City of Austin Approves Big Greenfield Development

Despite its smart growth policies, the city of Austin has approved a new development on the urban fringe that will include new detached housing starting at $115,000.

Austin is the third fastest growing metropolitan area with more than 1,000,000 residents in the United States, following Raleigh, North Carolina and Las Vegas. The city of Austin accounted for 53% (672,000) of the metropolitan area's 1.27 million population in 2000, but has seen more than 70% of the growth since that time go to the suburbs. Now the metropolitan area has 1.65 million people, and the city has 785,000.

The Austin metropolitan area managed to experience only modest house price increases during the housing bubble, though other metropolitan areas in Texas (Dallas-Fort Worth, Houston and San Antonio) did even better (see the Demographia International Housing Affordability Survey). Austin's Median Multiple (median house price divided by median household income) peaked at 3.3, slightly above the historic maximum norm of 3.0. Like other Texas markets, there has been little price decline during the housing bust, illustrating the lower level of price volatility and speculation identified by Glaeser and Gyourko with less restrictive land use regulation. This stability has helped Texas weather the Great Recession better than its principal competition, the more intensely regulated states of California and Florida.

The city of Austin, however, is rare in Texas for generally favoring the more restrictive (smart growth) land use policy devices that have been associated with the extreme house price escalation in California, Florida, Portland, and many other metropolitan areas. The city's freedom, however, to implement the most draconian policies and drive house prices up is severely limited by far less restrictive land use policies in the balance of its home county (Travis), neighboring Williamson County (usually among the fastest growing in the nation), Hayes County and the other counties in the metropolitan area.

Austin is competing. This is illustrated by the recent Austin city council action to approve a new "mega" development on the urban area's eastern fringe that could eventually add 5,000 new houses, town houses and apartments. The first phase will be 350 detached houses that the developer indicates will be priced from $115,000 to $120,000 (including land), an amount less than a building lot San Diego, Los Angeles, Vancouver and Australia.

By comparison with other developments in the Austin area, however, these houses may be expensive. One home builder is currently advertising new detached houses, only 7 miles from downtown Austin for $90,000. These are not the least expensive in Texas. Detached houses in Houston are being advertised for $79,000.

A case study in the 3rd Annual Demographia International Housing Affordability Survey showed that the median income Austin household could purchase the median priced house for 11 years less income than in Perth, Australia (this includes mortgage interest). While both Austin and Perth have been growing rapidly, Austin's faster growth is evidence of stronger demand, which, all things being equal, would have been expected to drive house prices up more than in Perth. But, with more restrictive land use regulation, all things are never equal.

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Yes, you are correct that

Yes, you are correct that we're moving from SF because we can't afford it. Actually its more that if we did want to buy in SF or the Bay Area it would take every penny we make to do so. I have friends who have bought here and the bulk of them do exactly that- they're broke because all of their paycheck goes to a house.

I don't think its just Austin that's getting a lot of people. I'm originally from Tennessee and whenever I visit there its clear lots of people are moving in. Mostly from other expensive places like the Northeast and the West Coast. My Mother is a school teacher and her school got no less than 9 new students from California alone last year.

Basically there's a situation in the US where the coasts are now too expensive for most middle class families, the Midwest and the rust belt states within in have caved in economically, and thus about the only region left in the country that has the right mixture of affordable housing and a decent job market is Texas and the Southeast. Thus that's where we're going.

I mention sprawl. Where I grew up certainly doesn't get any prizes for residential planning. It is a shining representation of what it means to have urban sprawl. But you know what? At the end of the day I'm sort of ok with that. Sure- deep down inside what I really want is a quaint, cute neighborhood with quaint old houses with real character. But it seems that rich people have an appetite for those types of living situations so I'm guessing that the choices left for us will either be like a 70's rancher in the burbs' or one of those new Mcmansions squashed next to each other. Either that or just move to the sticks which is where I grew up anyway.

So yeah- we too are moving because its expensive here and Austin is cheap in comparison. We will see...

Good to hear...

We're planning on moving to Austin in the next year or so. Where we live in the bay area is simply too expensive and even after the "bust" prices are still ridiculous. The thing is that we visited Austin last year and it wasn't the most positive experience I've ever had. The reason Austin is affordable is because its basically surrounded by vast swaths of land. Drive 10-20 miles out of the city and there's basically a lot of undeveloped land. A LOT. The experience we had was that there were definitely some cool older neighborhoods closer in to town. But quite a bit of that was really expensive- as in $500,000-$600,000 for a house in the hills in the city in a few of the neighborhoods. There was a more "artsy" area in south Austin and small homes were anywhere from $120-$200,000. But it appeared to be gentrifying fast. I imagine in a few more years it will be unaffordable. The rest of what we saw was ungodly hideous Mcnmansion/Suburban sprawl. We're talking massive fields full of houses squashed close to each other. For all practical purposes these houses could've been anywhere in the US.

I guess the way I look at it is that yeah- if you want " a house" then sure- cheap Mcmansions are plentiful in Austin. But who'd want to live in one?

Actually, a lot of people.

Actually, a lot of people. Why do you think there are so many of them? The cool factor may be high on your list, but for most its not a consideration. If you can't afford it, it doesn't matter how awesome the neighborhood is, you aren't going to live there, or it's going to be a struggle to live there. Why are you exiting SF? Probably that you can't afford to live there or have the lifestyle you want.


Wow, a brand new house for $79,000! Not very many places in the US can you find that (in a place you would want to live).

Most places are just missing the boat when it comes to affordability, and people are mortgaging their futures to live in a city they really cannot afford.

I hope that Austin resists the urge to restrict development like too many other places in the US.