Texas has been known as a place where real estate is cheap, and the cost of living is lower compared to other states. However, this reputation has been deteriorated by increasing property prices, especially in large metropolitan areas, including Houston. Since a significant portion of the state population resides in urban areas, it is essential not to overlook the issue as it may lead to drastic outcomes. The situation is worsened by the COVID-19 and related restrictions and economic downturn. Many people that have lived from one paycheck to another are experiencing unprecedented concerns. Although a moratorium on residential eviction was imposed, and the overall process has been altered to demand more time, current policies do not feature any efficacy. On the one hand, there are renters that cannot pay, and on the other hand, there are landlords who have their own liabilities. The objective of this newly appointed Housing Stability Task Force is to devise an optimum strategy for addressing the present issues. Prior to making any recommendations, it is vital to identify involved stakeholders because the problem is not isolated and is comprised of many parts.
Stakeholder Identification
The two most evident stakeholders in the context of housing issues are renters and landlords. The statistics indicate that the rate of homeownership in large Texas cities are behind national rates, which means the state features the highest number of renters (Fulton, 2020). Homeownership rates are low because of the rising ratio of home prices to income (Huang, 2017). Families merely cannot afford to buy property, which forces them to search for renting opportunities. An analysis of how homeowners managed to buy their property yields another stakeholder. Most houses in Texas are bought for money lent from banks, which means rent should be paid on time for landlords to pay for their liabilities. Utility providers are another set of stakeholders because landlords are responsible for paying for some of the utilities, including sewage, water, and garbage. Finally, the local government and the federal government complete the list of stakeholders. Effective housing policies should consider the interests of all these parties, and all stakeholders should be involved in order to solve the problem.
On Preventing Evictions
The primary issue renters are facing is the inability to pay for rent because many families lost the source of their income due to introduced restrictions. As a result, tenants are at risk of being evicted and going onto the streets. Extending the moratorium on eviction is the most straightforward way of addressing the issue, but this measure should not be introduced in isolation. Making the process of eviction more challenging does not resolve the problem because it will result in the waste of resources. Government officials will need to spend more time on individual eviction cases, which means more budget will need to be utilized. Instead, the local government needs to prohibit eviction entirely until COVID-19 restrictions are canceled.
While cafes and restaurants are closed, the construction industry is preparing to reopen in Texas. It can be recommended that individuals that do not have any financial reserves apply for low-skill jobs in construction. However, people must be aware of the guidelines provided by the Harris County Public Health Department (Reopening guidelines, 2020). Stimulating the construction industry may have positive effects on real estate affordability. In response to stagnating household incomes, property prices must decrease.
Helping Landlords
Prohibiting evictions will not yield any practical benefits if imposed in isolation. Landlords have liabilities before banks and utility providers, which means their issues should also be addressed. One potential solution is to enforce a loan moratorium under which landlords will have the opportunity to pay for their debts later. However, banks owe money to people, and if depositors decide to withdraw their short-term and long-term investments, the market may collapse. Similar situations have occurred several times in the history of the United States when banks and investment firms could not sustain the demands of their depositors. Therefore, the government should proceed with caution when imposing policies regarding financial institutions. A loan moratorium should only be proposed in combination with a postponement for banks, under which they do not pay to their depositors until restrictions are withdrawn. In summary, this combination of payment suspensions is to pause the liability flow. Renters do not pay to landlords, property owners do not pay for their mortgage, and banks do not return money to depositors.
Related Concerns
The issue regarding high real estate prices had been coming long before the COVID-19 entered people’s lives. The raw land price dynamics indicate that prices have risen by 50% in five years, between 2012 and 2017 (Fulton, 2020). These increasing costs impede investment into construction due to unaffordability. At the same time, not only renters are unable to purchase their own property, but they also struggle with paying rent because of increasing rent prices (Shelton, 2020). In all of the largest cities in Texas, the number of low-rent housing opportunities has decreased substantially (Fulton, 2020). Therefore, COVID-19 has only magnified the issue, but it should not be considered as its source.
This cascade of house-related concerns may be partially caused by high property taxes throughout the state. Considering the fact that income levels are lower in Texas compared to other states, high property Taxes are not justified. The current rate is 1.81%, which is even higher than in New York and California (Fulton, 2020). This tax should be canceled entirely until the end of the pandemic and should be reduced significantly thereafter. The state government should ensure that housing does not occupy more than 30% of the household budget. Unfortunately, renters are often forced to spend as much as half of their income on the accommodation they do not own.
COVID-19 emphasized areas where the state government should pay more attention. Short-term measures discussed in previous paragraphs will not lead to fundamental changes in the real estate industry in Texas. Therefore, the government should start thinking of long-term strategies in keeping property prices low. First, detailed research should be conducted in order to determine the exact causes of the problem. Second, after identifying the reasons, the government should devise a long-term comprehensive plan. As with short-term solutions, long-term strategies should involve and consider the opinions of all stakeholders, including communities, landowners, tenants, banks, and the federal government.
Conclusion
Short-term recommendations for addressing housing concerns include imposing a moratorium on eviction, along with postponing payments for loans on behalf of debtors and for deposits on behalf of banks. Property tax should be canceled entirely for the time of the pandemic and should be reduced after restrictions are lifted. To solve the issue in a comprehensive manner, the state government should devise a long-term plan after determining why house prices are rising throughout the state.
References
Fulton, W. (2020). Can Texas afford to lose its housing affordability advantage? Kinder Institute.
Huang, M. (2017). Vulnerabilities to housing bubbles: Evidence from linkages between housing prices and income fundamentals. International Finance, 20(1), 64-91.
Reopening guidance: Construction workforce [PDF document]. (2020). Harris County Government.
Shelton, K. (2020). As rents and home prices go up, once-affordable Houston grows less accessible. Kinder Institute.