How Austin, Texas, solved its housing crisis, and lessons for VT.

by Rob Roper

Pretty much everybody in Vermont politics says that housing, or rather the lack of it, is THE major problem at the root of so many other problems our state is facing. Young people are leaving because they can’t find housing. Businesses can’t hire because employees can’t find housing. The rent is too damn high! And so, by the way, are the property taxes, but that part seems to get routinely ignored in all the posturing, so let’s move on. As the story goes, if we just build 30,000 new homes by 2030 all will be right with the world!

There is something to this, although there is a chicken and egg issue about if-we-build-it-they-will-come versus if-nobody-wants-to-come-here-what-do-you-need-the-housing-for we will discuss later, but for now let’s agree we need to jump-start housing construction and assume our elected officials are sincere in their desire to really make this happen. What should they do?

The city of Austin, Texas, is making news lately as having hit on a formula that sparked a building boom. And — hold onto your hats because this is going to blow your mind – the answer is deregulation and making it attractive and profitable for private investors to build affordable housing. I know! Who’d’a thunk it?

Here’s the story in a nutshell. According to Pew Research, rents in Austin skyrocketed by 82 percent between 2010 and 2019. To address this, the city leaders made significant regulatory changes that made it easier (a.k.a. less costly and bureaucraty) for private real estate investors to develop properties for people to live in. These measures included relaxing mandates, streamlining permitting, reducing minimum parking requirements, reducing minimum lot sizes, allowing for mixed use buildings and small homes/accessory dwellings (things like basement and backyard apartments).

Although both “market rate” and “income-restricted” (a.k.a. subsidized) housing were part of the strategy, again according to Pew, only 4,605 units out of 120,000 newly created units (less than 4 percent) between 2015 and 2024 were the result of subsidized “affordable housing” programs. Which, just so you know, cost taxpayers some $600 million between 2018 and 2022 alone.

Long story short, by allowing private investment to meet market demand, the median rent in Austin dropped from $1546 per month to $1296 even as population in the city continued to increase. Taxpayer subsidized, government directed housing cannot, will not solve the problem. Only attracting private capital can. Back to Pew:

In apartment buildings with 50 or more units, rents fell 7% from 2023 to 2024 alone—the steepest decline recorded in any large metropolitan area. Rents declined about 11% in older non-luxury buildings that cater to lower-income renters, known as Class C buildings.

Yay!

Here in Vermont, according to the Vermont Future’s Project, “… the median price for newly built homes in [Vermont] was $616,500, of which $171,387 would be attributed to regulations.” (Emphasis added.) That, according to a quick AI search, is more than the median price of a whole house in at least six states: West Virginia, Mississippi, Oklahoma, Arkansas, Louisiana, and Iowa. And I’ll grant the point that it’s worth paying some premium not to have to live in any of those places, though I do hear Arkansas is surprisingly nice.

Now, some of those regulations surely make sense, and some are probably things any homeowner would want regardless of a government mandate. Still, I think I speak for everyone outside of the “green” NGO community and a majority of current lawmakers that $171,387 worth of regulations to build a house is bleeping insane. BLEEP…ING…IN…SANE.

It’s why private builders can’t afford to build housing for any customer who can’t afford to eat that expense, eliminating lower income buyers. It’s why the so-called “affordable” housing projects subsidized by Vermont taxpayers cost in excess of half a million dollars per unit, which is, uh… not affordable housing because the people moving into it can’t actually afford it – taxpayers need to subsidize their rent in addition to the construction.

The good news is there is clearly room to slash the red tape and lower the cost of
housing in Vermont given the political will to buck the nuts and do the commonsense thing, so, good luck to us with this.

And back to the chicken and egg issue I mentioned earlier. The reason Austin’s rents spiked was because tens of thousands of people were moving to Texas chasing jobs, lower taxes, and greater economic opportunity. Because Texas has policies such as no income tax and is business friendly, their population – and so Austin’s – boomed, driving the need for more housing to meet growing demand. It was a case of when-they-come-investors-will-build-it, if allowed. That’s the opposite of the thinking in Vermont where the political thinking is largely make-the-taxpayers-build-it-they-will-come. And there I worry we might be putting the cart before the horse.

Should we make it easier and cheaper to build housing? Yes, of course. But if we don’t first make our state’s tax and regulatory regimen attractive to job creators and job seekers, we can build as much as our tax-masters can squeeze out of us, and they still won’t come.

Rob Roper is a freelance writer who has been involved with Vermont politics and policy for over 20 years. This article reprinted with permission from Behind the Lines: Rob Roper on Vermont Politics, robertroper.substack.com