Real Estate

What Texas can teach San Francisco and London about building houses


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In the year ending March 2023, construction began on 72,000 new homes in Houston, Texas, population 7.5mn: more than three times the 20,500 new homes started in London, whose population is considerably larger.

In case you’re wondering whether this is another of those “America is booming, Britain is floundering” pieces, it’s not. Swap Houston for Austin, and London for San Francisco or New York, and the disparity would be even larger.

Unsurprisingly, these wildly divergent rates of housebuilding have an impact on prices. You would have to pay $1.2mn dollars for the average property on sale in the San Francisco/Oakland area today, around $800,000 for the typical homes in London and New York, but just $300,000 in Houston.

The disparities only become more striking if you consider the local context. New York, San Francisco and London are led by progressives who wring their hands publicly over their acute and long-running housing crises. Texas, meanwhile, is a red state, not generally given to pursuing socially beneficial projects. But actions speak louder than words.

Homes in Texan cities are cheap and their populations soaring because the state has made urban development easy. California, New York and London are overheating and squeezing out young families because their planning systems place artificial constraints on supply, making urban development extremely difficult.

Chart showing that liberal planning regulations have allowed Texan cities to build far more homes than their Californian counterparts, making their housing much more affordable

It’s not just that Texas simply has more space to build on: its cities aren’t merely adding sprawl at the periphery, they’re densifying the existing city, and doing so by allowing existing homeowners to expand and subdivide their property.

In Houston, a 1998 change to planning laws empowered landowners to turn one home into three — instantly creating space for new families in the heart of the city, while generating a tidy profit for themselves. A crucial detail was the inclusion of an opt-out for individual neighbourhoods whose residents wished to keep things as they were, increasing the scheme’s durability.

Auckland’s 2016 upzoning plan worked in a similar way, creating new defaults that facilitate modest densification in areas close to the city centre and transit stations while keeping carve-outs for neighbourhoods of historical significance.

In both cities, construction has soared and prices stayed much lower than elsewhere. Crucially, by focusing on what urbanists call “gentle density” — involving developments of anywhere from three to six storeys, designed with local character in mind — and building in exceptions, both plans have endured political upheaval.

And these aren’t just anglophone trends. In Israel, urban densification and renewal policies allow apartment block residents to convene with developers and local authorities to push through new and enlarged designs for their buildings.

The number and diversity of these successful schemes provides examples for other cities to follow. An incident from London, however, provides a cautionary tale. In 2018, the borough of Croydon published new planning guidance allowing homeowners to redevelop their large single-family homes into medium-rise apartment buildings containing multiple units, provided the new designs were broadly in keeping with the form and building materials of the local area. The policy applied to the whole borough, with no carve-outs.

The number of these small developments rocketed, adding hundreds of new apartments selling at prices far below the previous norm. Both supply and affordability improved dramatically almost overnight.

Chart showing that new planning guidance in Croydon allowed homeowners to convert large homes into multiple apartments at rates far outstripping all other London boroughs. This significantly increased local housing supply and lowered prices

But it didn’t last. The new policy became a key focus for anti-development campaigners in a fiercely fought mayoral election, and the borough’s new Conservative mayor repealed it just four years after it was announced. With that, the small densification projects came to an abrupt halt.

The lesson for the rest of London, for San Francisco and New York is that densifying historic cities need not mean architectural vandalism or characterless tower blocks. Small tweaks to planning regulations that make gentle density the default can deliver big gains for current and new residents alike, but their longevity depends on their flexibility.

john.burn-murdoch@ft.com, @jburnmurdoch





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