Diego Morales-Burnett, Pia Orrenius and Ana Pranger
Texas employment growth slowed even as overall activity strengthened in August and September. Resistance to price increases rose.
Employment expanded 1.1 percent in August, down sharply from 3.8 percent in the first half of 2023. Meanwhile, respondents to the Texas Business Outlook Surveys (TBOS) reported faster service sector growth along with rebounding manufacturing production. They also noted, however, that price pressures were stable in recent months.
TBOS respondents in August lowered their selling price and wage growth expectations for the year relative to what year-end expectations were in May. There was no downward revision of input cost growth, however, likely reflecting higher energy prices. The price of benchmark West Texas Intermediate crude oil has risen more than 20 percent to near $90 per barrel in the past year.
Employment growth slows in August
Texas job growth slowed in August, expanding only 1.1 percent at an annualized rate, equivalent to adding 12,401 jobs (Chart 1). By comparison, the nation’s employment grew 1.4 percent, outpacing Texas for the first time since November 2022.
Texas job growth had remained robust over the past year amid higher interest rates, falling manufacturing production and fears of recession. It is unclear whether the recent result indicates actual slowing or is a statistical anomaly.
Given strong job growth earlier this year, the Dallas Fed’s Texas Employment Forecast is now 2.9 percent for 2023 (December over December), implying growth of 2.1 percent, annualized, through the end of the year. Though lower than previous forecasts, this would still be stronger growth than Texas’ long-term, 2 percent trend annual employment growth rate.
Declining job openings and rapid labor force expansion have helped rebalance the state labor market since late 2021. The share of firms hiring has fallen from near 70 percent at its peak to nearly 50 percent in July. About half of those firms looking for workers reported that a lack of applicants is impeding their ability to hire, compared with three-quarters saying they were similarly constrained in July 2021.
Despite less-tight labor markets, some TBOS firms continue to report trouble finding qualified workers in particular areas. One administrative services contact said, “Skilled labor is still hard to find for our business. We have increased our hiring pay by 22 percent and cannot find qualified candidates.”
Manufacturing rebounds as service sector stays strong
There were positive output signs, especially in the goods sector, in the September TBOS. Manufacturing production expanded after contracting for four months (Chart 2). However, services revenue growth declined following a surge in August.
Overall, company outlooks remained pessimistic, which may mean a short-lived upturn. Comments were overwhelmingly negative, citing downside risks including the United Auto Workers national strike, the possibility of a federal government shutdown, weak demand in China, falling housing activity, troubled commercial real estate markets and difficulty passing on higher costs to customers.
Price pressures stable despite sharply higher input costs
Selling prices in September increased at about the same pace as in August in both the service and manufacturing sectors (Chart 3). Manufacturing input price pressures surged, however, possibly the result of higher energy prices.
Despite heightened cost pressures, Texas firms lowered their expectations for price and wage inflation, according to TBOS special questions in August (Chart 4). Selling prices were expected to rise 3.3 percent between December 2022 and December 2023, down from a 3.8 percent expectation in May.
Cost growth expectations did not change over the summer, as firms still anticipate 4.7 percent growth, while wage growth expectations fell only slightly (from 5.3 to 5.0 percent). Thus, the decrease in selling prices does not appear to be a product of cheaper inputs, but likely of limited ability to pass costs on to customers.
In their comments, TBOS respondents confirmed this situation. “[The] cost of goods sold continues to increase beyond [firms’] ability to raise prices,” one TBOS respondent said. Another noted a change in consumer attitudes, saying, “Customers were willing to accept practically any price increase over the last couple of years, [but] we are starting to see resistance to continued price increases.” That firm also reported it “expect[ed] more resistance going forward,” potentially making it even more difficult to pass through costs.
About the authors
The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System.
On a summer evening, Iraqis smoke shisha and go bowling at a sprawling riverside complex in Baghdad, one of the many new investments reviving the capital after decades of turmoil.
“Iraq is fertile ground for investments,” said Falah Hassan, the executive director of the complex of restaurants and shops built on the grounds of one of Saddam Hussein’s former palaces and named after the famed “One Thousand and One Nights” folktales.
In oil-rich Iraq, the fragile stability since the defeat of the Islamic State group in 2017 has paved the way for a building boom in a city that in recent years has mainly made headlines for wars and bloody violence.
Since taking office in October, Iraq’s Prime Minister Mohamed Shia al-Sudani has sought to rehabilitate Baghdad’s infrastructure, much of which has been left dilapidated by conflict and neglect.
But a World Bank report in July said investors were still hesitant to put their money in Iraq, citing a “lack of business-friendly legislation, a volatile security environment, administrative inefficiencies, and systemic corruption”.
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Hassan acknowledged investors still faced numerous obstacles, including “the security situation” and “bureaucracy”.
“You have to go through 1,000 counters to get a single permit,” he said, noting the new “1,001 Nights Park” complex perched on Baghdad’s Tigris river was opened in late 2022 by “young investors”.
This is a reality authorities say they are committed to changing to attract investors, especially from the Gulf.
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In late August, Sudani attended the groundbreaking ceremony for a luxury hotel and residential complex, the first major Qatari investment in Baghdad.
“From the prime minister to the lowest-ranking official, we will stand alongside investors and the private sector to carry out projects in Baghdad and the provinces,” the Iraqi leader said.
At the United Nations General Assembly last week, Sudani said “our top priority is the fight against the epidemic of corruption”.
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But experts say dirty money is behind many of the new developments seen in Baghdad.
“In recent years, Iraq’s political elite and their business associates have preferred to invest their wealth in local projects as a safe haven for ill-gotten gains,” wrote Hayder al-Shakeri in a piece for the Institute of Regional and International Studies at American University of Iraq, Sulaimani.
“In part to disguise the origins of their illegally obtained funds, the political elite have allegedly taken to investing in upscale residential compounds, malls, private universities, and other real estate ventures, resulting in a ‘visible boom’ in Baghdad’s development,” he added.
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In less than a year, Sudani has undertaken work to provide improved water and electricity services to Baghdad’s informal neighbourhoods, construct bridges and redesign the streets of one of the Arab world’s most populous cities.
In the 2023-2025 budget passed this year, annual investment expenses are set to hit $37 billion — three times the amount in 2022, the World Bank reported.
These generous allocations are made possible by Iraq’s tremendous oil wealth and foreign reserves, which amount to more than $100 billion.
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In the neighbourhood of Kufa on Baghdad’s outskirts, a bulldozer digs up the road to install pipes, while a dump truck removes the rubble.
A special unit is working to rehabilitate the many informal neighbourhoods of Baghdad “deprived of services for more than 20 years”, said Abdel Razzak Abd Mhessein, the project’s head engineer.
The unit is made up of people from various ministries, state-owned enterprises as well as engineers from the army and paramilitary network, the Popular Mobilisation Forces.
“We have a budget of about 200 billion dinars ($150 million) for infrastructure work for water, sewer systems and more,” the engineer told AFP.
“There are more than 1,093 informal neighbourhoods in Baghdad — a plan has been prepared to gradually carry out work there,” he added.
The public’s reaction to the work so far has been mixed.
“This is what we dreamed of. Paved roads, and services,” said Abu Ali al-Bahadli, a 55-year-old day labourer.
“Before, we couldn’t go out when it rained. The road was muddy and the sewers overflowed.”
His neighbour, Ahmed Radi, is more sceptical, noting work on his street had not brought him adequate electricity or running water.
“Tell me, which official would accept staying even an hour without water,” said the 45-year-old civil servant.
“When will they install pavements? Storm water drains?” he asked.
“We come home tired from work. There’s no water, no electricity. For how much longer?”
New home sales in the United States eased in August but remained high, the government reported Tuesday, as tight supply in the broader housing market kept the number of transactions high.
The lack of inventory for existing homes has kept demand for new properties elevated despite the high mortgage rates that have come about as a result of the Fed’s aggressive campaign of interest rate hikes to tame inflation.
Sales…
New home sales in the United States eased in August but remained high, the government reported Tuesday, as tight supply in the broader housing market kept the number of transactions high.
The lack of inventory for existing homes has kept demand for new properties elevated despite the high mortgage rates that have come about as a result of the Fed’s aggressive campaign of interest rate hikes to tame inflation.
Sales of new single-family houses fell 8.7 percent to 675,000 in August from a month earlier, the Commerce Department said, citing revised data for July.
This was below the median expectation of economists surveyed by MarketWatch.
But new home sales were 5.8 percent higher than a year earlier, underscoring the supply constraints that exist in the housing market.
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The US Federal Reserve has increased interest rates 11 times over the last 18 months as it looks to tackle inflation, which remains stuck stubbornly above the US central bank’s long-term target of two percent.
Higher Fed lending rates have pushed up borrowing costs on popular 30-year mortgages in the United States, making it harder for Americans to buy a home.
This pattern also discourages existing home owners who bought during the recent period of historically low interest rates from selling their properties, further constricting the supply of new dwellings.
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The median sales price for new homes sold in August was $430,300, down slightly from a month earlier.
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Commercial and multifamily mortgage debt outstanding increased on a quarter-to-quarter basis even as new originations have tanked from a year ago, the Mortgage Bankers Association reported.
Holders of these loans — banks and thrifts; life insurance companies; government agencies; and securities investors — reported their portfolios grew by $37.7 billion or 0.8% for the three months ended June 30.
“Commercial and multifamily mortgage originations are down by more than half from a year ago, and this lack of new demand means that fewer loans are being paid off,” said Jamie Woodwell, head of commercial real estate research, in a press release. “This in turn is helping to maintain, and in some cases even grow, the amount of credit outstanding.”
Total commercial debt outstanding ended the second quarter at $4.6 trillion, up from $4.57 trillion on March 31 and $4.38 trillion on June 30, 2022.
The multifamily share is $2.03 trillion, up from $2 trillion in the first quarter and $1.9 trillion one year ago.
Most of those increases came from the GSEs, which saw their portfolios add $13.4 billion on a quarter-to-quarter basis, slightly more than half of the sector’s increase. Banks and thrifts added $7.4 billion while life insurers added $4.3 billion.
An earlier MBA report noted that even though the second quarter posted 23% higher volume in commercial and multifamily mortgages versus the first quarter, it was still 53% lower compared with the period ended June 30, 2022.
At the same time, commercial mortgage delinquency rates are on the rise as certain sectors, particularly lodging, retail and office remain under stress originally driven by the pandemic.
Those loans are more likely to slip into foreclosure as they are unable to refinance before or at term end unless investors agree to some sort of workout plan.
For the full year, the MBA is now expecting $504 billion of new originations (including current loans that reach their term and refinance), down from $816 billion in 2022. Multifamily only volume should come in at $299 billion, compared with $480 billion one year prior.
FARMER CITY — The Farmer City Council and a Mahomet-based developer have approved a letter of intent for residential development near Interstate 74 and Illinois 54 on the city’s northeast side.
The project, which will initially involve construction of two eight-unit apartment buildings, is also expected to lead to to neighborhood commercial development on 2 acres.
Shawn Tabeling, manager of Tabeling Development Co., said additional residential and commercial projects could also be coming.
Farmer City Mayor Scott Testory said it’s about time.
“This property should have been developed several councils ago,” he said, adding that he helped to spearhead bringing utilities to that area at a cost of about $1.5 million.
“I really am hopeful this is a catalyst for future development,” Testory said.
Tabeling Development Co. has specialized in development in rural communities for more than 15 years. It has developments in Mahomet, Sullivan and Heyworth and will soon start a new project in Arcola.
City Manager Sue McLaughlin said a market analysis of the property showed the best commercial use would be a travel plaza.
“We’re still reaching out to developers for that type of use in conjunction with what Tabeling is doing,” she said. “He’s leaving enough acreage for us or him to do both. This property has sat for so long.”
Businesses will have the option to buy a 1- to 12-acre lot for a freestanding building, build-to-suit, or lease a space from the proposed multi-tenant building.
McLaughlin said the property has not yet been platted, and a development agreement has to be signed. Tabeling is hoping to turn dirt in the spring and have occupancy no later than the following spring.
Tabeling said Farmer City “has a lot to offer with its convenient access to I-74, several agricultural-related employers and nearby outdoor recreational activities.”
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As Austin’s sky-high housing costs put increasing pressure on renters and homeownership out of reach for many working Austinites, a yearslong fight over what kind of housing the city should allow could be at a turning point.
Austin has long been the epicenter of the state’s housing affordability crisis, but the problem reached new heights in the pandemic era amid massive population and job growth.
The crisis — along with the rise of a new political bloc calling for reform — has given Austin leaders a renewed mandate to tackle the problem. After the collapse of big housing reform proposals in recent years, the Austin City Council is embarking on a new push to ease city restrictions on how much housing can be built and where.
The current restrictions, the thinking goes, impede the city’s ability to build enough homes to meet the crushing demand for housing — resulting in higher home prices and rents.
“We have a significant affordability crisis, and it is an emergency,” Austin Mayor Kirk Watson told The Texas Tribune. “We’ve got a supply and demand problem, and we’re going to have to come up with unique and different ways than we’ve thought of in the past to solve it.”
City leaders have proposed a number of measures to try to stimulate more and denser housing, like allowing more single-family homes on smaller lots and taller apartment buildings near single-family homes, as well as doing away with mandates that require developers to set aside a certain amount of land for tenants to park their cars.
But these reforms will probably run into some familiar obstacles. For decades, efforts to loosen the city’s land-use regulations have run into opposition from homeowners fearful of neighborhood change, old-school environmentalists and anti-gentrification activists — even as policymakers increasingly backed the idea and the city’s housing woes mounted. A group of homeowners, deftly wielding state law to their advantage, persuaded a judge in 2020 to kill a major overhaul of the city’s land development code that would have allowed denser housing.
But as musicians, teachers, police officers and firefighters struggle to find affordable housing within city limits, Austin’s housing crisis is increasingly seen as an existential one.
“Without change, where do you think this will go? What are you preserving at that point?” said Dianne Bangle, CEO of the Real Estate Council of Austin. “Is this an Austin for everyone, or is it just for people who want to maintain their large home and neighborhood?”
An unignorable crisis
An organized and steadily growing activist movement is backing — and pushing — city officials to allow more housing to be built.
On a morning in late August, dozens of demonstrators crowded the steps of the Travis County Civil and Family Courts Facility in downtown Austin to protest a court challenge by a group of homeowners seeking to kill a popular affordable housing program and other housing initiatives. Demonstrators held signs that read “Support affordable housing” and “Housing is a human right.”
Anoosh Razian, a 34-year-old Austin therapist, saw the effects of the city’s housing shortage while working for a nonprofit that helps single mothers experiencing homelessness regain their footing. Often, she said, the women would hesitate to move out of supportive housing because they couldn’t find homes they could afford.
“There’s nowhere to go if they had to,” Razian said. “If they want to move out of supportive housing, they would have to move out of the city.”
Her husband, Edgar Handal, an engineer at a tech company and a board member at AURA, an Austin organization that advocates for denser housing, said they can afford a home in East Austin but some of their friends have had to move far outside of the city.
“I’m here because I care that other people have housing, my family and my friends,” Handal said. “It shouldn’t be that you need to be so lucky to have a high-paying job to be able to afford a home in Austin.”
Housing costs in the Austin area rose dramatically in the past decade as the region transformed into a major tech hub and companies like Apple, Google and Oracle ramped up their presence in the city. The market kicked into overdrive during the COVID-19 pandemic as more than 120,000 people moved to the region and millennials sought to buy homes, sparking fierce bidding wars for limited housing supply.
For several months last year, the typical home in the Austin-Round Rock region sold for more than $500,000, pricing droves of would-be first-time homebuyers out of the market. Nearly half of the region’s renters spend so much of their income on keeping a roof over their heads that they struggle to pay for other expenses like child care, groceries and transportation.
Housing unaffordability dominated Austin’s most recent citywide election, which brought new faces to the Austin City Council and solidified its pro-housing bloc. Observers say the City Council and Watson, who also took office this year, got a clear signal from voters to do something about the city’s housing crisis. Over the summer, council members gave their first stamp of approval to a slew of housing reforms.
“I think people are seeing the hurt, the pain, the frustration, and it’s unfortunate that it took so long to get to this point,” said Austin City Council Member Zohaib “Zo” Qadri, one of the new members.
Housing advocates place much of the blame for the crisis on the city’s land development code, which governs how land is used. The code hasn’t had a substantial overhaul since 1984, when Austin’s population was less than half its current size. Each time the city has tried to give it a significant makeover, homeowner groups have successfully killed those efforts.
One of the biggest criticisms targets the limits on the kind of housing that can be built. Much of the city’s residential land can only be used to build single-family homes. On top of that, Austin requires most single-family homes to sit on at least 5,750 square feet of land — a restriction known as a minimum lot size that research has linked to higher home prices. Those kinds of restrictions, real estate and housing experts say, lead to fewer homes and apartments being built — and higher housing costs as a result.
“When we don’t allow densification, that means we have a lower supply of housing units, which in general increases the price of all housing units in the area,” said Adam Perdue, a research economist at the Texas Real Estate Research Center at Texas A&M University.
An older home in a single-family neighborhood displays a large orange sign reading “END CONSTRUCTION” on Sept. 16, 2023. Newly built duplex units are visible in the car mirror.
Credit:
Julius Shieh/The Texas Tribune
First: A tree provides shade in the yard of a newly-constructed duplex near downtown Austin on Sept. 16, 2023. Last: A placard displayed on a wall during an open house in Austin describes the ecological benefits of infill building, or the construction of new housing in existing neighborhoods.
Credit:
Julius Shieh/The Texas Tribune
The restrictions, critics say, have made it tough for Austin builders to meet housing demand.
The Austin-Round Rock region routinely ranked among the country’s busiest markets for housing construction during the pandemic years, according to A&M data. Even so, construction hasn’t kept pace with the growth in the number of households, data from the U.S. Census Bureau shows.
“We have tenants whose rents are skyrocketing, [would-be] first-time homeowners who cannot enter the market, people who want to age in place and they’re not able to move to a home that better fits their housing needs,” said Awais Azhar, who’s with the advocacy group HousingWorks Austin.
The city is short nearly 152,000 homes considered affordable enough for two-person middle-income households, a recent report from the Austin Board of Realtors shows — a shortage that’s even more drastic for families of four at that income level.
“People like EMS workers, teachers and firefighters want to be able to live in the community that they’re serving and really can’t,” said Emily Chenevert, Austin Board of Realtors CEO.
Austin-Travis County EMS medic Claudia Cadena and her husband bought a two-story home on San Antonio’s Far West Side in 2019 for about $180,000. The house is close enough to Cadena’s parents, who live in nearby Lytle and often watch their children, but the decision to buy a home in San Antonio was also because they couldn’t afford one in the Austin area, she said.
“It was either afford child care or afford a house,” said Cadena, who makes the two-hour drive from San Antonio to her post near Austin-Bergstrom International Airport at least twice a week.
Claudia Cadena, a medic with Austin-Travis County EMS, stands in the EMS garage bay at the end of a shift on Sept. 14, 2023.
Credit:
Julius Shieh/The Texas Tribune
Cadena in her car at the end of a shift before commuting back to her home in San Antonio.
Credit:
Julius Shieh/The Texas Tribune
Commuting long distances is a relatively common experience for Austin-Travis County EMS employees, some of whom live as far as Killeen, about 70 miles north of Austin. Nearly one in five of employees live outside of the immediate Austin-Round Rock region, Chief Robert Luckritz said, partly because medics and other EMS staff can have a hard time finding nearby housing they can afford.
That distance can make it difficult to quickly call people in an emergency — and for workers to build camaraderie and develop a relationship with the community they serve, Luckritz said. The Austin region’s high housing costs, he said, also get in the way of hiring new recruits and filling vacancies.
The distance has taken its toll on Cadena. Years of long drives, with often sleepless 24-hour shifts in between, have left her exhausted. Cadena has stuck with the job for the benefits — and because she wants to help people.
Cadena may not endure the drives much longer. Her husband recently obtained his electrician license, which Cadena said will let her leave her Austin job and focus on getting her fledgling tattoo practice off the ground.
“I thought this was the place I was going to retire from,” Cadena said of Austin-Travis County EMS. “If the drive wasn’t so long, I definitely would, but I can’t imagine being here for another 30 years.”
More density, more homes
The housing crisis is not unique to Austin. By various estimates, the country needs to build millions more homes to meet the nation’s housing demand and slow the steep rise in housing costs.
A growing body of research has tied strict land-use rules to high housing costs — a conclusion embraced by the Biden administration as well as state and local policymakers across the country who have loosened zoning rules to try to juice their housing supply.
In recent years, cities like Minneapolis and Portland found some success in slowing down the rampant rise of housing costs. In 2018, Minneapolis officials enacted a series of zoning reforms — like allowing duplexes and triplexes to be built in areas previously reserved for single-family homes and getting rid of minimum parking requirements for new developments — that helped the city keep a tight lid on rental cost growth during the pandemic era, according to a recent study by The Pew Charitable Trusts. According to a recent Bloomberg report, the changes have even helped the city beat back inflation.
Meanwhile, states like California, Oregon, Washington and Montana have enacted statewide reforms to local zoning laws in order to increase housing production and short-circuit local opposition from elected officials and neighborhood groups.
Republicans in the Texas Legislature this year flirted with relaxing cities’ housing restrictions, to allow more homes to be built amid the state’s housing crunch, though those efforts ultimately failed. As GOP state lawmakers increasingly sap authority from the state’s bluer urban areas, some Austin leaders fear if they don’t loosen restrictions on how much housing can be built and where, state lawmakers will finish the job when they return to the Capitol in two years.
Now, the year after Austin became the 10th-largest city in the nation, city officials are pushing for similar solutions.
Perhaps the most sweeping proposals — and the ones likely to draw the most heat from opponents — would allow more kinds of housing units to be built in areas currently reserved for single-family homes and nearly halve the amount of land the city requires to build housing on those lots.
The idea, pitched by Council Member Leslie Pool, would allow up to three housing units to be built almost anywhere single-family homes are currently allowed. It would also reduce Austin’s minimum lot size in the city’s three most common single-family zoning categories to 2,500 square feet. More than half of the cost of a single-family home in Austin comes from the land, according to a recent city-commissioned study. If would-be homeowners don’t have to buy as much land, the ultimate cost of the home won’t be as high, advocates argue.
Austin’s zoning restrictions don’t just limit what kind of housing can be built and where, homebuilders say — they make it more difficult for that housing to be built quickly, which also adds to the cost of a home.
It took Austin homebuilder Scott Turner three years to build four homes on roughly a quarter of an acre in the neighborhood of South Manchaca. Even with that much land, the plot’s zoning wouldn’t allow for more than two units. So Turner opted to subdivide it — a process that took the city two years to approve, he said.
Had Pool’s proposal been in place, Turner said he would have built three homes instead of four — but they wouldn’t have taken him as long to build, which would have reduced the total cost of the project. The longer local governments take to approve housing projects, the more money homebuyers and renters also have to ultimately pay for that housing, studies show.
“You want somebody to buy a house? Don’t make it expensive,” said Turner, past president of the Home Builders Association of Greater Austin.
Austin officials are eyeing other ideas to allow for more housing construction. A proposal pitched by Qadri would get rid of city rules that require new developments have a set amount of parking, which studies show lead to fewer housing units and drive up housing costs.
Another idea would ease the city’s “compatibility” requirements that limit how tall apartment buildings can be depending on how close they are to single-family homes. Austin has the strictest compatibility rules among peer cities, which “significantly restrict the development capacity for high-density residential housing throughout Austin,” a recent city analysis found.
Proponents argue relaxing the land-use restrictions will at least help slow the growth of the city’s housing costs and give more middle-class families a better shot at homeownership. Nearly three-quarters of households in the Austin region can’t afford a home going for the median sales price, according to the National Association of Home Builders.
“If [this proposal] can keep families in Austin and attract younger families to raise their families in Austin, that’ll be a net plus,” Pool said.
Council members advanced Pool’s proposal and the parking and compatibility initiatives over the summer, but they haven’t taken effect. City staff first must figure out the nuts and bolts of each idea and bring the plans back to the council for final votes, the first of which is expected in December.
A staunch opposition
Some Austin homeowners have been fiercely opposed to any policies that would allow denser housing, saying they would radically alter their neighborhood’s character.
They have successfully blocked every recent attempt to change the city’s land development code to allow denser housing, including a proposed zoning overhaul in 2018. When the Austin City Council tried again to make changes the next year, a group of homeowners won a court battle to stop them.
For Frances Acuña, the homeowner at the heart of the legal battle against the changes, fighting the city on the proposed zoning reforms means making sure she and her neighbors aren’t priced out of their homes. Acuña has lived for more than a decade in her home in Dove Springs, the predominantly Latino neighborhood in Southeast Austin where she raised her three sons.
Home prices in the area have accelerated sharply during that time: The typical home went from less than $126,000 in the early 2010s to almost $400,000 in January, according to Zillow data. A 2018 report from the University of Texas at Austin deemed her neighborhood “more vulnerable” to gentrification and displacement because of its higher proportions of people of color, residents without higher education and renters, among other factors.
“I’m 52 years old,” said Acuña, a climate advocate and organizer with Go Austin/Vamos Austin, a community health coalition. “How long before I am not able to work and I don’t have a home? Where am I going to go? How am I going to survive?”
Frances Acuña stands in the front yard of her South Austin home on Sept. 16, 2023.
Credit:
Julius Shieh/The Texas Tribune
In 2019, Acuña joined forces with 18 other Austin homeowners — many of whom have owned their homes for decades and some of whom have seen their home values climb north of $1 million amid the region’s hot housing market — to sue the city of Austin.
Austin officials, the homeowners alleged, broke state law by failing to formally notify homeowners of the citywide zoning overhaul — the same way they would have to if a nearby property owner wanted to rezone their land. The city also ignored a state law that requires a supermajority of the City Council to approve a rezoning if enough neighbors protest the change, they said. Lawyers for the city of Austin argued neither law applies when a city overhauls its land development code.
In a ruling that will undoubtedly complicate any other Texas city’s efforts to overhaul its zoning code, a Travis County judge sided with the homeowners — a decision later upheld by an appeals court. Ensuing efforts at the Texas Legislature to peel back the laws the neighborhood groups cited in their lawsuit have failed.
Since then, Austin officials have picked away at smaller zoning reforms intended to stimulate housing supply. Last year, council members greenlit new rules that allow developers to build housing in commercial areas and denser housing along transit corridors.
However, the same group of landowners that blocked past citywide rezoning efforts has set their sights on those changes — as well as a city affordable housing program the council passed in 2019 that has produced thousands of lower-cost units.
Dubbed Affordability Unlocked, the program eases rules like height restrictions, minimum lot sizes, parking requirements and density limits if builders set aside half of a development’s units for households making less than the city’s median family income. The program has proved to be an effective driver of affordable housing and is already helping produce more units than other local affordable housing programs, according to a recent report from the Urban Institute. Of the nearly 7,700 ownership and rental units approved under the program since it began in 2019, the report found, more than two-thirds are affordable for households making 80% of the median family income and below.
Motorists commute northbound along Interstate 35 in South Austin on Tuesday, Aug. 29, 2023.
Credit:
Eli Hartman/The Texas Tribune
Despite the program’s virtues, the effort to block it and the other initiatives is about making sure the city isn’t violating homeowners’ rights, said Austin ethics lawyer Fred Lewis, one of the landowners suing the city.
“For most working-class and middle-class people who own a home, the biggest asset they will ever own is their home,” Lewis said. “And their home is not only an asset, it’s their stake in their community and their neighborhood, and it should be respected.”
For some, blocking rules that would allow more housing development is about protecting their neighborhoods from gentrification and displacement.
After witnessing the gentrification of East Austin over the past decade, some fear that clearing the way for more housing construction will accelerate that process in the city’s low-income neighborhoods and oust Black and Latino residents who live there. There remains deep skepticism that allowing the market to produce more housing will moderate housing costs — despite a growing body of evidence to the contrary.
“This is a gentrification provision,” one resident critical of Pool’s proposal told the Austin City Council at a July meeting. “It will increase the number of luxury condos, and it will absolutely not increase affordable housing.”
Whether allowing more market-rate construction leads to displacement of low-income homeowners and renters has been difficult for researchers to prove. Recent research shows that allowing more market-rate housing eases housing costs around that development and across the broader region. Allowing more construction means the crushing demand for housing in the region won’t fall just on existing homes; more housing units mean more places for demand to go, thus moderating prices, research shows.
“When people get mad and they see a giant fancy condo building going up, they should just reflect on the fact that that building is absorbing a lot of buyers with a lot of money who might otherwise be unleashing their spending power on existing houses or the existing housing stock,” said Jake Wegmann, an associate professor at UT-Austin’s School of Architecture who studies housing affordability.
Building market-rate housing in a gentrifying neighborhood could contribute to displacement in cities like Austin with high housing demand, a shortage of housing and strict rules on what kinds of housing can be built and where, experts say. Allowing greater density across a city — including in single-family neighborhoods that aren’t as vulnerable to gentrification — and building cheaper housing like townhouses and duplexes would lower that risk, said Claudia Aiken, director of new research partnerships at the NYU Furman Center and Housing Solutions Lab.
“Having sufficient housing is critical to preventing displacement,” Aiken said. “To do that, we have to build housing. It’s just a question of where and how.”
What’s more, loosening citywide zoning restrictions could shield low-income neighborhoods from gentrification and displacement. A recent Furman Center paper found that in the decades after Houston relaxed land-use restrictions to allow more housing units on smaller lots, the places where townhouses replaced traditional single-family homes mostly took place in wealthier neighborhoods or in parts of town that already had gentrified, though some of that development has taken place in poorer neighborhoods like the Fifth Ward.
“It’s not like you change the zoning and then overnight, the entire city gets torn down and replaced with townhouses,” said Wegmann, the paper’s author. “That’s just not how it works. It’s much, much more gradual.”
Proponents of the Austin proposals are quick to point out: the displacement that East Austin experienced happened under the current code.
Housing affordability advocates at the August protest were outraged at the attempt to end the Affordability Unlocked program.
U.S. Rep. Greg Casar, D-Austin, center, joins protesters gathered in support of affordable housing at the Travis County Civil and Family Courts Facility in Austin on Aug. 28, 2023.
Credit:
Julius Shieh/The Texas Tribune
“Opponents of affordable housing couldn’t win this fight in the court of public opinion,” said U.S. Rep. Greg Casar, an Austin Democrat who authored the Affordability Unlocked proposal when he served on the Austin City Council, noting that the program passed unanimously. “So now they’re trying to use the courts to try to block the overwhelming majority of Austinites who want to see housing prices come down in the city.”
Nicholette Lindsay, a 41-year-old Army veteran who lives in one of the affordable units made possible by Affordability Unlocked, said the opposition to the program was hurtful.
Her landlord evicted Lindsay in 2015 after a Microsoft supplier laid her off and she couldn’t pay rent, forcing her and her son to stay at a Salvation Army shelter. With the help of a city program to rehouse homeless veterans, they moved into a new apartment the following year.
This year, she and her son moved into a housing complex created through the Affordability Unlocked program. The complex’s affordability has helped her stay in the city while she runs a private security company, she said.
“If [program opponents] understood how much of a lifeline affordable housing was for individuals … it’s not just a lifeline, it’s life-saving,” Lindsay said.
Disclosure: Apple, Google, HousingWorks Austin, Microsoft, Texas A&M University and University of Texas at Austin have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.
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Top Chinese developers are quickly selling or downsizing their Australian operations amid a worsening property crisis back home.
Key points:
- Country Garden is the latest Chinese developer to withdraw positions in Australia
- China’s property meltdown has seen many developers forced to liquidate assets
- Analysts say the exodus of Chinese developers could impact housing supply, promising fewer high-density projects
Property giants such as Poly, Greenland, Yuhu, Wanda and Country Garden entered the Australian market in the 2010s with big ambitions, investing billions and buying and developing prime sites.
“It was literally for a period there week upon week, upon week there was a new entrant coming to the market,” former commercial real estate agent Mark Wizel told The Business.
“The decision-making was very sudden and very quick, however, at no point was it reckless … whether it was of state-owned enterprises, major developers or private developers.”

Mr Wizel, who has dealt with major Chinese developers in Australia, helped facilitate the boom.
“After 2013, a lot of the active Chinese capital moved more into income-producing assets,” he added.
“They moved into commercial office buildings, major shopping centres, and that really carried on the total from $8 billion of development site sales through to about $13 billion between 2009 and 2017, of total sales to mainland Chinese investors and developers.”
The retreat
One of the most high-profile transactions was One Circular Quay, a prime location with views across the Sydney Harbour Bridge and the Opera House.
It was bought by Wanda in 2014 for $425 million. The Dalian-based developer was eager to deliver a $1 billion project consisting of a 57-storey residential tower and a luxury hotel.
But with troubles emerging at home, there came an exodus.
Wanda sold One Circular Quay to another Chinese developer in 2018, and now it’s in the hands of Lendlease and Mitsubishi.
Greenland Australia sold a five-hectare Erskineville site in inner Sydney for $315 million in 2022.
The same year, Poly Australia pulled the plug on three projects in Sydney and Melbourne.
And now Country Garden is selling a portion (330 hectares) of the Sydney Wilton Greens project and a portion (150 hectares) of its Windermere estate in Melbourne.
The supply factor
Analysts say these sales will hold up development, impacting the number of new homes coming onto the market.

“Chinese property developers have had a tendency in the past to build high-density dwellings, the apartment towers, that’s what they’re extraordinarily good at,” property analyst Louis Christopher said.
“It does mean that those high-density towers that we actually do need, we’ll see less of those over the next two to five years.”
According to the data from the Bureau of Statistics, the number of dwelling commencements over the past 12 months is about 25 per cent lower than the long-term average.
Mr Christopher said the number of current dwelling approvals suggests commencements are about to fall further, to around 140,000 commencements (annualised).
“Based on our current population requirements, we need to build a minimum 200,000 to 250,000 dwellings a year,” he explained.
“The federal government’s five-year target of 1.2 million dwellings requires about 240,000 dwellings to be completed each year.
“What is in the pipeline is already behind schedule in terms what we need and what Labor has promised.”
‘Cash crunch’ back home
After almost two decades of a housing boom in China, Beijing introduced a series of measures to crack down on the sector, limiting the amount developers can borrower and reducing bad debt levels.
That caused the property bubble to burst.

“China’s property sector has contracted since the second half of 2021,” ANZ’s senior China economist Betty Wang said.
“This is the longest downtrend that we’ve observed since the late 1990s when China was trying to restructure the sector.”
Country Garden recently posted a record first half-year loss of $11 billion and is at serious risk of defaulting.
The world’s most indebted property developer Evergrande has lost more than 99 per cent of its share value and has recently filed for Chapter 15 bankruptcy protection in the US.

“The big developers are basically experiencing a bit of a cash crunch,” said Joseph Lai, chief investment officer at Ox Capital.
“So when they ran off or are running short on cash, one of the great ways to raise cash was to sell some of the assets — preferably in a market [where] they can still get reasonable value.”
Country Garden’s Australian branch Risland has told the ABC that depositors’ money is safe and is held in a trust fund.
Beijing forced to act
While Chinese developers say they’re committed to their projects in Australia, Beijing wants them to turn their focus back home.
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China’s property sector accounts for more than a quarter of its GDP.
The downturn has damaged the nation’s post-pandemic recovery and forced the Chinese government to act.
China’s central bank, the People’s Bank of China, recently announced several nationwide property-easing measures, exceeding market expectations.
Now home buyers in Tier-1 cities, including Beijing, Shanghai, Guangzhou and Shenzhen, can put down as little as a 30 per cent deposit on homes, compared to up to 80 per cent previously.
That saw a quick resurgence of home buying in some cities.
But economists say interest rates there are still too high.
“We do think that there is a need for China to continuously cut its policy rates,” Ms Wang said.
“By the end of this year, we’re expecting 1.7 per cent of China’s policy rates, and probably getting to the end of next year, the policy rates could be lowered to 1.3 per cent.”
There’s a chance that China’s property downturn will have some time to play out.
By Marinos Kyneyiros*
The prices in the Cyprus real estate market have been going up in recent years. This increase is mainly due to higher costs of construction materials and growing demand. As a result, both rent prices and home/apartment sales are on the rise.
Lately, it’s become noticeable that many property owners, land developers, and individuals are asking for unusually high selling prices and significantly higher rents for their properties. With our extensive experience in the Cyprus real estate market, we can distinguish when prices make sense, align with data, or become unreasonable. While we’ve previously discussed the impact of increased demand and reduced supply on real estate prices, there are currently some prices that don’t conform to the traditional and logical trends of the Cyprus real estate market.
The Central Bank of Cyprus data for the first quarter of 2023 is revealing. The House Price Index indicates a 7.7% increase compared to the same quarter last year. Specifically, house prices have risen by 6.6% annually, and apartments have seen an 8.4% increase. These increases are significant, considering, for example, that an apartment that was €150,000 in the first quarter of 2022 now sells for €163,000, and a house that was €250,000 now goes for €265,000.
This situation raises concerns, especially because higher interest rates are making it more challenging for households to afford buying homes or apartments. Additionally, rising rental prices are straining the finances of tenants, causing significant problems for them.
Real estate agents, who regularly interact with sellers, buyers, and tenants, often face complaints about the prices being offered. In recent months, many colleagues have received criticism from potential buyers and tenants. It’s important to note that real estate agents don’t set the selling or rental prices for apartments and houses. As the Estate Agents Registration Council, we are committed to clarifying these roles in the property market in the near future. However, excessive price increases should not be left to chance, as they can harm the entire sector and the economy.
*Marinos Kyneyiros, MRICS, President of Real Estate Agents Registration Board
An Australian multi-millionaire property developer has been lashed for accusing workers of becoming “unproductive” and saying a radical rise in unemployment was necessary to “remind people that they work for the employer”.
Founder and CEO of Gurner Group Tim Gurner made the comments at the Australian Financial Review’s Property Summit on Tuesday.
“I think the problem that we’ve had is that people decided they didn’t really want to work so much anymore though COVID and that has had a massive issue on productivity,” Gurner said.
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The 41-year-old identified productivity as a major issue in the housing sector, and a contributor to the current housing crisis.
“Tradies have definitely pulled back on productivity,” he said.
“They have been paid a lot to do not too much in the last few years and we need to see that change.”
Multiple builders have collapsed over the past few months and 1709 have gone under nationwide between July 2022 and April this year, with a shortage in supplies and rise in labour costs often flagged as the major causes.
The length of time between when a contract is signed and when a project is completed can leave projects unprofitable if there is a sudden increase in costs.
Gurner went on to say that he believed unemployment needed to rise.
“Unemployment has to jump 40 to 50 per cent in my view,” he said.
“We need to see pain in the economy.
“We need to remind people that they work for the employer, not the other way around.
“There’s been a systemic change where employees feel the employer is extremely lucky to have them, as opposed to the other way around.
“So it’s a dynamic that has to change.”
Gurner said it was clear to him that action was being taken “to kill that attitude”, evidenced in various layoffs seen in recent times and governments around the world were acting to increase unemployment “to get that to some sort of normality”.
“We’re starting to see less arrogance in the employment market and that has to continue because that will cascade across the costs balance,” he said.
Gurner’s comments have been met with outrage.
Australian Council of Trade Unions president Michele O’Neil slammed his comments as “incredibly offensive” and “just not factually true” while appearing on the ABC’s RN Breakfast on Thursday morning.
“I thought it was a spoof,” she said. “When I first saw it, I thought: ‘This is a sketch’.
“This is an uber-rich guy who is saying the quiet part out loud … he was basically advocating that you should make working people suffer to bring them under control.
“And he was talking about it being a good thing to increase unemployment by 50 per cent … saying that workers had got lazy, that people hadn’t been working hard enough.”
Workers “got us through” the pandemic by working “day and night to keep us safe”, O’Neil told the ABC.
It was “incredibly offensive” for someone who had “made his fortune off the back of skilled tradespersons building the properties that he’s developed” to say tradespeople are pulling back on productivity, she said.
“It was the most extreme arrogance I have heard … said out loud in a long time … it’s actually shocking.
“If people think in Australia there is no class difference, just have a listen to this guy and then think about the working people who made his fortune for him.”
‘People are really suffering’
The economy is currently in favour of corporations, O’Neil said.
“The growth we have seen and productivity in Australia in the last decade, the lowest share of it ever, has been shared with working people,” she said.
“When productivity has been increasing, more and more of it was going to corporate profits and not going back to the workers who are actually building that productivity.
“We’ve also seen one of the lowest investment periods for corporate Australia, ever. And we’ve seen some of the highest growth in CEO salaries and in profits.”
O’Neil said a healthy economy was not one in which company profits and executive salaries soared while workers missed out.
“People are really suffering now with the cost of living,” she said.
There are more people working multiple jobs than we’ve ever had, O’Neil said, and seeing more people out of work and facing job insecurity will not solve anything.
“One in four workers are casual and get no paid leave,” O’Neil said.
“And this multimillionaire thinks that we have to cause more pain to working people so that they’re not as arrogant.
“Well I just find that shocking and offensive.”
Gurner’s comments even attracted the ire of US democrat Alexandria Ocasio-Cortez.
“Reminder that major CEOs have skyrocketed their own pay so much that the ratio of CEO-to-worker pay is now at some of the highest levels *ever* recorded,” Ocasio-Cortez wrote on X, formerly known as Twitter.
Gurner previously came under fire for comments he made about millennials and avocado toast on Channel 9’s 60 Minutes in 2017.
“When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each,” he said.
He went on to accuse millennials of thinking lifestyles portrayed by celebrities, such as the Kardashians, were normal and didn’t require hard work.
“(Young people) want to eat out every day, they want to travel to Europe every year,” he said.
“You have to start to get realistic about your expectations.
“There is no question we are at a point now where the expectations of younger people are very, very high.”
Gurner’s early leg up
Gurner’s first investment was an apartment in St Kilda worth $180,000.
“I was fortunate enough to have my boss at the time approach me to renovate it while he fronted up the money,” Gurner told news.com in 2017.
After selling it for a profit of $12,000 a year later, Gurner combined this with a loan of more than $30,000 loan he received from his grandfather — which he used to obtain a $150,000 loan.
He then purchased a gym, which he renovated and sold.
Gurner was a teenager at the time.
“It was incredibly difficult,” he said.
Gurner Group now reports a development and management portfolio worth of $9.5 billion on its website.
China’s slowdown is actually helping the West
During July, falling demand for credit intensified among Chinese firms and households. Exports are down 15pc year-on-year, hit by the West’s cost of living crisis. And Beijing has stopped publishing data on youth unemployment, after the jobless rate among 16 to 24-year-olds topped 20pc.
Some say the Chinese economy itself is suffering from long Covid, with growth falling to 3pc in 2022 and a forecast expansion of 5.2pc this year. More than respectable elsewhere, these are low growth figures for China. And that’s raising concerns that the People’s Republic will cease being a major growth engine, causing the global economy to slump.
Such concerns have lately begun to crystallise. Hong Kong’s Hang Seng Index slid into “bear market” territory over recent weeks, down over 20pc from its previous peak back in January. The yuan just hit a 16-year low against the US dollar, prompting the central bank to spend heavily propping the currency up.
Now it’s all eyes on China’s vast real estate sector, accounting for 25 to 30pc of GDP – a major economic driver, given the extent of the construction and related services involved. But after years of fast growth built on local government and private-sector debt, the recent property slowdown has seen some big developers fold.
Property giant Country Garden is on the brink of collapse while heavily-indebted Evergrande just filed for bankruptcy protection in the US. With around 70pc of household wealth tied up in real estate, signs the property bubble could burst have hammered business sentiment, causing the world’s second-largest economy to stall. And that’s been noticed – with China’s woes now looming large over financial markets across the world.
During the global financial meltdown of 2008, China launched the largest stimulus package in history and was, under Hu Jintao, the first major economy to emerge from the crisis. President Xi, in contrast, has been reluctant to launch massive fiscal rescue measures.
One reason is that government debt, while the numbers are opaque, has spiralled above 140pc of GDP – much of it at the local government level. So the authorities have instead launched waves of smaller measures to boost demand – including less stringent mortgage conditions – as the Bank of China has slashed interest rates.
I read a research note last week claiming that China’s predicament is now “100 times worse than Lehman”, posing a much greater threat to global stability than the US banking and property sector before the 2008 collapse.
I’m not so sure. Ahead of 2008, US real estate was booming, with lots of homes bought on deposits of 5pc or less. So when an overvalued market started to turn, countless distressed sellers emerged who couldn’t afford their mortgage payments. That lowered prices even more – turning a lurch into a downward spiral.
Lending rules in China have typically set minimum down-payment ratios for first-time buyers up at 30-40pc in large cities, rising to 80pc for investors. That points to a residential property market less brittle than its 2008 US counterpart. And while the rules were recently eased, in a bid to boost confidence, first-time buyers and investors still require relatively stringent 20-40pc down-payments.
What’s more likely than a 2008-style collapse in China, in my view, is a drawn-out period of sluggish growth. China’s economic travails are being compared to Japan in the early 1990s, when its huge asset bubble burst, sparking a decades-long cycle of deflation and, at best, insipid economic expansion.
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