Zoning

How Texas Beat California on Housing

YIMBY policies in Texas have led to lower rents and increasing supply. The same cannot be said for California.

and |

HD Download

San Francisco and Austin are both known for their trendsetting tech sectors and cultural scenes. But while Austin is enjoying the best of times, for San Francisco, it's starting to feel like the worst.

San Francisco's population has dropped for the fourth year in a row. It saw one of the largest percentage declines among major U.S. cities during the pandemic. Meanwhile, Austin's population is exploding while rental prices continue to get cheaper and cheaper.

In Austin, you can rent a gorgeous apartment for about half the price of a similar place in San Francisco that only has about half of the amenities.

"I had a one-bedroom in San Francisco, a lot smaller. I didn't have an in-unit washer-dryer," says Alim Virani, an engineering manager at Etsy who moved from San Francisco to Austin during the pandemic. "Here, I'm living in the heart of downtown. Wonderful views; [a] two-bedroom; really sprawling, modern building. I'm getting way more for a little bit more."

Virani isn't the only one making the cross-country move. The greater Austin area grew by 11 percent between 2020 and 2024. Yet despite the influx of people, prices haven't gone up—they've actually dropped.

Jake Wegmann, a professor at the University of Texas at Austin who specializes in housing affordability and real estate development, says there are several reasons why Austin's rents are falling even as more people move to the capital of the Lone Star State. But there's one key reason: In Texas, counties can't zone outside city limits.

That opens the floodgates for new construction. Developers outside Austin's city limits can simply decide to build 100 new units.

"There are some regulations," Wegmann explains. "It's just a whole lot less regulated than probably just about any other state in the country."

Compare that to San Francisco, which, along with New York City, has one of the most regulated housing markets in the country.

"There's something that's gone awry when you've got prices that only allow for millionaires to access the American dream of home ownership," says Nicole Nosek, a Berkeley transplant who moved to Austin in 2019. She now leads a nonprofit aimed at cutting red tape to make building easier. 

In Austin, she says, "after 45 days of waiting for the city department to give your permits back, you can then go to an engineer or you can go to an inspector to work on the permits to be able to speed up some of that backlog."

In San Francisco, it can take over 627 days to get a simple permit, explains Nosek. That's part of the reason the city added around 1,800 new units in 2023—about 13 times fewer than Austin.

San Francisco also has a supply problem rooted in rent control. More than two-thirds of tenants live in rent-controlled units, often priced well below the market rate. The result? People stay put and new housing doesn't get built. Texas, on the other hand, gets to avoid this scenario entirely.

"Austin has a vibrant community that is building more housing, that is advocating for more housing. So you don't have rent stabilization," says Virani. "But what you do have is rents [that] are stabilizing naturally through the influx of more units and responding to people's demands for those units."

The idea is simple: A lightly regulated housing market benefits everyone. And in Texas, support for this approach transcends party lines.

Liberal Austin has embraced YIMBY-ism ("yes in my backyard"), and it's part of what drew Virani to move there. In San Francisco, however, the movement has struggled.

"I was actually quite involved in the YIMBY movement in San Francisco…but it's just been really hard to get liftoff in terms of getting new development," Virani says.

"You often saw people being like 'Well, what are you coming to San Francisco for? You're gentrifying the city,'" he adds. In Austin, "there is much less of that. There's almost like an enthusiasm of 'Come to Austin….We actually need you to come rent from us.'"

With new buildings popping up across the Texas landscape, landlords are fiercely competing for tenants.

"We have a lot of inventory and not enough population to fill that inventory," says Austin realtor Yasmine Acebo, who explains that Austin landlords are offering everything from several weeks of free rent to gift cards, cash bonuses, free Wi-Fi, and paid utilities to get tenants to move in. "It really just depends [on] what that property itself has to offer."

Acebo explains that Austin is evolving into a more walkable, amenity-rich lifestyle. "I really think that Austin wants to be at the top with the rest of the big, trendy cities, such as Los Angeles, Miami, Chicago, New York. So having living that's walkable to so many restaurants, gyms, community centers, I think that's the step that they're trying to take in that direction."

San Francisco and Austin represent two distinct paths: growth vs. stagnation, markets vs. government, and welcoming newcomers vs. protecting the status quo.

Austin proves what economists have known for centuries: Build more housing and prices will come down. The question is, will older, more established cities like San Francisco catch up, or will they continue to hemorrhage talent and turn away the very people who want to call them home?

 

Music: "Spider Theory" by Sage Oursler via Epidemic Sound; "Unsolved Mystery" by Josef Falkenskold via Epidemic Sound; "Which Way" by Josef Falkenskold via Epidemic Sound; "Domo Arigato" by Lofive via Epidemic Sound; "Kiss Me Honey" by Nicky Dowling via Epidemic Sound; "An Introduction" by Dream Cave via Epidemic Sound; "Tightening Tensions" by Josef Falkenskold via Epidemic Sound