The Nation’s Second-Worst Housing Shortage Is Crashing Into The ‘Texas Miracle’

This is Part 1 of a Bisnow investigative series that explores the “Texas Miracle” — the Lone Star State’s multi-decade strategy that attracted hundreds of U.S. companies, millions of people and billions of dollars within its borders. Texas became the ninth-largest economy in the world, but the nation’s housing crisis is hurtling the state towards an uncomfortable reality: It's becoming unaffordable. Part 2 is here. Part 3 is here. Our podcast conversation with former Texas Gov. Rick Perry is here.

Texas’ 20-year winning streak could be coming to an end.

In what has been billed as the “Texas Miracle,” the state transformed itself into the world's ninth-largest economy on a triple-pronged promise: the Lone Star State has low regulations, low taxes and low costs.

Those vows have attracted hundreds of companies, billions of dollars and millions of people, but even as major investment dollars and the masses continue to pour in from across the U.S., unbridled growth could be a thing of the past.

The Nation’s Second-Worst Housing Shortage Is Crashing Into The ‘Texas Miracle’

A major culprit? A severe lack of housing affordability that has many of Texas' top cities hurtling toward the once-unthinkable reality that the gap between it and cities on the coasts is narrowing to more of a crack.

"The housing advantage that we've had for decades is really gone," said Steven Pedigo, director of the LBJ Urban Lab and professor of practice at the LBJ School of Public Affairs at the University of Texas at Austin.

Texas remains at the top of the national charts when it comes to bringing in new corporate facilities, racking up 1,028 in 2022, twice as many as closest competitor Illinois.

But it is also beginning to take some rare losses. Amid a rising housing crisis, experts warn that if Texas doesn’t quickly step up housing production it could lose its coveted status as a people and corporation magnet.

After a flood of corporate relocations crescendoed at 62 in 2021, last year the state recorded its worst year for attracting new headquarters since 2017, Bisnow reported in December 2022, and had logged only seven in 2023 as of March, according to a tally kept by Texas Gov. Greg Abbott’s office. 

Though a laggard national economy and competing states offering more attractive incentive packages have played roles, a groundswell of housing advocates, academics and stakeholders on both ends of the political spectrum say the state’s housing crunch risks blunting its longtime competitive edge — and may have already begun doing so.

Late last year, Micron Technology announced it would invest up to $100B to build a massive semiconductor fabrication facility in New York — "one of the worst states for business in America,” Abbott said at the time — rather than the Austin area. And in late March, Placid Refining pulled a rare reverse relocation, saying it would move its headquarters from Dallas to Baton Rouge, Louisiana, making a $66M investment 430 miles away and across state lines.

While Placid Refining’s main impetus to relocate to Louisiana was proximity to its refinery and a slew of tax credits, Placid Corporate Secretary Tyler Gray said the move would make it far easier to recruit employees and grow the company.

“Louisiana is definitely less expensive from a housing standpoint, there's no question at all,” he said. 

Texas is not producing enough homes for the hundreds of thousands of newcomers still flocking to the state annually, a major reason for home prices skyrocketing more than 45% statewide since the start of 2020, according to Zillow. Three years ago, Freddie Mac estimated the state needed half a million new homes, and since then, upward of 880,000 new Texans have moved in, per the U.S. Census Bureau.


Meanwhile, renters in most of Texas’ largest metros have seen hikes fast outpace state and national averages, particularly over the past two years, much of that due to scarcity. Last year, national nonprofit Up For Growth ranked Texas’ housing shortage second-worst in the nation, behind only California.

Housing advocates, legislators and real estate experts say the problem is Texas is gaining population faster — particularly in already populous metros — than it is producing houses, especially since the onset of the pandemic. The state’s population has increased by about 50% since 2000, when it sat at around 20 million people. In 2022, census data showed the population had surpassed 30 million and could hit 55 million by 2050.  

But the number of building permits has remained static. Developers received 263,054 permits in 2022, census figures show, on par with the past two decades. Between 2000 and 2021, Texas issued an average of about 243,000 housing building permits per year. That’s not nearly good enough when the state’s population grew by 475,000 between July 2021 and July 2022 alone. 

“All the indicators kind of suggest that this is something that we have an issue with,” Pedigo said. “And frankly, this is an issue that the state really hasn't grappled with.”

Pedigo is among a group of University of Texas at Austin researchers who published a widely disseminated brief in February urging the Texas Legislature to take swift action, warning that “diminishing housing affordability poses a threat to the state’s economic well-being.” 

State lawmakers on the right and left responded, introducing about 200 bills aimed at lowering the state’s property taxes, the sixth-highest in the nation, allowing for more density and easing regulations to encourage more housing production.

“We’re recognizing the obvious that we’re not as bad as [California and New York] and people are moving here,” state Sen. Paul Bettencourt, a Houston Republican, told the Texas Tribune. “So these are issues that we need to take care of now and not wait and have the same problem run you over.”

‘There Will Be A Cause And Effect’

Even the longtime former governor most associated with the Texas Miracle recognizes housing affordability has become a nagging issue.

The Nation’s Second-Worst Housing Shortage Is Crashing Into The ‘Texas Miracle’
Former Gov. Rick Perry at an awards ceremony in November 2019 in his capacity as then-Secretary of Energy.

Rick Perry, who served as Texas governor from 2000 to 2015 and as U.S. Secretary of Energy under President Donald Trump, lured companies like Toyota to the state by the dozens, espousing a four-point mantra of “don't overtax, don't overregulate, don't over litigate and have a skilled workforce.”

The state’s relative affordability was important to that success, he said in an early May Bisnow interview. When Perry left office in 2015, about 60% of homes were affordable to Texans living in the state’s largest metros and earning the local median income, according to data from the National Association of Home Builders/Wells Fargo Housing Opportunity Index. Today, fewer than one-third of homes in Dallas, Fort Worth, Austin and San Antonio are in reach.

For comparison, in New York City, just 20% of homes are affordable to median wage earners and the percentage falls below 10% in San Francisco. But cities like Austin and Dallas are rapidly catching up, both approaching the 20% mark as well.


Perry noted members of his own family had a rude awakening when house shopping two years ago. Perry’s daughter and son-in-law moved from Las Vegas to Austin and were “shocked” by the metro’s home prices, which have risen 354% since 1998, the biggest increase of any metro in the nation during that time frame.

“Whenever housing gets too expensive, there will be a cause and effect at some point in time,” Perry said. “Whoever wants to go be hip and live in Austin, Texas, and enjoy that lifestyle, they're not going to be able to recruit.”

Some, like YTexas CEO Ed Curtis, see housing demand as a net positive. YTexas promotes itself as a resource for companies relocating or expanding into the state.

“That's a good problem to have,” Curtis said of the housing crunch, adding, “it's something that we definitely need to manage.”

Yet the pressure has pushed the state’s median house price from $235K to $331K since 2019, a 41% increase, according to the Texas Real Estate Research Center.

With every $1K increase in cost pricing out 22,000 households, according to center data, that’s a major concern in markets where price spikes have been even more acute. In the Dallas-Fort Worth and Austin metros, median home prices rose nearly 62% and 59%, respectively, between January 2019 and April 2023. 

Renters are also feeling deepening pain. Median rents for a two-bedroom apartment, while on a downswing in recent months, have risen 34% over the same 2019-2023 period in Austin, 22.5% in Dallas and 21.3% in San Antonio, according to apartment search site Zumper. Houston, which has comparatively fewer zoning and land use restrictions and has been able to jump-start housing production in a way other metros haven’t, has posted a relatively modest 9.4% five-year increase.

All of that adds up to an increasing level of alarm among Texans. A February Texas 2036 poll found that 88% are concerned about housing affordability, with 53% rating themselves “very concerned.” For 14 years, a separate Texas Lyceum survey has asked how Texans think the state’s economy compares to the rest of the country. Only recently — in 2021 and in 2022 — have the majority said the state’s economy is in worse shape than the nation’s economy.

“If a new company comes here, everybody in that company is not making $150K or more – like custodians. You have front-line workers, you have receptionists, and they have to be able to have affordable housing,” Houston Housing Authority President and CEO David Northern said. “You can’t come to work stressed out about being able to pay your bills and maybe living rent-burdened and be effective.”

The Nation’s Second-Worst Housing Shortage Is Crashing Into The ‘Texas Miracle’

While the state still has many more newcomers than it can deal with, some struggling Texans have given up and left altogether.

Xander Roan is a lead line cook who moved to Austin in 2017. He struggled to find a place he could afford, eventually settling into a rental house in Pflugerville he could just manage by splitting the $1,550 rent with three roommates. When the landlord declined to renew the lease last year because he wanted to work on the house, Roan was unable to find another rental in the area in his price range.

“It was difficult the first couple of years we were there, but after Covid, it spiked really badly,” Roan said.

Things got so dire, Roan lived in his car, then a hotel for a few months while saving up for a new place in Denver. Besides being cheaper — Roan and his partner are paying $1,175 for a basement apartment, most bills included — his wages are higher in Colorado than they were in Texas, he said. 

Texas “did not look like a super great prospect, even if we’re not going to buy for another decade or so,” Roan said.

Rising housing costs, including the impact of Texas’ property taxes, were also a major factor in Katy McLain’s decision to flee the state. When McLain and her husband got priced out of the Fort Worth housing market, they purchased a house in the small city of Mineral Wells, about an hour west, at the beginning of 2021. By the end of that year, though, increasing homeownership costs and inflation made it difficult to live off of their family’s income of about $70K annually, she said.

The actual mortgage on their house was just $500 a month. But the escrow payment, covering interest, property taxes and insurance, which increased due to wildfires and tornadoes, came to $900, she said. They sold the house and moved to Oregon in late 2022. 

Though Texas famously has no state-level personal income tax, its high property and consumption taxes put its effective state and local tax rate at 12.73%, the 41st-highest in the nation.

Maher Maso, a principal at Ryan focused on site selection and business incentives, as well as a former mayor of Frisco, said he worries the state, especially its pricey metros, risks losing its workforce if it cannot get a handle on affordability.

“[If they] can't afford to live in your community, they go elsewhere, which impacts job creation,” Maso said. “So there's a real risk of not having housing, and even more importantly, the right kind of housing.”

Blood In The Water

Stories like McLain and Roan’s strike at Texas’ long-cultivated reputation for relative affordability. Growing discontent plus the prospect of losing the state’s economic ace in the hole is worrying developers, economic development experts, urban planners and politicians.

“When you think of what has attracted people to move to Texas, and, in particular, Dallas, it’s not our beautiful beaches and beautiful mountains, it’s the fact that it’s a really affordable place to live and a great place to build a community and raise a family,” Dallas Builders Association Executive Officer Phil Crone said. 

“If we aren’t able to find a way to lower our costs associated with housing and to create affordable options, we face the risk that Texas will lose business as a result,” said Angela Hunt, zoning and land use attorney with Munsch Hardt Kopf & Harr and former member of Dallas City Council.

That is already happening, according to Dennis Shirshikov, a licensed Texas broker who also serves as real estate head of growth for rental technology platform and brokerage Awning. Shirshikov has seen two clients opt out of Texas moves in the past year.

One, a San Francisco-based technology company explored setting up shop in Texas last summer, excited about the state’s growing tech talent pool and what it expected to be cheaper living costs for its 75-plus employees. It was considering subsidizing relocation costs — until it ran the numbers. 

The firm was so taken aback by skyrocketing prices for homes, apartments and offices in the state’s most desirable metros, it put its Texas expansion plans on the shelf, Shirshikov said.

“Things are beginning to shift,” Shirshikov said. “The rapidity of this change has started to affect the affordability that Texas was known for.” 

The Nation’s Second-Worst Housing Shortage Is Crashing Into The ‘Texas Miracle’

Another California client, a small business retailer, backed out of a relocation to Texas in the latter half of 2022 after conducting a detailed analysis and finding the vaunted gap in housing costs between the two states was closing.

“Part of their challenge was that their employees aren’t super highly compensated because it’s not very specialized work,” Shirshikov said. “California has programs available for people with lower incomes to get housing and places to live … Texas has fewer of those.”

Affordability has always been a factor in where companies choose to go, but even more so now amid high interest rates and shrinking supply, said John Boyd, principal of The Boyd Co., who has been working in site selection for 22 years. 

“Today, it's a major site selection factor given the affordability crisis and the lack of inventory, particularly in high-growth, Sun Belt markets,” Boyd said. “There's been an exclamation point on the affordability issue since the pandemic."

For advanced manufacturing projects, eastern Washington state, Iowa, Nebraska and Rust Belt markets are pitching themselves as a better place for employee recruitment, Boyd said. Indianapolis, in particular, has “very attractive suburbs” working to its advantage, he said.

“We are seeing other markets, other areas, target Texas as part of their economic development pitch,” he said. “They're saying, ‘You will have an easier time accommodating your workers and recruiting into our market because housing is more affordable.’”

Some of Texas’ immediate neighbors are smelling blood in the water and seizing the opportunity to show the state up on costs. Oklahoma, in particular, is making a major play as an alternative to Texas that is just as business-friendly and more affordable, to boot.

“Now other states can take advantage and say, ‘Hey, you can't afford to live in Texas, come to Oklahoma, come to Arkansas or Mississippi, Louisiana, because we have plenty of space and housing here,’” said Roger Arriaga, executive director for the Texas Affiliation of Affordable Housing Providers.

“We might do great, we might be drawing all these wonderful companies and all these jobs. But at some point, there will literally be an economic limit to who's interested in coming to Texas, simply because the places they want to live might be too expensive, and they might not have a housing option.”

Drawing out-of-state talent and companies isn’t the only issue with a constrained and increasingly out-of-reach housing supply.

A lack of affordable housing has stopped some Texas-based companies from expanding in certain metros for fear of not being able to find staff within commuting distance. One town on the north side of the DFW metroplex failed to get an H-E-B grocery store because of a lack of potential workers willing to do the job in the immediate area, multifamily developer Ryan Combs told Bisnow, declining to specify which one.

“H-E-B said, ‘Day one, we’ve got to hire 200 workers. We can’t find enough workers within 45 minutes of this town to come live here, so you don’t get your grocery store,’” said Combs, a senior vice president at JPI. 

Other Texas companies are taking matters into their own hands to ensure their workforce has affordable shelter: those owned by billionaire Elon Musk.

Musk chose to relocate Tesla's headquarters in Austin in 2020 after becoming frustrated with California's taxes and regulations, having already established The Boring Co.'s headquarters in the Austin suburb of Pflugerville in 2016.

A lack of available housing options in the region prompted a partnership with developer Lennar earlier this year to construct a 110-home subdivision on more than 3,000 acres in Bastrop County. Employees have been able to apply for rents as low as $800 a month for a two- or three-bedroom, according to The Wall Street Journal. Some have characterized it as a latter-day company town.

“Elon Musk [is] planning to do a Hershey-like housing development for his employees,” Boyd said. “The media was fixated upon that as some sort of Orwellian dark agenda, but it's really no more complicated than having affordable housing for SpaceX, Tesla and Boring Co. workers.”

‘It’s Reality’

Not everyone agrees the state is in crisis — or that the housing crunch portends any hint of tarnish on Texas’ crown.

The Nation’s Second-Worst Housing Shortage Is Crashing Into The ‘Texas Miracle’

While the number of residents is outpacing inventory, that has yet to deter people or businesses from moving to Texas, Curtis said, though YTexas’ own website, which also tracks headquarters relocations, lists just three so far in 2023.

Perry told Bisnow the market will respond to demand and eventually self-correct, though he does favor a property tax cut to reassure businesses, entrepreneurs and others the state is open for business and committed to keeping costs low.

“That's not government's role,” he said of a stack of legislation aimed at increasing supply and lowering costs wending its way through the system. ”Government needs to do a few things, do those few things really well, and then get the hell out of the way, and let the private sector do what the private sector does best.”

In the meantime, he said, those who want to live in places like Austin may just have to settle for far-flung rural suburbs and accept longer commutes.  

“If you are a firefighter or a teacher or someone that's kind of middle class, you may can’t afford to live in West Austin,” Perry said. “You [maybe] could have afforded to live there in 1988 when the market was on its back … That may not be a comforting answer, but it's reality.”

But Maso and others believe government intervention is critical, the sooner the better.

“It's incumbent upon the communities, the cities, the counties, to make sure they have a good workforce,” Maso said. “And that's where affordable housing and housing in general are dealt with.”

In Part 2 of Bisnow’s Affording The Texas Miracle series, reporter Olivia Lueckemeyer examines the barriers to getting more housing on the ground.