Texas Senate Local Government Committee
Chair Bettencourt, Vice Chair Springer, and members of the Senate Local Government Committee, thank you for allowing me to offer testimony on the issue of reducing minimum lot size requirements. I am Emily Hamilton, a senior research fellow at the Mercatus Center at George Mason University, where I am codirector of the Urbanity Project. I study housing policy and housing affordability across the country and how reforms to housing policy like those proposed in Senate Bill 2037 have affected housing market outcomes.
You don’t need me to tell you about the increasing problem of housing affordability in Texas. As land use regulations in other states are pricing people out of coastal markets, Texas’s own land use regulations threaten to cause similar problems here.
Research shows that zoning rules and long, uncertain approval processes for new housing construction are the key drivers of housing scarcity and high house prices. We see that places that make it easy to build new housing of all types can remain affordable even as they grow quickly. Limiting minimum lot size requirements is one way to create opportunities for the lower-cost construction Texas needs. I have attached to this testimony a policy brief I authored on Houston’s minimum lot size reforms as well as a study by my colleagues Salim Furth and Nolan Gray that analyzes the effects of minimum lot sizes elsewhere in Texas.
MINIMUM LOT SIZE REQUIREMENTS AND OPPORTUNITIES FOR REFORM
Minimum lot size requirements mandate that each house sit on a yard of a certain size. They take away property owners’ right to build a house on a smaller piece of land than rules require. In places where land is expensive, these rules mandate that each house is packaged with an expensive piece of land. Requiring that each house has an expensive yard also leads home builders to build only large, fancy houses, because land prices alone push home prices beyond what families looking for basic starter homes can afford. Minimum lot size requirements are one of the land use regulations that has the greatest effect in making housing expensive.
Allowing small-lot construction is a proven path toward abundant, relatively low-cost housing. Because small-lot construction makes lower-cost fee-simple homeownership possible, it can take advantage of the simple financing and lower interest rates available for owner-occupied housing. And in places where this type of development is legal, homeowners have shown that it’s a type of housing they want.
Texas policymakers do not need to look to other states for a successful model of lot size reform. The country’s most successful example of minimum lot size reform comes from Houston. In 1998, Houston policymakers reduced the minimum lot size requirement within the city’s I-610 Loop from 5,000 to 1,400 square feet. 5 This reform has facilitated the construction of nearly 80,000 new houses.
Economist Mike Mei estimates that the reform has benefited the average Houston household by about $18,000. Owing, in part, to its openness to small-lot construction, Houston has a median house price below the national median despite having grown faster than the rest of the country for decades. Following the success of the 1998 reform, Houston policymakers expanded the reform in 2013 to cover the entire city. This small-lot construction takes place in many parts of the city, both in new subdivisions at the outskirts of the city as well as in infill properties close to job centers.
Local governments’ authority to regulate housing development, including minimum lot sizes, rests on their power to pass rules that protect Texans’ health, safety, and welfare. But when local land use restrictions cause statewide affordability problems, state legislators have a responsibility to set some limits on the extent to which local governments can restrict property owners’ right to build housing.