(orig. posted April 10, 2013) In seeking the first fundamental changes to Houston’s development rules in 14 years, city officials stress that the revisions will produce more workforce housing, giving middle-class families an affordable alternative to the suburbs. How much middle-class housing will be built is an open question. Industry experts say the only certainty is that the change would make it possible for more workforce housing to be produced.
The proposed changes would allow greater housing density outside Loop 610, enabling builders to fit more houses on the same piece of land, bringing down the price of each home. However, the cost of land is key, experts say, and getting land cheap enough to produce middle-income housing in areas where people want to live will be difficult.
The proposed ordinance will be discussed at City Council Wednesday.
“We have housing for the working poor, we have a lot of high-end housing, and we’re rapidly redeveloping the inner core of the city of Houston for high-end, high-density housing. But the kind of house that I grew up in, the kind of house that many of the working men and women in this city want to own close to their jobs, is disappearing,” Mayor Annise Parker said. “If we can create more density, there is more opportunity for people to have the opportunity to buy a home – maybe a patio home, maybe a townhome, maybe a single-family home on a small tract – and live closer to their jobs.”
While the Houston region is booming, little of that growth is inside the city limits, a trend builders blame on their inability to build reasonably priced housing in the “doughnut” between Loop 610 and the unincorporated suburbs. The last rewrite of the ordinance in 1999 designated the Inner Loop “urban,” with 27 housing units allowed per acre, and areas outside “suburban,” with up to 16 units allowed. The proposed changes to the development code, known as Chapter 42, would extend the Inner Loop’s density citywide.
In the last 15 months, 12,711 single-family housing permits were issued in unincorporated Harris County and just 5,242 in the city of Houston, according to Bohlke Consulting. Nearly half of Houston’s housing permits last year were issued inside the Loop, despite that area comprising just 15 percent of the city, according to the city Planning Department.
Shopping for homes last year in the $210,000 to $275,000 range, Michael Lipsey and his wife looked close to downtown, but found the Heights too pricey, homes in Oak Forest too old and the three-story townhomes in north Montrose had too little yard. The couple settled on a home in Cypress.
“There’s a lot of people I know that would not have come out to the suburbs, including myself and my wife, if it was just a little bit more affordable, because we do like living down in the city,” said Lipsey, 31. “There’s more restaurants, it’s more diverse, there’s so many more things to do. We both have decent-paying jobs, but we also don’t want to sink all of our income into living in a house.”
These are the buyers builders want to target with greater density, said Joshua Sanders, executive director of Houstonians for Responsible Growth, a nonprofit that represents developers.
“By letting us have the option to change the footprint of the land, we now can play with that price point to better meet consumer demand,” Sanders said.
To produce workforce housing, land generally must cost between $5 and $10 per square foot, according to calculations provided by builders. Most areas outside Loop 610 but inside city limits have median land prices of less than $5 per square foot, according to Harris County Appraisal District data. But Jim Gaines of the Real Estate Center at Texas A&M questioned whether there is a market for housing in such areas. Land prices in many desirable neighborhoods outside the Loop exceed $20 or even $30 per square foot.
“You almost have to be surgical about it,” said David Hale, vice president of David Weekley Homes. “If it’s workforce housing, they can’t afford necessarily a $300,000 house, but with increased density can I get them in a $200,000 house?”
Hale has given a presentation to neighborhood groups about the proposal, using seven developments as examples. In all but one case, the average home price dropped from $400,000-plus under existing rules to $300,000 or more with greater density.
Other builders said greater density would produce townhomes in the $250,000 range.
Such prices may be out of reach for the “workforce,” however, which city housing department guidelines define as those earning 80 to 110 percent of the area median income.
Given that buyers with good credit can afford a home 3.3 to 3.5 times their annual income, Gaines said, workforce housing in Houston would be about $140,000 to $204,000 for a two- person household and about $157,400 to $229,500 for a three-person household.
“A little wishful thinking there, but maybe there are providers that know how to do that better than us,” said Will Holder of Trendmaker Homes, a high-end suburban builder.
“If you look at what’s done inside the city, there’s no $150,000 homes, or $200,000, being built there, so I don’t really think it’s going to happen one mile outside the Loop.”
Another obstacle, Gaines said, is that land values are rising, and may rise more if the rules change.
“I wouldn’t want anybody to think that just making these changes in Chapter 42 is going to create a Renaissance where we’re going to have a lot of middle-income people being able to buy housing just because of that all by itself,” said former city housing director Jim Noteware.
Jane West of the Super Neighborhood Alliance is doubtful. Builders will use the new rules to redevelop older homes on the edges of desirable areas, she said, just as they did inside the Loop after the 1999 revisions.
“If you look at the empirical evidence from what has happened in the Inner Loop over the last 14 years of this type of development, this development displaced workforce housing,” West said. “It did not produce workforce housing.”
Industry experts said any steps to lower housing prices are worth pursuing.
“If it doesn’t get all the way down in the workforce housing category, still, more townhouses or multifamily housing in the $250,000 to $300,000 range will make living in the city more available to more people,” said Matthew Festa, of South Texas College of Law, whose research focuses on land use.
For every $1,000 reduction in a home’s price, noted city Planing Department Director Marlene Gafrick, 5,000 more people can qualify for a mortgage to buy it.