Over the years, Texas has grown to be one of the biggest states in the country in terms of population. That is why the real estate market is also growing, with new construction happening left and right. But what exactly is the state of housing developments in Texas at present? A quick glance shows that Texas housing developments continue to rise, particularly in the major metropolitan cities like Houston, Austin, and San Antonio. Continue reading to learn more about the newest housing developments in Texas and how this could affect your rental property business.
Key Takeaways
- Texas housing development remains strong despite slowing growth, with major metros like Austin, Dallas, and Houston leading the nation in building permits.
- Landlords face shifting supply-and-demand dynamics, increased competition, and higher renter expectations due to new housing developments.
- Generally, single-family rentals still dominate, but multifamily construction is gaining momentum in key cities in Texas.
Why New Housing Developments Matter to Rental Owners?
As a company that provides Austin property services to landlords in Texas, we are closely familiar with the way market conditions change over time. As part of this, we also know that new housing developments hold great influence on how the local real estate market behaves.
But why does this matter for rental owners? Well, this is because new developments in the real estate market alter supply and demand. This, in turn, impacts a lot of things – pricing, tenant quality, tenant preferences, economic growth, and more. All together, these can dramatically change how rental property businesses operate to align with the current market.
Which Texas Cities Are Seeing the Most New Construction?
To better understand the state of housing developments in Texas, let’s take a look at the numbers. According to the latest building permits report from the National Association of Home Builders, Texas ranks first in the sheer number of authorized construction projects. But which Texas cities are experiencing the most housing development and growth exactly? Despite the declining rate of new construction from the year prior, the cities of Austin, Dallas, Houston, and San Antonio are still on a roll for rapid residential development. Let’s take a closer look.
First, we have San Antonio. Known for its relatively low home prices (compared to other Texas metros), San Antonio continues to attract homeowners and builders for future housing developments. With more than 8,800 building permits authorized as of the most recent survey, San Antonio is expected to continue to provide critical housing, particularly single family residentials.
Next is Austin, which has nearly 23,000 new construction permits. This bustling city continues to grow economically. With this job growth, Austin is bringing more and more people into the city and its surrounding suburbs, where model communities and build-to-rent housing are being developed.
Houston and Dallas are leading the state and the country when it comes to new construction, with 55,935 and 56,909 building permits recorded in the last survey. Both cities are also showing an increase in multifamily construction to address the growing housing demand within and near city centers.
Multifamily vs. Single-Family Rental Developments
More than new construction, it is also important for landlords to understand trends in multifamily and single-family construction to fully grasp the state of housing development in Texas. Generally, single-family residential units dominate housing developments in the state. However, some key areas are showing an increase in multifamily compared to the previous year. Here are some key points to highlight from the NAHB report:
- In Austin, the number of single-family and multifamily developments sits relatively close to each other, with 12,890 registered permits for SFRs and 10,029 for multifamily buildings.
- San Antonio development shows a significant preference for single-family homes, with 7,602 SFRs against 1,206 multifamily construction.
- While developments in the Dallas and Houston areas still emphasize single-family housing, both cities are showing an increase in multifamily housing. Dallas has a slight 5% growth, while Houston shows a 43% increase from the year before.
- Single-family construction in Texas is slowing down, with the major cities experiencing 11% to 21% decrease from last year’s records.
How New Construction Impacts Rent Prices
For landlords, knowing the current state of housing developments in Texas is only the first piece of the puzzle. As mentioned earlier, new constructions influence rental supply and demand. But what does this really mean when it comes to rent prices?
A common misconception in this situation is that “new developments = more supply = lower rent”. However, that is not entirely true. While an oversupply of rental properties can bring rent down, it is not guaranteed. This is because new developments also influence drivers that may lead to an increase in demand, and therefore higher rent prices. Let’s break this down further.
Let’s look at the circumstances brought by new construction that may lower rent prices. One possible scenario is that the development of real estate, particularly residential housing, can lead to an oversupply. This means that there are more housing units available than there are renters looking for one.
Because of this, rental property businesses experience an increase in vacancies that are harder to fill since renters simply have more options. When this happens, rental owners may lower rent prices to attract tenants and fill vacant rental units. In fact, in Austin, new constructions have led to a continuous decline in rent prices for nearly two years.
But the new supply of housing units does not automatically guarantee lower rent. Another possible scenario is that new developments, particularly retail, industrial, and commercial real estate, can drive demand by encouraging migration. When this happens, the community experiences an influx of residents who will be actively searching for a rental property to live in. Because of this, competition becomes tight, allowing landlords to maintain or even increase rent prices.
Another potential effect of new housing developments in Texas is that they can change tenant behavior and preferences. Simply put, with new construction featuring modern amenities, renters are more likely to choose this over older housing units. When this happens, landlords may lower rent prices to attract tenants or look into capital improvements to enhance market appeal.
How Property Management Can Help Navigate Rental Market Changes
There is no doubt that the state of housing developments in Texas is reshaping the rental landscape. That is why it is important for landlords to learn not just the numbers, but to understand how these influence rental pricing, demand, and even tenant preferences. When this happens, some landlords may feel overwhelmed to navigate these changes effectively. More so, some may fail to leverage these circumstances to their advantage.
This is where a professional property management company, like us at BMG, becomes an especially valuable asset. With our experience, we can help you navigate shifts in the market brought by ongoing housing developments in Texas. Our goal is to position your property to continue competing in the rental market effectively by analyzing market trends, optimizing operations, and more. Need our expertise? Contact us today and let’s figure out how we can help.
