There are too many people (especially younger millennials) taking out 30 year mortgages on housing that requires subsidized infrastructure, largely paid for by the urban cores.
This suburban sprawl also REQUIRES a car, which leads to maintenance and insurance costs.
You also have high property taxes to keep districts “good”, which is really translation to keep poor people out of their schools.
It’s quite simple really. Of course, this is in addition to the universally shared challenges of inflation.
Just wait until the the mid to late 2030s where baby boomers, the largest asset-owning class, starts to die. The amount of houses and neighborhoods that were built in the 90s (the peak of suburban growth in America) wil need maintenance that these low density neighborhoods can’t afford as a community.
Edit: I should emphasize that mortgage debt largely impacts non-mortgage debt, before anyone picks out my reference to mortgages
Other cities are not growing as fast as Texas cities, which is why their debts appear to be hidden. They aren’t hidden, they just aren’t as high on the list.
Texas has no barriers to sprawling because it’s flat and cheap. Coastal cities have natural barriers to sprawling, and they also have nimby’s making it harder to sprawl.
Houston’s growth (and San Antonio, Austin, Dallas) is predominantly being channeled via outer sprawling. This leads to higher overall costs of lifestyle. The true costs of living in Bridgeland or Fulshear is hidden because a lot of it subsidized by the urban cores.
People living in those outer suburbs should really be paying 3-5x more than what they pay now, but property taxes merely cover the costs of the initial buildout of the subdivision and school districts.
Those three cities have been experiencing rapid growth. It’s expensive to keep up with that.
Duce630
(DustinK - Still 97 hostages held by Hamas for a YEAR)
7
Dude. The list has us ranked #3 on non mortgage debt yet you start your analysis with mortgage debt and then government spending/budget deficits.
While you get to discuss your favorite subject of the urban/suburban paradox, you virtually skipped over any other issues related to non mortgage debt.
You know cities with good transit have super high housing prices, because everyone wants to live near the transit lines. I don’t want to live in a 1000 square foot apartment with hundreds of people. If that’s the lifestyle you want, go live in those cities.
Duce630
(DustinK - Still 97 hostages held by Hamas for a YEAR)
13
Actually, build out of a subdivision is done by private developers. They take raw land and put in the utilities and other stuff, pave the streets initially and divide into lots. This makes the land more valuable and increases property tax revenues. It’s a long game, as it can be years before they sell out all the lots and realize their profits. Though in Texas it is a lot easier and faster than it might be in som other states. All that work going into the lots is capitalized as inventory rather than expenses annually, by the way.
I’ve had a large developer as a client, you very likely heard their advertisements in Houston before. Also, as discussed before, school districts tend to rely on bonds to raise money to do capital projects. So the property taxes service those bonds, while in essence that means property taxes are used to build schools, you shouldn’t omit the role of bonds in the process.
The reason you see so much non-mortgage debt (ie cars and cc) is due to the HCOL relative to pay scale in Houston.
When I was a younger professional, Houston was known as a city that paid well relative to the COL, but the last 10-12 years that has changed. Now, cities like Atlanta and Dallas have shot past Houston. Yet housing costs (not prices, which is different) have increased.
Fact is, I am reminded of my days as a banker; the ability to “buy” a house is different from having the ability to “own” a house. Hell in America, anyone will sell a home to anybody with a pulse, and they will be glad to lend you the money to do it. Why? Well simple: since the Great Depression the government became the backstop to all “conventional” mortgages. As such, the mortgage lenders know that provided they do the proper due diligence, they are off the hook in the event of a default. This creates perverse incentive to issue/underwrite more mortgages to generate fees, and then to sell them off for cash.
The sprawl piece is key because even with a government backstop, at some point even the government will not act as that backstop any longer. So, the mortgage companies have to securitize these loans. The rates are a little higher due to the risk. A higher rate on a more expensive home means higher mortgage payments. So in response, people are living further out. This just adds to the commuting costs, HOI, Auto Insurance, and gas, and the costs jump quickly. If you don’t have sufficient income to meet the monthly expenses, then you can either reduce your expenses or you can borrow it via a cc and “pay it back later.”
It is sort of why you see so many pawn shops and car title loan companies in Houston. People living beyond their means.
The economy is strong and folks feel confident in the future. People buy beach houses, boats and other large buys. With lower mortgage payments in Texas, more can be spent elsewhere.
I’m trying to exit Houston gracefully. I’ll keep a couple of condos for my kids and when I come back to watch the Coogs and Astros. Other than that I don’t want the headaches. I will miss having a controller job where I can drink beer at my desk any time I want, however. And I have no interest in boring San Antonio or self-repellant Austin.
Now, if we had a rail line to San Angelo I would probably commute.
Wouldn’t land restrictions reduce the housing stock msking it more expensive whereas endless flat sprawl cities, like Houston, could build more housing inventory making it cheaper?
Might also have something to do with the fact that FIVE of the 12 most populous cities in the United States are in the Texas Triangle- Houston, San Antonio, Dallas, Austin & Ft Worth.
That’s 42% of the top 12…that’s SEC level poll dominance…lol
That’s exactly why people move here, for cheap housing compared to other states especially on the coasts. The economics of Texas allow for endless sprawling without any regulation.
The problem is that Houston is running out of space to sprawl, and once that sprawl stops, there will be a cascade affect of debt from the outer most to the inner core. People living in new suburbs aren’t forced to live there forever, so instead of paying higher and higher taxes to fix future problems, they leave for a newer suburb and then the liabilities get dumped on later-residents (typically lower income).
If people in an aging suburb no longer have a place to flight to, then what do you think happens?
Every new subdivision of a suburb essentially pays for the previously built subdivision. When private developers build a new suburb or subdivision, they can’t predict the specific amount of residents to pay for everything. The property taxes mainly pay for the initial development costs. They won’t pay for the long term liability or else nobody would move there in the first place.s
A 5 bedroom house in the outer suburbs will cost 3-5x less than it would in the inner loop. That’s fine. People like big houses. I get it.
The problem is that the same people also want nice neighborhoods and “good” schools. We also live in Texas, and Texas does not like high taxes.
Big house for a cheap price, low taxes, and good schools → is going to come at a cost.
This isn’t really true. Actually property taxes are generally higher in new areas until some of those things are paid off. I’ve lived in a neighborhood that had a property tax rate of 4% that was slowly walked down.
Property taxes aren’t one bucket of money. My rate is ~3% and is separated out and goes to different places including the county, college districts, MUD district, community college district, and emergency services. Much of it goes to schools.
Our property taxes aren’t low. Property taxes in Texas are very high.