A Tale of Two States: Home Building in California and Texas

The construction industries of Texas and California are facing polar-opposite conditions. For builders, life is good in the Lone Star State. Texas’ lax land-use regulations allow builders to construct homes rapidly. Even with the state’s economy projected to slowdown slightly, the pace of building will still trend well-above the national average. California, meanwhile, is buckling under the weight of its housing crisis. The curious part of the Golden State's plight is that its opportunities are not stagnating: Job growth is strong, and its economy is outperforming many European nations. But the heavy environmental regulations and strict zoning laws restrict builders from constructing much-needed new developments. As local and state governments scramble to a solution, the state’s housing shortage deepens, pushing out lower-income and middle-class residents.

Texas and California represent opposite poles on the spectrum of government ideology⁠—the Golden State’s Democratic supermajority versus the conservative Lone Star State’s regulation-averse independent streak⁠—and in recent years, starkly different results when it comes to housing policy and production.

Predictions for this coming year highlight the divide. According to the recently released Texas A&M Real Estate Center’s outlook for 2020, the state’s homebuilding industry will still have a banner year, despite forecasts for muted economic growth.

“Both the Texas and U.S. economy will likely slow in 2020 yet still register solid growth,” says Real Estate Center research economist Luis Torres. “With uncertainty around trade wars and the current crude oil trajectory, two of the strongest economic drivers for Texas will decrease economic momentum. In contrast, one of the star performers of the 2020 economy will be the housing market, with double-digit growth in new home construction for the first time since 2017.”

California flips that idea on its head. Instead of attracting residents with a surfeit of new housing options despite low growth, it’s posting job growth above the national average, even beating the economies of many European nations when it comes to growth and performance metrics, yet still pushing away many residents⁠—making it harder for lower- and middle-income residents to stay—as a result of soaring housing prices and continued difficulty building new supply.

Texas on a roll

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