Inside Texas’ Explosive Growth and Future Housing Reforms (original) (raw)

Happy Tuesday and welcome to another edition of Rent Free. This past week, I was in Austin, Texas, for this year's YIMBYtown conference of activists, academics, architects, builders, and more, all there to talk about ways to make housing more abundant and affordable.

I'm told it was the largest YIMBYtown conference yet—a sign of a growing and increasing bipartisan movement. Since it was held in Austin, a city experiencing explosive growth inside a state that's also growing like mad, this week's Rent Free is a special Texas-themed issue. Our stories include:

But first! We have our first Rent Free Q&A with red state zoning reformer, Montana Gov. Greg Gianforte.

Q&A: Gov. Greg Gianforte

Last year, Montana passed a long list of housing reforms (dubbed by Bloomberg the "Montana Miracle") that allowed middle housing options like duplexes and accessory dwelling units in single-family areas, allowed residential development in commercial zones, and limited public input on individual, code-compliant housing projects.

Most of these reforms were drawn from recommendations made by a housing affordability task force convened by Montana Gov. Greg Gianforte. The governor was a champion of the reforms while they were moving through the Legislature. His administration is now a defendant in a lawsuit filed by anti-density activists challenging the new state laws.

Gianforte spoke remotely at Austin's YIMBYtown conference. I also interviewed him by phone about Montana's zoning reforms, the case for more property rights in housing development, and whether we'll ever see 10 million Montanans.

Q: One case you can make for zoning reform is that it enhances property rights. How important was that case for passing Montana's zoning reforms last year?

A: To get my brethren on the right on board, it was very important. Different aspects of the argument appeal to different folks. Certainly, if you own a piece of property, within reason, you ought to be able to do what you want with it.

This is why two particular areas, allowing [accessory dwelling units] ADUs, allowing duplexes anywhere you have a single-family home were reasonable extensions of property rights.

There was also a need for public input so that everyone can put their fingerprints on the master plan for a community. But we've seen those processes weaponized at times to just shut down development.

Some of the reforms we adopted, like master planning, allow everyone's voice to be heard and the community to agree on how they want to grow. But once that's settled, if you come in with a development plan that matches the growth plan that the community agreed on, you just get your permit. I think that's the right balance.

Q: Critics of Montana's zoning reforms make their own case for property rights: "I bought into this neighborhood under certain zoning. I expect it to stay a certain way." Do you think that's wrong?

A: If you enter into an agreement, and there's a homeowners' association, and there's a contract amongst the owners, nothing we've done impinges on that. But nothing ever stays the same. The reality is that the needs of a community change over time. It's important that people's voices are heard.

With increased demand and lack of [housing] supply, prices have gone through the roof. Our teachers, nurses, and police officers can't afford to live in these communities anymore, and we need to do something different.

Q: Montana's zoning reforms were pitched as a way to avoid sprawl. Do Montana's cities need to sprawl, to grow outward, as they also grow upward?

A: There will be some of both. But we had policies that forced sprawl. In Missoula, there was virtually no zoning that allowed multifamily housing, virtually zero, in a university town where multifamily would make a lot of sense.

This is why we allowed duplexes anywhere you have a single-family home and allowed multi-family units in commercial and retail areas, so we could have more walkable communities. Once people are in those communities, they like them. And if they don't like them, they don't move there.

Q: Montana is the seventh-fastest growing state. It currently has 1.1 million people. Is the goal 10 million Montanans? Will you get there with these reforms?

A: Well, it's not the job of the government to set population goals.

I ran for office on two key platforms. One is we've been exporting our kids and grandkids for decades. My number one goal is more good-paying jobs. That's why a strong economy matters. We're hopeful that all the Montanans who moved away will move back home.

Secondly, just as important, is to protect our way of life. Restricting sprawl or increasing density as we grow as a state is essential to preserving our way of life.

Q: What's a mistake you see other policymakers making when they approach housing affordability?

A: This problem is so big, there's not enough money to buy your way out. Some policymakers try to do demand-side incentives to buy off mortgages or supplement rent. If you don't increase supply, those demand-side incentives have unintended consequences that actually make the problem worse.

Q: What do you see as the federal government's role in housing policy?

A: They need to stop printing money because it's the runaway spending at the federal level that's driving inflation. That's a large part of the problem we're facing in housing is the inflation that's occurred across the supply chain and labor, and everywhere else.

The first thing I think the feds can do is stop spending money like a drunken sailor. Someone pointed out to me that that wasn't a fair comparison because drunken sailors are spending their own money. When they run out, they stop spending. That is not what is going on in Washington.

And that's it. Then they should sit on their hands.

This interview has been condensed and edited for style and clarity.

The Secret to Texas' Growth Machine

According to the U.S. Census Bureau, Texas experienced the largest numeric population growth of any state last year. It was also the third fastest-growing state in percentage terms, tying with Florida and only a hair behind booming South Carolina.

Stepping back, there are 5 million more Texans today than there were at the beginning of the century. Texas also has more jobs than it's ever had before and is creating new ones at nearly twice the national rate.

Meanwhile, the country's other large states, noticeably California and New York, continue to shed residents.

Texas Gov. Greg Abbott likes to credit his state's small government, business-friendly economic policies for the state's growth. Texas does have some of the lowest tax burdens in the country, although it's also one of the most regulated by one measure.

At a YIMBYtown panel, the Manhattan Institute's director of research, Judge Glock, suggested another reason for Texas' growth: it's hot and ugly. Or at least, most of Texas is not as pretty as the San Francisco Bay Area.

"This has made us work harder to keep the cost down," he says.

It's the (Housing) Economy, Stupid

A major way that Texas has kept prices down is through building gobs of new housing. Lone Star State jurisdictions collectively permitted about twice the number of new homes that California did last year, despite the state having around 8 million fewer residents.

Data culled by the Financial Times shows that the difference in per capita building is even more pronounced when one compares cities like Austin and Houston to San Francisco, which is in turn reflected in prices. Median home prices in Houston are a quarter of what they are in San Francisco.

The state has some of the most affordable housing of all the booming sunbelt states (save North Carolina) and is more affordable on average than the U.S. as a whole.

The Right Geography

Part of Texas' housing success is its uninteresting geography that Glock alluded to—lots of flat, dry land around its major cities that's ideal for building new exurban subdivisions.

"A couple of the metros might have some physical constraints, but not really," says Jacob Wegman, an associate professor at the University of Texas Austin's School of Architecture. It's "nothing compared to the California coastal metros or the Northeastern metros with their harbors. That's got to be part of the story."

The Right Policy

Texas' policies also put no real regulatory obstacles in front of new suburban housing either. The state's counties, for instance, can't adopt zoning laws. That means housing is allowed on all unincorporated land.

High-cost, low-growth California and New York both have environmental laws that require endless studies on new development, and which give third parties the right to sue over new housing approvals. The result is new subdivisions can take half a century to approve.

Texas, in contrast, has no such laws.

"There's just no real mechanism for neighbors who don't want greenfield development to happen to stop it in any meaningful way," says Wegman. "That's got to be a big, big part of the story."

Texas' cities (save for famously unzoned Houston) are zoned like typical American cities. Municipal governments have all sorts of land use restrictions on the height, density, and location of new housing. Like everywhere, these rules limit new housing construction and drive up housing costs. They're most burdensome on walkable, infill development.

Here too, local policymakers—often at the prodding of YIMBY activists—are shifting municipal development regulations in a more liberal, pro-growth direction.

Austin's YIMBY Revolution

Opening Austin's YIMBYtown conference was Austin Mayor Kirk Watson, who gave a crowd-pleasing speech about how the key to keeping Austin "weird" is to build more housing.

"Our distinct Austin vibe will be gone if only a select few can enjoy what Austin has to offer," said Watson.

It was a message tailor-made for the crowd of assembled YIMBYs. It also represents a shift in Watson's general stance on development since his narrow 2022 election victory.

"This is the same guy who proudly owned up to having a yard sign opposing the [liberalizing] land development code rewrite and was endorsed by the city's most prominent anti-reform leaders," writes Jack Craver in his Austin Politics Newsletter. "On land use, [Watson] has thus far completely abandoned the anti-density constituency that supported him in 2022."

Watson isn't the only Austin politician to find YIMBY religion on housing. At another YIMBYtown panel, a staffer for Austin City Councilmember Leslie Pool noted how the councilmember had gone from being an arch-opponent of liberalizing the city's zoning laws to being a chief zoning reform champion.

Overall, the 11-member city council has gone from having a minority who supports YIMBY-style zoning reforms to a nine-member YIMBY-leaning supermajority that's eliminated single-family-only zoning and parking minimums citywide. The council is now at work on new reforms that will shrink minimum lot sizes (allowing for smaller, starter homes) and upzoning transit corridors.

Susan Somers, one of the founding members of the local YIMBY activist group AURA, credits the city council's 2014 shift from at-large to district representation for bringing in a more diverse cohort of council members who were also more pro-development.

That change, combined with the rising national salience of housing affordability and Austin YIMBY's growing organizational capacity (AURA was founded in 2014), has shifted the city's housing politics in a pro-growth, pro-supply direction, says Somers.

At the Statehouse, Much More to Do

One consequence of Texas generally being pretty accommodating of new housing construction is that policymakers have felt less pressure to adopt statewide reforms targeting local red tape.

While California has passed dozens of bills that collectively legalized ADUs on almost all residential land statewide (kicking off a boom in ADU construction), Texas has left local ADU bans untouched.

YIMBY activists and YIMBY-friendly lawmakers are now trying to play catch-up, but it's been a tough road to hoe.

In the 2023 Legislative Session, a bill that would have preempted cities' many ADU restrictions came two votes away from passing. Another bill capping urban minimum lot sizes also failed to pass. On the flip side, the Legislature did approve a new law that lets private parties issue building permits.

The question for many of the assembled activists at Austin's YIMBYtown conference was what, of a long, long list of possible reforms, should they prioritize for the coming legislative session.

Top of the list for many was reforming Texas' valid petition law, which gives property owners the right to protest rezonings near their properties. The law also requires cities to either provide individualized notice about rezonings to affected property owners (a tall order if you're trying to rezone the entire city) or to pass those rezonings with supermajority votes of the city council.

Local Austin anti-development activists, with the help of some novel (critics would say "radical") court decisions, have used the law to stop the city's last attempt at a major zoning overhaul. Earlier this year, in the City of Austin v. Acuña case, they also convinced a judge to toss out the city's density bonus program.

The solid YIMBY-leaning supermajority on the Austin City Council is enabling the city to revive that density bonus program and press ahead with other rezonings. But many still argue changes to Texas' valid petition law are necessary to safeguard future efforts.

"The court's [_Acuña_] ruling jeopardizes future zoning overhauls in the Fourteenth Court of Appeals District and casts a shadow over any Texas city's efforts to comprehensively rezone," wrote Salim Furth and C. Whit Ewen in a research brief for George Mason University's Mercatus Center last month.

Several bills were introduced last session that would have paired back Texas' valid petition law, but none went anywhere.

Rep. Cody Vasut (R–Angleton) says that any valid petition reforms will be a big lift at the Legislature.

"When you get to the rights of neighbors to be able to voice their concerns, that becomes perhaps, I don't want to say a bridge too far, but something that affects a lot of other issues," Vasut tells Reason.

He suggests more direct zoning preemptions, as was considered with last year's ADU and minimum lot size bills, would be easier policies to pass. That could involve some tweaks to give cities a little more flexibility in implementing these laws. Continuingly rising home prices could also prompt some lawmakers to be open to state-level zoning reform come 2025.

"Perhaps as we see more and more of an [affordability] issue in Texas, perhaps even bringing that bill up next session will have more traction because of changing circumstances," says Vasut.

Sometimes things have to get worse before they get better.