Austin is copying Houston's playbook for making housing more affordable

• Demand for housing in Austin, Texas has outstripped even its relatively rapid housing production. 
• But the city council recently passed a resolution that would allow more dense housing construction. 
• Pro-housing advocates say it's a big step in the right direction and could be part of a larger shift in Texas.

Austin is suffering from a rapidly worsening housing crisis, but a recent move by the city's government to push for denser building could finally bring relief from skyrocketing costs.

Demand for housing in Austin has surged over the last decade, fueled in large part by the movement of major tech companies, including Apple, Amazon, and Tesla, into the city. Median home prices in Austin more than doubled between 2011 and 2021 and the city is now among the least affordable in the country. 

The capital city has built a significant amount of new housing in recent years, but its restrictive land use laws have prevented it from building enough, said Jenny Schuetz, an expert on urban economics and housing policy at the Brookings Institute.

"They've also had just huge amounts of in-migration in the last couple of years, and so the population growth has overwhelmed the supply response," Schuetz told Insider. 

But the city government is making a new push for building even more housing. The Austin city council last month approved a resolution that cuts the minimum lot size for a single-family home from 5,750 square feet to 2,500 square feet and allows at least three homes on a single lot. 

Austin's upzoning measures are designed to incentivize "gentle density" — also known as infill housing or missing-middle housing. They would allow townhomes, duplexes, and triplexes to be built on single-family lots, offering denser, more diverse housing options. 

Reducing minimum lot sizes has worked elsewhere in Texas to boost housing construction. Houston has significantly increased its housing supply since cutting its minimum home lot size from 5,000 to 1,400 square feet in 1998. The policy change has allowed almost 80,000 new homes to be built on these smaller lots.

"The Austin resolution draws important lessons from the Houston case that small lot single-family is something that's proven to work well for homebuyers and home builders," Emily Hamilton, a housing researcher at the  Mercatus Center at George Mason University, told Insider.

"You can feel the changing tides here," Nicole Nabulsi Nosek, board chair of Texans for Reasonable Solutions, told Insider. "People have come around to the fact that they're either leaving or they know that their own kids aren't going to be able to buy a home if things don't change. And even if you don't care about housing policy, you are feeling this in a very intimate way."

Austin's pro-housing lawmakers have had a few other recent wins, including ending the city's mandates requiring a certain amount of parking spots be built with every new home, and cut back on some limits on taller buildings being constructed next to single-family homes.

"It would have been great if this had happened many years ago, but it's definitely better late than never," Greg Anderson, director of community affairs at Austin Habitat for Humanity, told Insider."This is definitely going to move the needle and allow for a lot more folks to live in high-opportunity areas." 

Still, the work's not over yet. Austin's city manager has to review the resolution's details, including building heights and how much green space there needs to be surrounding homes. And there's always the threat of lawsuits. Last year, an appeals court sided with a group of homeowners that sued the city, arguing that it didn't properly notify landowners about code changes that would have allowed more housing. 

'Spreading like wildfire'

State lawmakers are also starting to consider similar moves, but there's a rocky road ahead. 

In May, the Texas state senate passed bipartisan legislation to limit minimum lot sizes to 1,400 square feet. It later died in the state House, but advocates are hopeful it will pass in a future session. 

"There's an awakening of importance to the issue of housing at the Capitol," Anderson said. "Step one is to realize that there's a problem. Step two is to start looking for solutions. And that conversation is growing pretty fast." 

At the same time, both Democrats and Republicans squashed other pro-housing legislation, including a bill that would have loosened restrictions on the construction of accessory dwelling units, which are secondary units on the lot of a primary home.

Still, Nosek argued that the bipartisan push behind the pro-housing efforts is a promising sign. She says state lawmakers are increasingly seeing the housing crisis as a threat to Texas' economy and ability to continue attracting new businesses and residents, many of whom were drawn to Texas by its affordability. 

"There's a very tangible economic cost — that I think that the legislature is understanding — by not adjusting their land use laws," Nosek said. "If we don't turn this ship around, the very thing that is driving the exodus from California I think will beset Texas." 

Most recently, Dallas city Council member Chad West is leading the charge to consider cutting minimum lot sizes in his city. 

"It feels like good policy is catching on — it's spreading like wildfire here in Texas," Nosek said.