For decades, government has artificially controlled the supply and types of housing that can be built through a variety of different mechanisms. Texas property owners have been hogtied when it comes to what they can build on their own land with regulatory sleights of hand like parking requirements, lot setbacks, and minimum lot sizes. Builders have been fighting uphill battles for years in an attempt to address the demand for housing, demand which has gotten much worse in recent years. We must create a favorable environment and remove burdensome regulations.
Since the early 20th century, the predominant development pattern in the United States has been one of inefficient suburban sprawl and zoning by use. This practice is characterized by its unbounded outward expansion, nearly ubiquitous low density enforced by local ordinances, and significant public infrastructure costs. This has translated to the prioritization of single-family homes on large lots enforced by minimum lot sizes, car-centric regions, low inventory of affordable, workforce housing, and drastically increased distances between work and home. The less obvious costs of this pattern of development, however, are found on government balance sheets.
One of the more subtle but deadly results of this sprawl has been its effect on the collection of property taxes.
To unlock the tax efficiency needed for future property tax reductions, we must allow for the appropriate density and diversity of housing types necessary to address need. A survey of growth studies projecting tax revenues from different development strategies found that on a per-acre basis, smart growth development, which allowed for smaller lot sizes and a mix of uses, produced on average 10 times the net revenue of their suburban greenfield development counterparts. Simply by allowing 9.25 units/acre on 185 acre greenfield development, Nashville was able to produce 8 times the positive net revenue that a traditional suburban development of the same size did at just 3 units/acre. This tax efficiency was not just limited to highly dense urban environments, however. Rural environments also saw similar or higher tax revenue benefits when development patterns were focused on the more efficient use of land. Equally as important as tax revenue efficiency are expenditures on service delivery and capital projects.
A 2010 national survey of local government spending saw $1.6 trillion in total spent across the United States. Of that, $525 billion worth of expenditures are directly or indirectly affected by land use decisions. More efficiently utilizing land resources has been shown to create, on average, a 38% reduction in infrastructure costs.
In Sarasota, FL a more efficient residential development project required a $5.7 million dollar investment in upfront infrastructure costs while generating $1.98 million per year in tax revenue meaning within 3 years the city saw return on its investment. A comparable suburban style project characterized by larger lots and purely single-family housing saw an upfront cost of $10 million while generating $239,000 in annual tax revenue. The city would not see a return on its investment in this project until year 42. This is just one example of many indicating that the budget constraints states and cities face are often directly tied to the quality of their land stewardship practices.
Not only do more Texas families deserve a shot at owning their own small slice of the American dream, if we have any desire to maintain our position as the economic powerhouse of America, we must address the housing crisis at state level now or see that growth fade as development stalls.