What’s making Houston’s affordability problem worse? Homebuilders say it’s development delays

Luna Ruth

If there’s one thing most Houston homebuilders can agree on it’s this: Building an affordable home isn’t getting any easier even in a market recognized for its relative affordability.

Skyrocketing diesel prices, shortages of building materials and permitting delays are raising costs and slowing down construction times for homebuilders in Houston. That’s pinching their ability to quickly develop lots and build homes in a market starved for inventory, some of the region’s top builders and developers said at an industry event held Tuesday by Greater Houston Builders Association.

“Speed, speed, speed. Time kills,” said David O’Reilly, CEO of The Woodlands development company Howard Hughes. “When it takes an extra nine months to deliver a finished lot to (builders), that shrinks supply and demand doesn’t change. Pricing goes through the roof.”

More than 800 people attended the event at the Hilton Americas as affordability remains one of the biggest challenges facing housing. In addition to record home prices — the average price in Houston has soared past $400,000 — mortgage rates have risen rapidly, topping 5 percent after starting the year near 3 percent.

The supply of vacant finished lots ready for sale to homebuilders remains historically low, which means builders have fewer parcels to site new homes. Staffing shortages at local government agencies responsible for permitting are pushing back timelines for both lot development and home construction, noted another panelist at the event, Jim Jenkins, vice president of master planned communities at Toll Brothers, a national homebuilder with local communities stretching from Manvel in the south to Conroe in the north and Fulshear in the west.

“In several of our communities, we’re having to get approvals for the same thing in the city level and the county level,” Jenkins added.

Another big time suck? Supply chains are getting further tangled by rising diesel prices, Jenkins said. A typical construction site might see dozens of trucks flowing in and out every day as materials are delivered. But now truckers are hesitating to deliver materials because diesel costs are making it tough for them to break even, Jenkins said after the panel.

“When the price of diesel fuel is getting to the point where you really can’t afford to drive a truck anymore — you’re going to have to do something about that,” Jenkins said. “But there’s a lot of things we can’t control.”

As shortages of building materials continue to plague builders, some are stockpiling supplies and equipment, such as HVAC systems, noted Allan Merrill, president and CEO of Beazer Homes, an Atlanta company with several communities in the Houston area.

“That’s not really a sustainable answer; builders aren’t warehousers,” Merrill said. Instead he said builders must simplify houses, give manufacturers more lead time and only sell homes that they can deliver in a reasonable time.

The good news is more building permits are getting issued in the Houston area, an indicator that more supply of new homes could be coming down the pipeline. The number of single-family building permits issued in the Houston area in the first three months of the year hit 15,072 — a nearly 17 percent increase from the same period in 2021, according to census data cited by Ted Jones, chief economist at Stewart Title, a Houston title insurance company. That’s nearly 8 percent higher than the permits issued during the same period of 2006, when the nation was in the midst of a housing boom fueled by subprime lending.

“In 2006 to 2008, we sold home just to flip them,” Jones said. “This time we’re selling home for people to live in and rent … because people are moving to Texas.”


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