Governor Abbott Signs HB 14 into Law, Streamlining the Residential Construction Process by Allowing Third-Party Reviewers and Inspectors

New law will speed up housing construction for Texas’s growing economy and growing population

AUSTIN (June 12, 2023) – House Bill 14, a Speaker Dade Phelan (R-Beaumont) priority bill carried by Rep. Cody Harris (R-Palestine), was signed into law today by Gov. Greg Abbott, marking an important step in helping solve Texas’ housing availability and affordability crisis by shaving off between five and 25 percent of housing costs in some Texas cities.

Almost half of Texans spend more than one-third of their income on housing. HB 14 requires that third party reviewers and inspectors - state-licensed and -certified  professionals such as engineers - be allowed for plans, plats, other development documents, and building inspections. This flexibility will safely streamline and expedite the process for construction and help ensure that local regulatory struggles are not a bottleneck to housing growth, saving time and money for Texas homeowners and renters.

“This legislation addresses one of the most expensive, time-consuming and burdensome local government regulations that are restricting the much-needed supply of housing in Texas,” said Nicole Nosek, chair of Texans for Reasonable Solutions.

Some Texas cities already accredit third party inspectors through their own programs, in addition to the mandatory certification and regulation by the Texas Department of Licensing and Regulation.

A May 2021 National Association of Home Builders study found that, nationally, 25% of the cost of a home is due to regulatory barriers and fees. When these burdensome regulations add delays to construction timelines, Texas home buyers and renters are stuck paying up to five percent in increased costs for every three-and-a-half-month delay.[1] The City of Austin takes 1-2 years[2] to clear site plan reviews, requiring builder coordination among 10-12 departments within the city. The City of Dallas takes more than 22 weeks–-over five months for the majority of builders.[3] In Austin, bottlenecked permitting processes can add up to 30% while in Dallas it can add 10% to the final process, based on current time delays. The City of San Antonio takes “between four to seven months from start to finish” according to one high volume builder’s estimates.[4]

“Delays in the permitting, inspection and review of new home and apartment construction adds time and costs for homeowners and developers,” continued Nosek. “Allowing third-party review will expand the pool of licensed, state-regulated experts who can move projects along in a safe and timely manner.”

According to a report by the Nation Bureau of Economic Research,[5] homes in Austin cost about $100,000 more to construct than similarly sized homes in Houston. Dallas, San Antonio, and other metropolitan areas struggle with overregulation and time delays, too. One study of a 135 unit apartment complex in an overly regulated market showed that a 2 month delay added $4,000 to the final price tag of each unit. Why? The overhead, consultant fees, capital investment and additional worker time gets passed on to the consumer.[6]

Florida enacted an almost identical version of this law in 2021: Ch. 553, Sec 791 allows inspectors and engineers to bypass the city review process.[7] What’s more, third party reviews and inspections are already used in many Texas cities and counties across the country and state, like Fort Worth and El Paso.[8] Additionally, in 2021, the Texas Association of Builders helped pass a law allowing third party inspectors during times of catastrophe, such as after hurricanes. HB 14 is a thoughtful, pro-Texas expansion of this concept.

[1] Hoffer, Adam & Nesbit, Todd (2020). Regulation and Economic Opportunity: Blueprints for Reform. The Center for Growth and Opportunity at Utah State University.  https://www.thecgo.org/wp-content/uploads/2021/09/Regulation-16-pdf-1.pdf

[2] Clifton, Jo. (2022). Council directs staff to develop site plan-lite process. Austin Monitor. https://www.austinmonitor.com/stories/2022/12/council-directs-staff-to-develop-site-plan-lite-process/

[3] Goodman, Matt. (2022). In permitting snafu, Dallas City Manager creates his own PR problem. D Magazine. https://www.dmagazine.com/frontburner/2022/05/in-permitting-snafu-dallas-city-manager-creates-his-own-pr-problem/

[4] Website accessed Dec 2022. Https://www.davidweekleyhomes.com/custom-homes/tx/san-antonio/build-on-your-lot/faqs  

[5] Gyourko, Joseph & Krimmel, Jacob (2021). The Impact of Local Residential Land Use Restrictions on Land Values Across and Within Single Family Housing Markets. National Bureau of Economic Research. https://www.nber.org/papers/w28993

[6] Mayer, Christopher. (2000). Land use regulation and new construction. Regional Science and Urban Economics.

https://www.sciencedirect.com/science/article/abs/pii/S0166046200000557

[7] Glock, Judge (2023). Texas Homebuilders are losing time and money with Permitting Requirements and Delays. https://www.dallasnews.com/opinion/commentary/2023/01/12/texas-homebuilders-are-losing-time-and-money-with-permitting-requirements-and-delays/

[8] Dorseano, Charley, Esq. (2023). Spreadsheet of 3rd Party Review Across Texas. https://docs.google.com/spreadsheets/d/1M41KGgidNITsw6uicwYctd6nMrcuh3yX/edit?usp=sharing&ouid=102400306943526932490&rtpof=true&sd=true

As Texas Housing Costs Creep Up, So Do Zoning Reform Efforts

For decades, single-family zoning and suburban sprawl helped Texas keep housing costs at bay. Now cities like Austin and Dallas need to grow up, not out. 

By M. Nolan Gray
Bloomberg

In the rivalry between California and Texas, there’s no question about who’s winning on housing production: Since 2020, the Lone Star State has built three times as much housing per capita as the Golden State. And it isn’t all just single-family home sprawl: Despite its 30% smaller population, Texas built twice as many new apartments as California last year. 

For those of us involved in California’s YIMBY — or “Yes In My Backyard” — movement to legalize more housing, those permitting numbers seem dreamy.

While Texas has seen housing prices rise since the onset of the Covid-19 pandemic, in keeping with national trends, this building boom helped to keep prices from spiraling out of control. According to home price indices, Texas housing prices increased at a slower rate than California and most other states, even as the former picked up 884,000 residents and the latter lost 353,000 residents. 

The key to the Texas miracle, as its boosters will eagerly tell you, has been the state’s relatively low cost of living. 

Still, half of Texans remain housing insecure, spending more than a third of their income on rent and utilities. And in places like Dallas-Fort Worth, rising prices — even if slower than the rest of the nation — mean that many Texas families may soon no longer have a real shot at homeownership.

For decades, building out into the countryside helped to keep a California-style housing crisis at bay in Texas. But as open land within reasonable commuting distance gets developed, affordability will depend more and more on building up. 

As things stand, local zoning often makes it illegal to build housing in existing Texas neighborhoods. Crack open any given Texas zoning code, and you’ll find the exact regulations that made California so unaffordable. In suburbs across the state, townhouses and apartments are often prohibited, and many Texas homeowners face strict limits on their ability to build and rent out the backyard dwellings known as accessory dwelling units. In many neighborhoods of Austin — that most Californian of Texas cities — “All Are Welcome Here” yard signs stand next to ones opposing future housing development, just as in progressive Bay Area enclaves.

As much as Texans drag California for its rising costs and falling population, the state could soon face a similar housing crunch absent zoning reform. 

Enter the YIMBYs: Over the past two years, the pro-housing movement — originally associated with high-cost coastal cities — has started making inroads in Texas. Following in the mold of efforts in red states like Montana, groups like Texans for Reasonable Solutions swap out progressive pro-infill arguments concerning climate change and racial equity for a focus on property rights and the American Dream. But the basic pitch is consistent: Texas needs more housing. 

One tweet put out by the group — featuring a Texas-shaped American flag — implores Texans to “VOTE YES ON PROPERTY RIGHTS FOR ADUS & LOT SIZES” And there’s something to it: What could be more true to the ethos of Texas than letting people do what they like with their property?  

State lawmakers weighed in on a slew of pro-housing legislation in the 2023 legislative session, which wrapped in late May amid scandal and drama. Density-promoting SB 1787, for example, aimed to clear a path for the production of more starter homes by dropping minimum lot sizes to 1,400 square feet in cities of over 300,000 residents; it was modeled on Houston’s successful 1998 lot size reforms, which kicked off an infill building boom that has helped to keep Bayou City one of the most affordable cities in the nation. (At present, minimum lot size regulations drive up lot sizes across the state, raising housing costs and fueling sprawl.) 

HB 3135, meanwhile, would have required that jurisdictions of over 200,000 residents conduct a full audit of all land-use regulations every 10 years. Cities would have been required to consider the tradeoffs of each new zoning mandate, with a special focus on housing affordability. The first of its kind, the law would have helped to prevent the slow build-up of out-of-date, often conflicting rules that block growth. 

Inaction on both bills came as a disappointment to Texas YIMBYs. So did the failure of HB 2789, which would have made Texas the fifth western state to legalize ADUs: It died in a 68-70 vote that cut across traditional party lines.

Source: Zoning Reform, Texas-Style, Aims to Hold Housing Costs Down - Bloomberg

Texas’ Opportunity To Make A Dent In Rising Housing Costs

by Avik Roy

Forbes

Texas and Florida have long bragged about the number of immigrants they receive from high-cost states like New York and California. But that migration may begin to slow down, as housing costs rise in the former pair of states. Florida has enacted some meaningful reforms in response. Will Texas follow?

A recent paper by Lee Ohanian and Joseph Vranich of the Hoover Institution concludes that housing costs are a key driver of business departures from California. “Headquarters migrations out of Santa Clara, Alameda, and San Mateo counties [are] not only to control business costs but to recruit workers with the benefits of lower housing costs,” they write.

But rising housing costs in Florida and Texas pose a risk to their impressive growth. “If you buy a house in Miami today versus just three years ago,” said Peter Thiel to Bari Weiss in a recent interview, “you’re paying four times as much for a monthly mortgage payment,” due to the combination of higher housing prices and higher interest rates.

As my colleague Roger Valdez regularly points out, antiquated housing regulations restrict growth in the supply of housing, leading to higher prices. “There’s a little bit of everything in Texas,” Valdez writes, “even the kind of thinking that too often prevails in policy debates about rising housing prices”—that is, restricting supply and hoping that subsidies to the poor will make up the difference.

The City of Austin, to its credit, has attempted to update its land use code to expand housing supply, only to be paralyzed by multiple lawsuits from groups that favor the status quo.

In response, Texas governor Greg Abbott has advocated state-based reform that would preempt these local vetos. “As opposed to the state having to take multiple rifle-shot approaches at overriding local regulations, I think a broad-based law by the state of Texas that says across the board, the state is going to preempt local regulations, is a superior approach,” says Abbott.

Two land use bills being considered by the Texas legislature stand out: one on “third party review” (House Bill 14) and one on lot size requirements (Senate Bill 1787).

Third party review, a priority of Texas House Speaker Dade Phelan (R.), would streamline the homebuilding process by allowing experts like architects or engineers to sign off on site plan reviews, among other aspects of the permitting process, similar to a law signed in April by Gov. Ron DeSantis (R.) in Florida. Site plan review consumes the most time in the permitting process, adding up to 5 percent to the final price tag of the home for every 3.5 month delay. Tackling this bureaucratic bottleneck can function as a relief valve on cities which struggle with high turnover.

The second law, lot size reform, would transform the cost required to buy one home by restoring the property right of an owner to own a medium sized lot of 1,400 square feet. Less restrictive lot sizes are a vital component of any efforts to make housing more available and affordable for Texas’ middle class. In the South, 40% of housing costs are land. Mathematically, if Texas cities can reduce the land to build a home on, they can make a dent in the overall costs. Austin requires 5,750 square feet, while Dallas requires a minimum of 5,000 square feet. It comes as no surprise then that Austinites spend 48 percent of yearly household income on housing costs, while Dallasites spend 42 percent of their yearly income on housing.

A 2019 paper by Brian Asquith, Evan Mast, and Davin Reed for the Upjohn Institute estimates that new buildings lead to an immediate decrease in rents in the surrounding area by 5 to 7 percent. Sounds good, right? Well yes, unless you’re one of the neighboring landlords who benefits from higher prices.

These landlords and their allies claim to support “community” over “developers,” but the result of their favored policies is to exclude lower- and middle-income Americans from their communities.

This problem isn’t new. All across America, “not-in-my-backyard” NIMBYs fight against “yes-in-my-backyard” housing activists striving to remove regulatory constraints to housing supply. But the problem is particularly striking in Texas, a state that claims to stand strongly for free enterprise, but frequently falls short when special interests are involved. The Texas legislature should take advantage of the opportunity in front of them to do something constructive.

Source: Texas’ Opportunity To Make A Dent In Rising Housing Costs (forbes.com)

OP-ED | Southern Affordability

An Austin teacher asks: “Texas, who will teach your kids when housing affordability drives us out?”

by Kristina Pollard

Southern Urbanism Quarterly

Although I am proud to be a Texan, I cannot ignore the decline of this great state. The affordability crisis, in large part due to housing affordability, has reached an unacceptable zenith.

I am a preschool teacher who teaches toddlers Monday through Friday while also working at a restaurant Saturdays and Sundays, doing my best to make ends meet. I struggle to make a living as a college-educated Texan, wife, and mother, working two jobs with no homeownership in sight. But Texas legislators have the opportunity to change that by voting yes on historic workforce housing legislation to allow for homes I could comfortably afford, like smaller-lot homes and “granny flats,” a.k.a. accessory dwelling units (ADUs).

I work as a lead guide at a prominent Montessori academy. My father, a Texas native and Marine Corps veteran, often told me of the wondrous opportunity the state of Texas offers to industrious individuals. My salary, after the deduction of vital health insurance necessary for my husband and son’s asthma care, barely covers half my rent. Because of this, I work on the weekends at a restaurant and take occasional financial help from my parents, as little as possible and only as much as my pride will allow.

By allowing smaller kinds of housing, this homeownership fantasy can become a reality for teachers, nurses, and young professionals.

Unfortunately, mine is not an uncommon story, and I have seen a number of hard-working, talented teachers leave my school simply because Austin is too expensive to live in. I have mentally calculated how much I can spend on lunch (trust me, it’s not much) so that I can make the long commute to work, sometimes two hours round trip to my home in Cedar Park. I have offered to share what little I have with assistant guides who cannot afford gas to make it to work. I have looked into the eyes of parents worried about the high turnover rate and told them it will surely get better, knowing that it will not because housing prices keep climbing.

I, and many teachers like me, are doing all that we were told would grant us simple but autonomous lives. I work seven days a week, every week, and still homeownership is beyond my grasp, save in my most ludicrous fantasies. My husband and I care for a nation’s disabled veteran and my handicapped mother, and still we calculate exactly how much we’ll have after paying rent. But by allowing smaller kinds of housing, this homeownership fantasy can become a reality for teachers, nurses, and young professionals.

Now, being from a military family and having immersed myself in the idealism of Texas, I am strongly opposed to the notion of handouts. But what I’m asking for is not a form of charity. I ask simply to cash in on the American promise of stability through hard work and unfailing optimism. This is a plea to Texas legislators to cast votes for the ADUs and medium-size lots that teachers like me can actually afford. 

As Texas legislators cast votes for housing affordability bills, I respectfully ask for deep consideration of the Texas middle class—public servants and workers. A group that is dwindling, drowning, and dying. A group that the community depends on to perform such lofty work for our society. Educated and hardworking people like me who make in the $40,000 - $50,000 range and hope to afford homeownership at some point in their lives. 

While lawyers, legislators, and business owners are busy working, there are teachers like me watching your children and grandchildren, your nieces and nephews. There are servers to bring you your food. There are nurses to support life-critical surgeries. Please, help us, so that we can continue to serve our Texas communities. Please, help us, and protect the dream of the hardworking Texan by voting yes on landmark ADU and Minimum Lot Size laws.

Kristina Pollard is a Montessori teacher/guide in the Austin area as well as a restaurant host.

Source: OP-ED | Southern Affordability — Southern Urbanism Quarterly

Dallas Morning News: How ‘granny flats’ can help preserve Texas’ middle class

Bans on accessory dwelling units limit property rights and raise housing prices. A Texas bill can change that.

The Texas Legislature is currently considering housing legislation aimed at improving the middle class’ financial security, helping more Texans achieve homeownership and maintaining an affordable cost of living in our biggest cities.

A recent report indicated that Dallas’ housing affordability index dropped from 28% of homes in Dallas being affordable four years ago to only 8% present day — a large shift. One of the state bills introduced, House Bill 2789, would streamline the permitting process for accessory dwelling units, or ADUs, also known as pool houses, granny flats or in-law suites.

Recently, House Bill 2789 was voted out of the House’s Land & Resource Management Committee. So far, eight other states have passed laws allowing more homeowners to add ADUs to their properties, including Utah and New Hampshire. Likewise, Dallas passed some limited reforms (with limited results). A companion bill, Senate Bill 1412 was voted out of the Local Government Committee.

The House version, sponsored by Rep. Justin Holland, R-Rockwall, would give homeowners across Texas the freedom to build an attached or detached ADU, while allowing homeowners associations and neighborhoods with deed restrictions to opt out of the provision.

What are the implications of more ADUs in Texas?

Across America, ADUs are frequently banned or made difficult to build at the local level. These bans don’t just limit homeowners’ rights to use their own property. In places like Texas’ increasingly expensive cities, rules preventing the construction of low-cost types of housing — ADUs, apartments or missing middle housing, for example — is driving up prices for the housing that’s already on the ground. As a result, working families may be forced to move not to where their best opportunities are located, but to where they can afford housing.

One in 5 middle-income Texas renters — think teachers and emergency medical technicians — are “rent burdened,” meaning they spend more than 30% of their income on rent. This outcome harms Texas’ middle class and undermines the state’s continuing status as a leader in economic growth.

More ADUs mean more potential for homeowners to offset a portion of their mortgage payment by renting out part of their space. This can be especially helpful for first-time homeowners or retirees. ADUs also provide housing for the essential workers in our communities who may not be able to afford an entire single-family house.

Because they’re built in backyards or existing structures, ADU builders don’t have to purchase separate land for them. And because they’re small, their construction costs are relatively low. One study of ADU affordability finds that, on average, these units rent for prices affordable for households making just 62% of the area median income.

ADUs also provide an important opportunity to adapt our housing stock to our changing demographics. They make intergenerational living feasible by giving homeowners the right to build space for a young-adult child or elderly relative. ADUs can be built to meet any accessibility needs. Legalizing housing that makes it practical for family members to care for one another is especially important as one study finds that 72% of middle-income seniors won’t be able to afford assisted living in the coming years.

Some argue that HB 2789 opens up the door to more short-term rentals, but a closer look reveals that the bill contains safeguards that leave the decision on whether or not to allow STRs up to local leaders and local government.

For the past several decades, state policymakers have delegated most land use regulation to localities. However, the effects of too many local restrictions are spilling over from one jurisdiction to the next and increasingly causing statewide affordability problems. That’s why more policymakers in more states are looking at setting limits on zoning and other local rules. Texans need streamlined and consistent rules to unlock more affordable housing options in our cities.

Nathaniel Barrett is the owner of Barrett Urban Development LLC, Emily Hamilton is the senior research fellow and economist at Mercatus Center, and Nicole Nabulsi Nosek is chair of Texans for Reasonable Solutions. They wrote this column for The Dallas Morning News.

Source: How ‘granny flats’ can help preserve Texas’ middle class (dallasnews.com)