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What does the population boom mean for Texas housing and infrastructure?

Texas leads the nation in terms of population growth, according to new data from the US Census Bureau. The Lone Star State currently has a population of 30 million, with approximately half a million new residents added since the summer of 2021. About half of this increase is due to internal migration from other US states.

What does the population boom mean for Texas resources and infrastructure? To answer this question, the Standard spoke with Jake Wegmann, an associate professor at the University of Texas at the Austin School of Architecture, and Pia Orrenius, vice president and senior economist at the Federal Reserve Bank of Dallas. Listen to the story above or read the transcript below.

This transcript has been lightly edited for clarity.

Texas Standard: Let’s talk about the large influx of new residents over the past few years. In terms of demographics, who seems to be moving here and why? What is the biggest motivating factor?

Pia Orrenius: All who come have, on average, a much higher education than native Texans. They greatly improve the level of education in the state. They come in the fields of STEM, corporate management, finance, professions where we have a relative shortage in the state.

Economics is a big motivating factor. When we saw internal migration to Texas, most people moved here in search of work. This is in contrast to other states, such as Florida, where they retire. At the same time that they come in, when the economy is doing well, they also amplify this economic growth by moving here. So it’s kind of a virtuous cycle.

Jake, what are the biggest challenges for Texas with this rapid population growth?

Jake WegmannA: At the top of my list would be a big jump in home prices. We’ve seen it across the country, but it’s especially fast in Texas. First of all, in Austin. It was once one of the cheapest places to live in the country. Now this is a little less true than before.

Pia, given these housing costs, will the job magnet still be the main driver of migration to Texas? Or can we start to see the boomerang effect?

Pia Orrenius: What Jake says is very true in the sense that we are no longer as accessible as we used to be. In fact, by some measures, we are now less affordable than the national average due to rising housing costs, especially in Dallas and Austin. There are definitely some growth issues in population growth and in migration. People moved here because 10 or 20 years ago it was very affordable. It will be less of a draw in the future.

Jake, is this basically what local leaders are responsible for in terms of formulating recipes to solve the problem? Is this a public issue? How can we best address this skyrocketing housing cost?

Jake Wegmann: Both have their role. An important factor is that cities are riddled with regulations that make building housing unnecessarily difficult and expensive. It didn’t get much attention before, because we just thought, “Well, you know, we’re Texas, we have very little regulation. It’s really easy to build a home here.” We discover that this is actually not as true as we thought. There are many improvements that could be made.

The legislature is preparing to begin its session. Any advice for lawmakers considering how to deal with rising prices and housing shortages?

Jake Wegmann: Of course, there are things with which the state can do nothing. For example, high interest rates. But there are definitely things they could do something about. Let me give just one small example. There’s something called the Valid Petitions Act, which basically allows neighbors to stop building projects near them, or at least makes it easier for them to do so. The state can get rid of it. This is not the case in many other states. So there are definitely things the legislature could do.

Pia, I want to move on to transportation. It always seems to take a backseat when people come to Texas. Could this ultimately stifle the growth we are seeing here in Texas?

Pia Orrenius: We have already seen some examples of how this stifles some growth and raises the cost of living even higher than it would otherwise be. I think the Austin area is an example of this. However, I want to keep this in perspective because Texas as a whole is growing quite quickly in terms of regulating the economy, as well as infrastructure, water and other utilities, and housing. I mean, we do build a lot. We are typically the number one state in construction per capita—both single-family and multi-family housing.

We also deal with toll roads and public-private infrastructure cooperation. So it’s a very pro-growth state. But I think it shows that despite this, we are not keeping up with the demand in terms of so many people migrating here.

It looks like it will mean a push for more roads, more construction… more projects like this.

Pia Orrenius: Absolutely. I think we are still on that trajectory. However, this should slow some down, because the prospects for demographics — not just for Texas, but for the entire country in the future — lie in an aging workforce and slowing workforce growth. I think that this will slow down economic growth in general and slow down migration. So, I think we expect a slightly slower uptrend in the future than we have seen in the recent past. With that in mind, I think it will take the load off the infrastructure.

In December, there was only one state in the country with a population of over 30 million people. It was California. When we ended December, we found out that this was no longer the case. Texas has now reached that psychologically significant level of 30 million people. Is there a moment when Texas should abandon its philosophy of growth when it comes to the state? Jake, do you have any thoughts on this?

Jake Wegmann: Personally, I’m all for growth. Growth creates a lot of problems. But if you think growth has a lot of problems, try not to grow. Here’s how I look at it. Crossing the threshold of 30 million is just psychology. But I think it’s a good reminder that the state must act accordingly. We are no longer a rural state. We are a highly urbanized state. Pia is absolutely right that the state is investing in road infrastructure.

But right next door is New Mexico, a tiny state that has a successful commuter train system connecting Santa Fe and Albuquerque. Meanwhile, here in Austin and San Antonio, where the population is three times the population of all of New Mexico combined, we don’t have anything like that. I think the state should look at ways to further support this tremendous growth that is happening here.

Pia, what does 30 million mean to you?

Pia Orrenius: Well, 30 million is basically a problem for me because everyone goes to the same places. I think over half of the counties in Texas haven’t grown at all in terms of population. So what ideas can we come up with, especially now that we can work from home? Can we think of incentives for people to move to mid-sized cities, move to small towns, move to rural counties where housing and living costs are still low and there is still lots and lots of space?

I bet this could be the driving force of the future, instead of gathering everyone in Dallas, Austin and Houston. It would be nice to diversify the locations where people settle. This may spread some of the by-products of this growth throughout.

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