20+ year resident of Austin here. I skimmed the article so maybe I missed it, but one thing that is lacking is the actions of private equity real estate purchases. During 2021/2022 (I'm not sure exactly the start/stop of the window) house values went up 50%+ here, and rent went up correspondingly. At the time, P.E. first were responsible for 40% of all home purchases.
I just had a look at zillow, as imperfect as that is, it estimated my home value in Jan 2020 at $882K. It shot up during covid and peaked in May 2022 at $1.7M. It is now $1.2M. Anyway, the point is I think the private equity buying spree was also responsible for much of the run-up, which has since cooled off somewhat.
It's reasonable to wonder how rents and home values doubled over a few years when the population didn't.
It wasn't PE directly buying houses that falsely inflated housing costs, but how they laundered their collusion through software to manipulate the availability of housing across the nation and manufacture demand for property, with global effects. They just set themselves up to massively profit.
PE-backed rental price fixing software allowed a handful of property management companies to control up to 80% of all multi-family dwellings in the nation. They were able to make their repayment obligations by setting non-negotiable rents despite massively warehousing apartments (some areas were maintaining as low as 75% occupancy rates, far below the historical 95% failure threshold).
If you can't increase the population, just artificially shrink the housing supply. And when rental prices are determined by median house prices, and house prices are based on the affordability of rentals... the feedback loop should be apparent.
> It's reasonable to wonder how rents and home values doubled over a few years when the population didn't.
Is it a mystery? As I understand it, more people want to live in the same few places (where jobs are or are otherwise desirable). There are huge parts of the country where real estate is cheaper than ever.
Are you implying that this somehow explains the full price? Those same few places are also the best places to buy investment properties, and this fake demand (not buying to live there) increases prices too, and this impact could be huge.
10+ year resident of Vancouver (the Canadian one, eh) here. Saw a similar increase in both Van and Dallas during that time period, knew something fishy was going now.
Now we know it was a coordinated attack on all housing and equity using drug money. I still can't figure out if I should marvel at the events that have transpired or be scared shitless of the things to come. Guess we will figure out soon enough.
Zillow themselves were buying a lot of property that they planned to rent them or flip. They reversed course on that and ended up selling them all off.
Neither. They do cross-promote a company, Opendoor, that does flipping, but Zillow's main goal is trying to replace realtors (or, rather, REALTOR®s, because the term is a trademark that wormed its way into people thinking of it as a business category).
> Austin’s housing crisis had become undeniable. How to solve the problem became a dominant theme in the city’s 2022 elections.
> "People just kind of got to this point where they had had enough," Council Member José "Chito" Vela said. "They just were like, 'okay, what we were doing on housing for the last 20 years is clearly not working.'"
> The council members YIMBYs helped elect passed several reforms aimed at juicing the city’s housing stock.
There's new housing where I live that I went to hearings to advocate for. And as more comes on line, rents have started falling a bit, despite being a desirable place to live.
Who knew that the one and only solution to a housing crisis (besides forcefully removing people from the area) would actually help the problem of a housing crisis.
The takeaway from this should be "Never listen to anyone who offers a fix for high housing costs if they say anything other than "Build more housing""
Around here in Oregon, there's a truly bizarre subcurrent of people who think that building more housing makes prices go up, because something mumble mumble builders blah blah luxury.
I suspect these people are looking for any rationalization for their emotional desire for Portland to turn back the clock 10-20 years to being a slightly grungy and relatively inexpensive city. Like back in 2009 when I paid <$500 a month for a room in a shared single family home in a slightly dangerous outer NE neighborhood. Probably the most visible change since that period is the explosion of multistory development in SE and NE.
Unfortunately for them, an urban doom loop will not be kind to all the things that made Portland livable to begin with. The budget deficits looming city-wide are grim. On the housing front, our only hope is that the statewide ban on single family zoning plus urban growth boundaries will continue to structurally encourage density via infill.
Same in Montreal, people say that prices are going up because of the luxury condos. Where 'luxury condo' == 300 sqf boxes in towers built near highways.
It’s a completely reasonable concern if new luxury housing is replacing older rundown construction. If the population growth rate is large enough, poorer people get evicted from the older housing that is then occupied by newer richer residents, and they can’t trade down to other remaining older housing, just out.
Because a 5 million dollar luxury apartment built for foreign investors and an affordable 2 bed for a nurse arent competing in the same market any more than a bike and a ferrari are.
It wouldnt be such a problem if the free market could create land, could create public transportation to link up housing to cheap land or could be kept from creating "apartment bitcoins" with a 100% land value tax but it refuses to and it wont.
So, while the margins on luxury housing are ~15% and affordable is 4-6% the free market will rationally maximize the utility of property construction firms...
It's the same market, because those investors are already there whether or not new luxury housing is built. The people buying the ultra-high-end stuff will, if it's not available, buy slightly lower high-end stuff, and so on down the chain ad infinitum, resulting in higher prices for those low-end two-bedrooms. Conversely, the very-high-end stuff being built then frees up some fraction of housing capacity all the way down the chain, lowering prices. https://www.nmhc.org/research-insight/research-notes/2024/wh...
> inner city land is scarce
Inner city land here in Portland has plenty of surface parking lots, one- and two-family homes, and old buildings that have gone unused, sometimes for literally years†.
† This part also gets into the bizarre rules around commercial building valuations and mortgages, which can make it a better choice for the building owner (at the expense of the city) to leave a building vacant indefinitely and eat the commercial mortgage payments than to rent it out cheap and have the mortgage provider suddenly call in the entire loan because the building valuation went down.
No, the people who buy the ultra high end stuff will not buy it if it is not a good investment.
Tax them more and they will decide that they dont need a huge and opulent second home in the middle of a city where all the jobs are.
>Inner city land here in Portland has plenty of surface parking lots, one- and two-family homes, and old buildings that have gone unused, sometimes for literally years.
Until we catch up on literally decades of underbuilding housing, real estate in most US cities will be a good investment. The only question is which cities are gooder investments than others and how much money the investor has.
It's not really relevant to bring in radical overhauls to our economic system when people are talking about what politically-possible changes might help improve the housing market.
> So, while the margins on luxury housing are ~15% and affordable is 4-6% the free market will do what it always does...
Volume isn't something that companies tend to ignore.
In any case, there's a chain of purchasing; if people have to move somewhere then they buy whatever is available at the top of their budget. If there's a shortage of housing then they buy whatever was originally the cheaper housing. You can see this in London where in some areas 2-bedroom terraced houses are well over £1 million.
American cities are some of the least dense in the world! You can't make more land, but you can build up. Taxation can even encourage this with land value taxes.
Change "Build more housing" to "Increase supply of available housing". Those are distinct. There is a LOT of unused housing that sits empty. If you changed the incentives a bit, that housing would not sit empty, and thus the supply of available housing increases.
Citation needed. I've never seen an-one back that up. Note that people who move need to occupy two units and scheduling the next renter to arrive on time is hard so some units must be empty while other people have two units.
Austin vacancy rate sitting at 6%. Getting below 3% is generally seen as impossible so 6 isnt that bad. Vast majority of vacancies are rehabs and people moving.
I feel like housing density is one of those subjects where I will get called a capitalist bootlicker or an Orwellian communist for suggesting that we should let the private market build more dense housing if there’s market demand for it. I don’t know how the “deregulate density” position can be simultaneously a far right and far left position, but here we are in 2025.
For many people yea, but I’ve also had many conversations where very left friends and acquaintances will argue that we shouldn’t density because:
- more dense housing makes housing more expensive (and trying to explain why this isn’t true to them is usually met with some form of “nuh uh, capitalist simp”
- if housing is built by developers and not the government then new housing will be such bad quality that you might as well die instead of have a home
- anything short of the proletariat revolution and the end of history isn’t good enough, so we should oppose density so that the market fails even more and capitalism can finally collapse.
(This is all in Seattle, I’m sure the cocktail party conversations vary around the country)
Dense housing is great until you're the first one to build in your block and then someone slaps a few 50 story buildings near you and your city hall doesn't give a damn about water usage and sewage.
Source: living in a developing country where regulations suck and am facing this awful problem.
"Affordable housing" is the brand name for state-subsidized housing in the US that usually has higher than market unit build price with the surplus captured by various affiliated organizations.
Novel industrial policy mechanisms like this are always proposed and underperform market solutions.
My understanding is that buildings that are built to rent out are of higher technical quality than comparable owned apartments, since the owner's plan isn't to take the money and run but is on the hook for upkeep. And thus more expensive to build.
I've definitely heard the horror stories about condo builders who halfass the work in a way that will last just long enough for it to get into the hands of ownwers and the owners' HOA. My own building had a lawsuit (before my time) that resulted in the original builders paying for a replacement of the entire building's plumbing.
Programs like San Francisco's Local Operating Subsidy Program would not be necessary if the affordable properties covered had higher technical quality (which should translate to lower maintenance costs). The fact that LOSP coverage can go up to 100% of affordable housing operating cost indicates that higher spending is not improving technical quality - if quality were superior, no subsidy to operate would be required.
Affordable housing are the old "luxury" apartments people vacate to go live in the new luxury apartments. Fighting new luxury builds is dumb, because you need them to free up the old builds for lower income.
Right. And few people involved in real estate have any interest in lowering housing prices. Not builders. Not agents. Not the government. Not your neighbor. Etc.
A generalization of this solution: If you're faced with a seemingly intractable socioeconomic problem, nine point eight times out of ten the problem will become less severe with Supply Growth. What's more: the easier-to-predict second-order negative impacts of that Supply Growth also become solved because of the harder-to-predict third-order impacts.
One good example of this might end up being the American energy policy under Trump (with emphasis on the word "might"). Energy costs being high can be well-solved by increasing the supply of energy (drilling, etc). The easy-to-predict second-order negative impact of this is likely to be a harsher global warming curve. But, a harder to predict third-order impact might be increased innovation due to lowered costs of energy, enabling humanity to out-innovate global warming. Again, this is speculation, but that's how this generalization works, nine point eight times out of ten.
With housing: You increase the supply. An easy-to-predict second order impact is: housing values go down because of increased supply. But: A hard-to-predict third order impact is: Because there's more people, more businesses open shop, and that access to services actually raises your property value.
> a harder to predict third-order impact might be increased innovation due to lowered costs of energy, enabling humanity to out-innovate global warming.
This is already happening.
Texas is building insane amounts of solar capacity because there's very little environmental regulation there, which makes solar cheap to build.
Meanwhile, California is stuck with non-renewables because it's impossible to build anything new in California.
> One good example of this might end up being the American energy policy under Trump (with emphasis on the word "might"). Energy costs being high can be well-solved by increasing the supply of energy (drilling, etc).
But energy supply (by many different metrics) have been increasing for years. So either (a) energy costs are not high (b) increasing energy supply will not affect energy costs (c) it takes way more energy supply than we've seen over the last several years to affect energy costs.
Some interesting snippets from the article also in-play here:
> above where rents stood prior to the pandemic but below where they peaked amid the region’s red-hot growth
> The region’s population and job growth slowed as apartment building took off.
> San Antonio, Dallas and Plano have also seen declining rents — but they haven’t fallen as fast as in Austin.
> While nearly 17,000 apartments are under construction, according to MRI data, builders have pulled back on new projects amid the glut.
> Austin rents sit about 17% above pre-pandemic levels, Zillow figures show. Nearly half of the Austin-Round Rock region’s renters are “cost-burdened,” according to a report last year published by Harvard University’s Joint Center for Housing Studies — meaning that they spend more than 30% of their income on rent and utilities, leaving less money in their pockets to spend on other essential needs like groceries, clothes and transportation.
This is obviously far better than them not falling at all, but as a place with a big Covid migration boom + crazy pricing market, it will be interesting to see if it turns into a long-term decrease compared to the pre-Covid prices.
Slowed job growth compared to the Covid-migration will likely help keep the prices from ramping back up, but slowed construction as prices already started to dip could counteract that to mean it ends up more like "pre-Covid status quo" than "much more affordable than it used to be."
They built in a boom - which is better than NOT building in a boom like some places have done - but there's a lot more work to be done.
Question is: will being hands-off there be enough, or will there need to be more proactive government intervention to encourage continued building in a more "normal" market?
It would also be interesting to compare the effect of the mentioned YIMBY politicians with policies in other areas of TX where rents have fallen post-Covid. There is a LOT of underutilized land already available around the major cities in the state, it's not like the SF Bay Area. That's where more active intervention might be needed since for the couple decades before Covid developers were happy to build at a rate that let prices still go up quite a lot.
Ignore the "plunge" in the title. I think it mentions it's only something like a 3% drop. But will be interesting to see if that 3% increases over time.
Much less red tape thanks to political support, plus the fact that new housing now coming online in Austin were largely financed in the 2018-22 period.
Don't underestimate the collapse of financing for residential construction. That's a bigger reason why there aren't as many new developments plus those that are prioritized tend to be priced much higher than to be affordable.
The quickest way to build new housing is to turn short term lets (e.g. AirBnB) back into long term lets.
A slower way is to extend and improve public transit (so effectively growing the desirable 'inner city' area).
Affordability would benefit from rolling back some of the financial engineering that makes people believe they can pay more than they can actually afford.
It would be interesting to know if land prices have changed over the same period. Also whether any other comparable cities have had similar falls in price.
The article mentions "San Antonio, Dallas and Plano" as also having seen declines in rent, and that the job market in Austin has slowed compared to during Covid. There is likely a shared post-Covid-migration dip as the market no longer has a huge influx of relatively-desparate new money.
Anecdotally, I was considering Austin but am no longer, primarily b/c of the governor, ag, and socially regressive laws. Sad I'm going to miss out on a great music and growing tech scene. There are other options though
I also have a (former) long time friend that went hard MAGA and now wants to move to a state that reflects his political alignment
The entire tech job market is in a recession, but people want to blame politics. It's not politics. Some people don't like the Texas weather, and that is a bigger factor than politics.
I don't know if this counts as a "political" reason, but since I became old enough that there is a good chance that my next job will be my last job before retirement (if my current job does not turn out to be my last), I'd only consider moving for that next job if it is in a state I'd be willing to retire in.
Texas is not such a state because of their Medicare rules. Medicare is a federal program, but for some aspects of it states are allowed to add additional rules.
First, a very brief overview for those younger or foreign readers who have had no reason to learn anything about Medicare. When you turn 65 and start Medicare you can choose between "traditional" Medicare (also called "original" Medicare) and "Medicare Advantage".
With traditional Medicare the government is the insurer. They provide hospital insurance (called "Part A") which for each hospitalization covers up to 60 days at 100% after a $1676 deductible, then covers 30 more days $419 per day. They will also cover days after 90 at $838 per day, up to a lifetime total of 60 "after 90" days. After all those "after 90" days are used you pay all costs.
They also provide insurance for non-hospital stuff (called "Part B") that covers preventative services at no cost, and a bunch of other stuff with with a $257 per year deductible and 20% coinsurance.
There are a series of plans available to traditional Medicare users offered by private insurance companies that supplement part A and B by covering your part A deductible and your part B coinsurance. The plans are called "Medigap" plans or "Medicare supplement" plans. The federal government defines what these plans must cover but the companies that offer them set the price (and can offer additional benefits beyond what the government requires). There are 10 of these plans, called plans A, B, C, D, F, G, K, L, M, and N. Not all are available in all states, and some of those are no longer open to new enrollees, but generally in most states you'll have a choice of several.
When you turn 65 and first enroll in Medicare you have "guaranteed issue" rights. If you apply for a Medigap plan the company must issue it regardless of your prior health history and they cannot charge you more based on that history or on pre-existing conditions.
Every year there is an open enrollment period where you can change your Medigap plan, either to the same plan letter from a different company or to a different plan letter but you will not have federal guaranteed issue rights (with some exceptions such as your provider no longer offers the plan you are currently on).
So maybe you bought a Medigap plan from say UHC when you started at age 65, because they were the least expensive option for the plan you wanted. But now 3 years later they have gone up and are the most expensive, and also in that 3 years you've developed some expensive chronic illness. You want to switch to another provider for your plan to save money, but they will charge you more because of that chronic illness so that won't work.
So you are screwed...if you live in a state that doesn't provide guaranteed issue rights beyond what the feds require.
Several states do provide more. California, Idaho, Missouri, and Nevada for example provide guaranteed issue during a window each year after your birthday provided you are switching to a plan that has the same or fewer benefits than your current plan. In my UHC example this would mean that every year you could switch to whichever provider had the lowest premium for your plan letter. (I think Missouri is slightly more restrictive...you can change to the same plan with a different provider rather than to any plan with the same or lower benefits).
Some states go even farther. You can switch Medigap plans at any time, there is no restriction on changing plan letters except that A can only go to A and B-N can only go to B-N. New York is similar except I don't think they have that restriction on A <=> B-N.
Bottom line is that if you live in Texas when you start traditional Medicare with a Medigap plan you might get stuck with that particular Medigap plan and provider, at least as long as you aren't willing to move. If you move to somewhere where your current provider does not offer your current plan you have guaranteed issue to chose a new plan available in that new area.
It's a hypothesis that with RvW repealed, state laws become important for that. Similarly other laws may cause outmigration. Ultimately, California is losing people and Texas is gaining them so it's hard to say that this is driving depopulation of Texas.
I just had a look at zillow, as imperfect as that is, it estimated my home value in Jan 2020 at $882K. It shot up during covid and peaked in May 2022 at $1.7M. It is now $1.2M. Anyway, the point is I think the private equity buying spree was also responsible for much of the run-up, which has since cooled off somewhat.
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