutes in the USA or even among first world countries for that matter. All the data sources I am personally aware of, do not show this. Australian cities are actually some of the worst in the world, with the UK and Europe following, and the USA actually suffering less on average. LA, the USA’s worst, is nowhere near as bad as London or even Sydney. Even Auckland NZ is worse.

        Even so, when a city is growing extremely rapidly – like adding 1 million people to an existing population of 4 million in just one decade, like Houston has, it could be expected for time to be needed for everything to sort into efficient locations and road-building to catch up. Californian cities famous traffic problems are actually because their road building never caught up with their extraordinary growth rates in the 1950’s and 60’s.

      • arescarti42MEMBER

        “But better to overcome such concerns with petrol taxes and the like rather than via blunt policies that artificially restrict the urban footprint.”


      • That study was about “Southern USA” only.

        “……Based on data from the U.S. Census Bureau, HBJ determined that just 20.1 percent of Houstonians enjoy a commute time of 14 minutes or less. The average travel to work is 28.1 minutes.

        No. 1 on the naughty list was Atlanta, where less than 19 percent of residents commute less than 14 minutes and more than 23.8 percent drive for more than 45 minutes. The average travel time to work in the Georgia capital is 30.5 minutes….”

        And these figures are for cities that have added 1 million population each, in 1 decade flat, from a base of 4 million in one case and 3.5 million in the other…!

        Actually, average trip-to-work times are around 30 minutes in most of Europe and the UK and Australia. It is the USA’s data set that contains some impressive outliers in the low direction.

        Shorter distances (IF this is the case, it often isn’t) does not mean less fuel consumption if the car is crawling along in 1st gear, or stopped with the engine running, for much of the time.

      • Philbest

        “Australian cities are actually some of the worst in the world, with the UK and Europe following, and the USA actually suffering less on average. LA, the USA’s worst, is nowhere near as bad as London or even Sydney. Even Auckland NZ is worse.”

        Have you actually lived in the UK? Because I have and I can tell you straight that the UK roads can be far worse that Australian Roads, its not uncommon to be stuck on the M25 for 3, 4 or 5 hours at a time, last time I was there, I said the the wife, we should have brought a picnic, tables and chairs it was that bad. Give me Australian roads any day.

    • One of my favourite quotes of all time, is the urban economist Anthony Downs in “Still Stuck in Traffic” (2004), who says that trying to reduce energy consumption via urban form regulations is like adjusting the position of a picture on the wall by moving the wall, not the picture.

      A simple tax on energy would be like moving the actual picture – but of course there are no fat capital gains for “big property” and fatter profits for mortgage lenders by doing it that way. Hmmmmmm………

      “Vested interests” are actually not predominantly “pro-sprawl”, contrary to anti-car activists frequent assertions.

      • Yeah, but “6th worst in the US” makes it pretty good by international standards. While the rest of the world has been criticising the USA for the traffic congestion in its cities, they have failed to look at their own backyards.

        Australia’s cities are absolutely ridiculous, and New Zealand’s are slightly worse. Europe and the UK are worse than the USA, and Australasia is worse still.

        We have sorely lacked data that includes this part of the world because the local governments have wanted to keep the lid on their dismal under-performance. But the latest TomTom International Congestion Index has blown our cover.

        Extremely rapidly-growing cities like Houston and Atlanta take time to catch up with their highway building, and it takes time for everyone to “locate” to maximum efficiency. But compare Australia’s cities (and the UK’s and Europe’s) congestion, to comparable US cities like Philadelphia and Indianapolis.

        Heck, if an Aussie city had grown 20% in one decade at the same time as the current policies about transport applied, no-one would be getting anywhere at all for the congestion.

        The actual data proves that low density, urban dispersion and building road lane-miles results in far less congestion than constraining urban growth and diverting spending to trains. And the housing price difference is around threefold. It is all pain for no gain.

    • UE is conveniently leaving out some of the RE development support costs that are absorbed by the big city but utilized by the suburban areas. I don’t know of any examples wrt Huston so I’ll cite only Dallas examples, however I’m certain the Huston was similar.

      In the 1990’s North Dallas suburban areas developed very quickly. The fastest growing areas were in Collin county (note NOT Dallas county) Collin County is the next county north of Dallas, the main sectors (towns)are Plano, Frisco, Allan, Lucas, Murphy….

      The development of Collin county all happened INITIALLY along I75 (aka North central expressway). At the time I new lots of people that bought new houses in Plano, (in 1992 it was only a 15 minute total compute home to Dallas North Ring road I635). Between 1994 and 1998 basically all of Plano land anywhere near I75 was already builtout and people were moving north to Allan and even Mackinzie??

      Well by 1998 the 15 minute commute took 45 min and the I75/I635 interchange was a disaster area. This change caused DALLAS to spend over $500M to build a huge freeway interchange and double the number of lanes for both I75 and I635.

      Collin county developers (residents) got the benefit Dallas County residents got the bill.

      There are a lot of unusual ways that Dallas city supports “Dallas-suburban” and these are reflected in the higher land taxes paid for Dallas County over Collin county. (e.g. Parkland hospital (the ONLY public hospital in the north Texas area is supported by a landtax levee on Dallas residents. Most homeless people end up in the city area in part because the local suburban police have rules that shift the homeless out of their area.

      All I’m trying to point out is that, in many ways the costs of RE development in Texas are allocated to the existing homes in exactly the opposite way to that which happens in Australia. These extra costs for the city make the new suburbs an even smarter choice. (note this is only really possible because of the relatively small sizes and financial independence of the individual Counties in Texas)

      • This is why “road pricing” is a good idea.

        You are absolutely correct that Texas (and most of the USA) funds infrastructure the opposite way to Australia. The essential reason their system is superior, is that loading “infrastructure fees” into the price of new houses, also flows into the prices of all houses (used ones). Same as if new cars had “road user charges” built into their price.

        This means that all first home buyers pay an equivalent of the infrastructure fees, to the seller of whatever home they buy, in the form of a windfall gain to the seller.

        This essentially comes down to the difference in the way the more conservative folk in parts of the USA treat their younger generation. Australia certainly is NOT the exemplar of “the fair go”.

      • Phil, my real point was that these new satellite city extensions do not pay at-all. The new suburbs gets the benefits without the costs, they also get to leave the dysfunction of Dallas schools behind them and create new schooling systems. Look at the average SAT scores for Plano Vs Dallas schools. Leaving the dysfunction behind is a cost that results in depressed RE prices in established neighborhoods. t remains to be seen if this will be repeated in Plano when these house age.

        I can tell you of several Dallas areas where absolutely none of the local children attend the local schools. This is not because of religions conviction but because these local schools are dreadful. There is also so much corruption and nepotism in the DISD (Dallas independent schools district) add to this the problem of educating the migrant workers kids and you get a Black, Brown, White racial problem that no one wants to touch. So white home owners in Dallas get to pay for public schools they never use and private schools they need, this means that these assets stay depressed.

      • Yes, this is a problem all over the USA. The way they fund their schools; zoning; and teachers union blocking of progressive initiatives. This is really a separate problem – education is not like roads and water, which is what we are talking about when we are talking about Australian infrastructure funding policies.

        It is not an issue that is synonymous with race – racial minority people who care about their kids, who have capitalised on their own educational opportunities, and are upwardly mobile, also are part of the “flight” to new suburbs.

        The same phenomenon would occur in an all-white society – there would be spatial sorting by “economic achievement”. Ed Glaeser, in “Triumph of the City”, says the solution is either “more government”, or total privatisation and level playing field tax incentives.

        We have problems with spatial sorting by economic achievement too, and “failing schools” in “low socio-economic areas”. I do not think that the ability to extract more taxes from people in better off locations, to channel to the failing schools, shows much evidence of making much difference. It is really all about the kids life at home, not dollars from the government.

        In fact I am forever seeing schools that receive top-up funding, still strapped for cash to repair broken windows, while schools in better areas that receive less government funding, are managing to offer students a wealth of extra-curricular activities due to the involvement of parent volunteers and private benefactors.

        These problems go way back upstream. Thomas Sowell writes very pithily about himself and his contemporaries growing up poor but still having ethics of work and thrift and learning and personal responsibility drilled into them, generally by a father as well as a mother (or at least surrogate fathers from the extended family) – and less than 10% of black children being born out of wedlock.

        (EDIT) I know of some households who make a conscious decision to buy a depressed-value home (usually nearer a CBD job) in a neighbourhood with failing schools, and send their children to a private school. These things do tend to find their own level. Ironically, in some cities the former ghetto areas have “gentrified” and now we have activists wringing their hands over “the poor” being forced into dreadful “suburban” existences with no mass transit and no “affordable housing” (they mean row-houses and apartments).

    • What about urban sprawl? How sustainable is their urban design going to be with increasing fuel prices?
      Electric cars are a drop-in replacement for most people. And that’s with technology available today.

  2. Butbutbut, what else do they talk about at barbies? Such a sad life Houstonites must be having when they are not “generating wealth” through the shelters—quite backward people really!

  3. The “less is more” efficiency that minimised zoning restrictions actively work to deter RE speculators from gaming the system must be driving those NY RE shysters nuts.

    • +100

      I have often said that an economy that is heaven for specufestors is hell for everyone else, and the reverse is also true.

      • Bingo.

        Which is exactly what our brains trust have created. A juiced-up, supply-constricted, negative-geared speculator heaven, ripe for the gaming.

        Welcome to hell everyone else.

  4. More on Leith’s point that “Employment in Houston is highly decentralised”. Figures from this TedX talk ( say that only 7% of Houston’s jobs are located downtown. Would be interesting to compare that to other cities in Australia/the region.

    There are some useful stats on Houston’s growth and future challenges/opportunities in those slides and this page:

  5. While Houston is like the outstanding example of how to handle growth, we shouldn’t forget that a majority of the USA’s 250-odd cities are stable-affordable house price cities, and the reason is because of responsive supply and lack of urban growth containment.

    So people who have reasons to knock Houston for whatever reason, can take a look at plenty of other US cities.

    In fact California itself, the epicentre of unaffordable and volatile house prices now, grew even faster than Texas is now, back in the 1950’s and 60’s, and their house prices were affordable then.

    California’s climate and desirability didn’t change meanwhile. What changed was their regulations relating to development.

    The Poms don’t have any problem engineering unaffordable housing markets even in dismal cold rainy smoggy places.

  6. Phil Best, do you get paid for all your spruiking on the Texan housing market?

    And, somehow you conveniently and repeatedly fail to mention that Houston, Austin etc are bloody ugly. Concrete loop de loop roads that dominate the landscape abound and are the bane of every local’s life in those places.

    • @kolchak – see my post

      and how much time have you spent there? Sure it can be really ugly and there are multiple areas of serious urban blight in Houston. There are also many more residential areas that are truly beautiful. The freeways are not the ‘bane of every local’s life’. Some hate them, some love them but for most, it’s a way to get around as quickly and efficiently as possible.

      You don’t think there are opportunities in the housing market – great, leaves more for the rest of us

      • +1 on the convenience of freeway networks.

        Having lived in LA/Inland Empire for a few years, I will take the ugliness of freeway networks any day due to the convenience they provide.

        Here in Australia we have a similar car culture, but we have not followed through on it by building the freeway networks.

    • What do you mean, “all my spruiking on the Texan housing market”?

      Are you even reading my comments? I said that most of the cities in the USA are affordable and prices are stable. Houston just proves it is possible even with very fast growth.

      I also pointed out already that California was affordable once; it is stupid to infer that it must have been an unpleasant place once and has become more pleasant now, hence become unaffordable.

      Who is trying to kid who, anyway, about how pleasant Aussie cities are? California it certainly ain’t. In fact the similarities are all to Texas.

      I also already pointed out that there are plenty of unpleasant places to live, where house prices are still unaffordable. Eg half the cities in the UK.

      No-one pays me for my efforts to get housing supply reformed, I just have deep convictions about what is fair, especially how one generation treats the following one. What I am “spruiking” for is an end to the corrupt, “Baptists and Bootleggers” racket being run by environmentalists, bureaucrats, and “big property”. I already pointed out the “vested interests” are the obvious reason that we don’t address the desire to reduce energy consumption by simple taxes – it has to be via regulations that benefit fat rent-seeking sectors in the economy.

      The reason that affordability is not an election issue, is the same reason we get people making flimsy excuses on blogs, against perfectly logical reform suggestions. The majority already own their own house and don’t give a stuff for those who don’t.

  7. Property investment (and careful planning) has enabled my goal of being a self-funded ‘retiree’, and I mean real investment, not buying a tax deduction – careful choice of property, improve the property, actively manage it and your tenants. Property 101 – yield. With this focus, and given the atrocious stupidity of our political classes and a complacent, willfully ignorant electorate, I looked to the US last year. Our company now has a project in Houston – bought on a 14.5% net yield with good upside as it is refurbed and repositioned. Re this article:

    – a very important point unaddressed from the investor perspective. Texas has fair rental laws that are predictably administered. A lease is regarded as a contract which binds both parties. A lease is not regarded as an example of social oppression as is too often the case in Australian tenancy tribunals;

    – everywhere I go in Houston I experience polite people – regardless of race, age or gender. Houston is a truly multicultural city – they get on with it and don’t need to sprout the ideological nonsense pervading Australian race/cultural debate;

    – workers at all levels in all sorts of situations overwhelmingly reflect the view that they must support their employer and work hard because that is in their personal interest. The community supports business as the generator of jobs – the rational housing policy referred to in this article is one manifestation of this community attitude;

    – having driven many miles on the Houston freeways I can attest to the demands but it’s way better than Sydney, Melbourne, Brisbane or Canberra

    Want to see how badly Australia has handled our opportunities – go and check out the development of the gas industry in Houston. While there, take a good look at the rail/road/port interfaces and how they have been developed over the last 10 years…..and if you want a really, really big reality check – take a good look at the Texas Medical Centre area, find out how it works after understanding its origins. And all this is just the one city of approximately 6.5m if you take in surrounding towns and municipalities (and check out how that system works for another reality check on our national stupidities)

    I’m very glad to be Australian. But I’m also very happy to have diversified my asset base and look forward to expanding it – but not here.

  8. Mortgage servicing of only 15% of incomes. The stuff of dreams. Those living in Houston must find it difficult to walk with all that discretionary income in their pockets weighing them down!

    • Exactly; and imagine the effect of that on the whole economy, going forward for the next few years and decades.

      This is far greater than the “stimulus” effect of ever-inflating house prices, which is based on people going deeper and deeper into debt, meaning that a day of reckoning has to be due eventually. What we are starting to see now, is “the great divergence” between that model and the
      “affordable housing market” model.

      The debt-inflation model is in trouble all over the world. I have been predicting for some time, that the dozens of cities in Southern and heartland USA that have stable, affordable house prices, “OWN” the future of western civ right now. It also helps that most of them are pro-resource extraction, pro-business, pro-employer, low-tax, etc.

      • +++ PhilBest and on your earlier contributions. Like you, I and I would expect anyone who spends time on the ground without ideological or other blinkers, the policies adopted in south west states of the US are clearly working, not just for the people in those states but is supporting the wider US economy.

        It remains a constant source of amazement that people refuse to see the benefits of sensible policies (as PhilBest mentioned). All the attacks in the world against posts like PB’s don’t change the realities of the evident success of Houston housing policies (even if some posters think it is ugly) for the bulk of normal working people in stark contrast to the extraordinary mess we have inflicted on ourselves.

        I have personally benefited from our system – that doesn’t stop me from seeing it is economically stupid, unsustainable, fundamentally unjust and well past its ‘used by’ date.

  9. I have to say, having lived for 3 of my younger years as a Houstonian in Houstonia, the place is UGLY thanks to the mish-mash of commercial and residential use. And yes, I’ve been back in the last 2 years to verify this is still the case.

    Now, I guess you could argue much is this is due to seemingly zero regulations on signage (and could therefore be fixed somewhat easily), but this is a pretty standard drive-by view, with many other places being far uglier: . Not to mention the exploding fertilizer factory being a few hundred meters from a school, hospital and elderly care facility (though this was not in Houston).

    I’ve never been much for regulations, but on-the-ground in Houston is ugly so I hesitate to push their approach simply due to this myself, but YMMV. I suggest doing a Google drive-by around Houston to see if this is something you think is a good idea (warts and all).

    • I don’t think that intersection is all that ugly? But I guess it’s a matter of form or function?

      I’d gladly pick function every time, but then again I am a pragmatic person.

      • I could have cherry picked far worse, but that I thought was emblematic of nice suburbs on one side and comically ugly commercial on the other. Driving down the freeway into Houstonia was definitely fugly on the frontage roads.

        Now other parts of TX are much less this way (Dallas/Ft Worth, San Antonio, etc.), so I’m not sure what the difference is with Houston, but I definitely noticed a big difference on the ground.

  10. Has Houston’s population been growing as fast as that of our major cities? One thing to consider – even if they did have the same population growth, if they had the same level of price growth and unaffordability as we do, and if people were priced out of the market, there are plenty of other cities in the USA that people can move to. In Australia, we only have a handful of cities where there are “good” job prospects, and even those are becoming more uncertain now.

    • Houston has added 1 million people (an increase of about 25%) over a decade, which is pretty swift growth?

    • Houston, and the whole of Texas, is growing faster than anywhere else in the entire Western world, and faster than a lot of the developing world.

      They are adding “employment” at about the same rate as in-migration. The residual unemployment level is at about US average, but it is a mistake to take this to mean Texas’ employment situation is “average”. Texanomics Blog has regular postings; I think Texas has had more than 50% of total new employment created in the entire USA.

      The affordable price of housing and land for businesses is one of the reasons FOR the growth. It is nonsense to assume a connection between growth pressures and unaffordability. Aussies actually don’t know jack about “growth pressures”. It is all an attitude thing, Aussie grew much faster in the 1950’s and 60’s than it is now, without a whole lot of wussing around about infrastructure costs and land preservation, and without housing ceasing to be affordable.