A fierce debate over state-mandated reforms to city zoning restrictions is likely.
Builders say there won’t be a considerable drop in new-home prices. That’s simply because land represents between 20% and 50% of a final home price, depending on location. Limited land availability and delays in land development—including entitlement, zoning, and plan approval—drive up development costs.
Backed by an emerging movement of “yes-in-my-backyard” activists, some believe that relaxing zoning restrictions in Texas cities is critical. While city governments have the ultimate power to decide on zoning, some are insisting that the Texas legislature take steps to get government out of the way and allow free market forces to build more affordable homes and bring them on-line quicker.
Austin, Houston Set Examples
Austin’s re-election of Mayor Kirk Watson and a pro-housing City Council reaffirms its commitment to boosting housing supply through zoning reforms. Over the past two years, Austin policy-makers reduced single-family lot size requirements. They passed legislation allowing up to three housing units in many neighborhoods that previously only allowed detached single-family homes. Austin also enabled the construction of apartment buildings closer to existing single-family homes as well as along the city’s planned light rail line.
It’s been decades now since Houston relaxed its requirements for how much land the city requires a single-family lot to sit on. 1998 was the year that policymakers approved an ordinance reducing the minimum lot size in the urban core from 5,000 square feet to 3,500 square feet—or to 1,400 square feet for parcels meeting certain standards for open space. Since then, thousands of new homes built on smaller lots have helped Houston keep its home prices low compared with other major U.S. cities.
But elsewhere, zoning change is a complicated and controversial issue.
Texas lawmakers introduced Senate Bill 1412 to permit small dwellings, such as Accessory Dwelling Units, (such as mother-in-law suites or backyard cottages) on single-family lots statewide in May 2023. However, the bill did not gain full approval by the state legislature. Opponents feared the bill would allow the density of neighborhoods to double and set a precedence of robbing decision-making power away from cities.
There is, however, some common ground between zoning reform proponents and its opponents on some ideas. Both sides indicate that they would support permitting homes built on land that’s zoned for commercial development, a practice Texas’ largest cities don’t currently allow.
Getting rid of minimum parking requirements could also save on land costs. And it appears to be gaining some traction. Austin became the largest city in the country to get rid of minimum parking requirements for new residences. Dallas has also incrementally starting the process in specially planned urban developments and other mixed-income housing developments.
Texas insurance premium increases outpace the rest of the country
This isn’t the first time insurance woes have been a top agenda item. The Texas Legislature created the Texas Windstorm Insurance Agency (TWIA) in 1971. It provides windstorm and hail coverage to 14 coastal counties of Texas plus a small portion of Harris County. It’s available to those who are unable to obtain insurance from the voluntary insurance market.
Texas homeowners who aren’t eligible for TWIA policies can explore rates from another last-resort state plan, the Texas FAIR Plan. It was enacted by the Texas Legislature in 1995 and activated in 2002 during a time when significant mold and water damage claims were filed in Texas. Applicants who could show they had two declinations from other insurers can apply for coverage with TFPA.
This year, maintaining the American dream of homeownership is once again heavy on the minds of many current and potential homeowners and state leaders.
Rising rates are a nationwide problem, Average homeowners insurance premiums have increased by 39%. And when insurance companies don’t jack up their prices, they are dropping coverage and refusing to pay claims.
Florida and Louisiana are the states home to the most expensive homeowners insurance in the nation, and Texas is third. The Houston Chronicle reports that Southeast Houston is among the most expensive places in the U.S. to buy coverage, with homeowners paying $3,740 per year — three times the national average and 60% more than the state average — for fire, hazard, and flood insurance,
Some insurers are pulling out of Texas entirely due to storm events and the threat of wildfires in the Lone Star State. The Texas Department of Insurance (TDI) says 160 companies still offer homeowners policies in Texas. But a Fiscal Notes review of the state economy notes that Foremost, a division of Farmers Insurance, is scaling back its presence. And Progressive has restricted selling homeowners policies. It claims Texas storms accounted for nearly 40 percent of the company’s losses in the second quarter of fiscal 2024.
Texas is considered a file-and-use state
Other states require insurers to get approval before adjusting rates or get approval for “flex rating.” (rate changes that exceed a certain percentage)
But Texas state law currently allows insurance companies to apply rate changes before receiving a go-ahead from the Texas Department of Insurance (TDI). However, if the rate changes don’t meet certain standards, the commissioner of insurance is authorized to issue disapproval.
“Going Bare”
The primary reason people have insurance is because they have a mortgage, and the lender requires it. There’s a surprisingly large number of people that, once they own their home, will choose not to have insurance.
It’s estimated that one in six Lone Star State homeowners — or 1.1 million households —opted out of insuring their homes in 2023. Others are choosing to increase their policy’s deductible to make premiums more manageable. Either can leave Texas homeowners at significant risk.
Educating young people about the career opportunities in construction
Development of skilled labor programs ensures the construction sector can scale as needed to deliver housing. The CONSTRUCTS Act bill would directly address the lack of workers in the housing sector. It proposes to expand funding for residential construction training programs at community colleges and technical education schools.
SB208 relates to the establishment of a workforce housing capital investment fund program to fund the development of workforce housing.
The Texas Association of Builders works with schools to incorporate construction trades programs into their curriculum. These programs can help students earn certifications and credentials while still in school and can lead to well-paying careers. See Training Tomorrow’s Workforce for a report on progress made in Texas.
INDUSTRY NEWS IS BROUGHT TO YOU BY: STRUCSURE HOME WARRANTY
Other Texas Housing Industry Topics of Interest:
- Housing Inventory is Still 300,000 Homes Short
- The power grid still remains a hot topic after the 2021 winter storm
- TAB and Texas 2036 urge state lawmakers to prioritize water infrastructure spending
While the Texas industry is squarely focused on the actions of the 89th Legislative Session, Eyes Are Also on Washington
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