It is a well known fact that in general Texas has incredibly affordable housing. Our median home prices have never eggregiously surpassed the national rates like prices did in area areas along either coast. In particular DFW has held such affordable rates that it has continued to spur growth in the area for some time. I recall recent S-T articles touting our growth as being a function of affordability, and also this demographic study from 2008 which notes Dallas and Fort Worth as two of the most affordable major markets in the nation.
In their article addressing a regional housing strategy for North Texas, I was a bit surprised to find the Fort Worth Business Press touting the area as becoming excessively expensive. Or their terms “housing burdened” defined as an excess of 30% of income being housing oriented. Some might call this house poor, and there is no doubt that it is a real problem. Apparently over one third of the Metroplex could be classified as such. But in such an inexpensive region I would begin to wonder how much of these financial burdens arise from personal decisions? I would be especially interested to see the distribution of the “housing burdened” over income levels. If there is a region which promotes overextension within the upper and middle income levels I would assume DFW would be a good candidate.
What is a little bit more concerning to me are the potential legislative restrictions arising from regional initiatives. From the Business press article, the North Texas Housing Coalition has conjured up some proactive steps to curb monetary overextension. The ideas include disallowing certain zoning regulations, tax credits for affordable housing construction, raising funds through “various real estate fee’s”, and requiring builders to dedicate parts of developments to low-income housing.
It was only earlier this month that I wrote about the counteractive effects that initiatives like these have on overall housing prices. Take for example the idea requiring builders to dedicate a percentage of developments to low-income housing. In fact, a percentage of the units that will be available in the new West 7th development are dedicated exactly to this. So if price concessions have to be made on 20% of a 500 unit development, those losses incurred will ultimately burden the other 80% of residents. The FWBP article addresses some fee waiving and other nominal concessions to offset lost income, but I assure you they will not offset 100% of the losses realized. Ultimately you end up with a net increase in the property costs which are then passed on to the consumers. This transfer of cost burden sounds good on paper, but plays out poorly when we look at markets like California.
Surely it seems logical then that we would see similar issues of artificial value inflation with ideas like creating public housing trusts. The funds for such a trust would arise from “real estate fee’s and surchages” most likely levied against developers and consumers. When a developer’s fee’s rise they ultimately end up burdening the end user of the property. These rising costs create premiums which are not supported by any true market demands and will ultimately necessitate corrections. Texas real estate has faired better than most parts of the country in the last few years mostly due to the fact that our median home prices never exceeded the fundamentals of the markets. We have already seen the fallacies of attempting to control real estate markets in other regions, I would hope that we could learn from those lessons before implementing any “cohesive regional housing strategies”.
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