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Labor shortages, construction costs make it tough to build affordable homes in Austin

Friday, July 21, 2017 by Syeda Hasan

The rising cost of construction has made it harder to build affordable homes in Central Austin, housing analysts said after the Home Builders Association of Greater Austin released its midyear housing forecast Thursday.

Researchers expressed general optimism about the growth Austin has seen for years but said labor shortages, increased construction costs and permitting regulations have all made it tougher for builders to construct new affordable homes, specifically homes priced at or below $300,000.

“If a builder is providing a product below $300,000, he can’t build them fast enough,” said Vaike O’Grady, regional director of the real estate research firm Metrostudy. “There’s just so much demand for that price point.”

O’Grady said these trends don’t come as a surprise. They’ve been a growing issue in Austin for the past decade.

“The smart builders are finding ways to build homes differently and building smarter,” she said, “because the current way is not only expensive from a construction material standpoint, but it also requires a lot of labor.”

For now, O’Grady said, high prices continue to push new buyers outside the city center, where some affordable homes remain. That poses a challenge to Austin’s goal of becoming a more compact and connected city. Even in those far-flung areas, she said, some potential buyers are virtually shut out of the market.

“As strong as the Austin housing market is, I think it’s also held back by two factors,” she said. “One, the millennials, who are just starting to form families and should be purchasing homes, are saddled with student debt, and they’re also facing increasing housing prices, so it makes it more of a challenge for a millennial to get that starter home, if you will.”

One way builders are responding is by getting away from single-family homes, according to Tim Riley, a broker with the firm Riley-McLean Land. He said the area is seeing more of what’s called “missing middle” housing in the suburbs.

“We’re talking about town homes, attached product, duplexes, condos, things of that nature,” he said, “out in some markets where we haven’t historically seen them.”

While much of the recent growth has been concentrated in areas northwest of Austin, builders also have their eyes on recent infrastructure investments in places like Del Valle to the southeast of town. In the coming years, that region could be the next place for buyers to get the most bang for their buck.

This story was produced as part of the Austin Monitor’s reporting partnership with KUT. Photo by Jorge Sanhueza-Lyon/KUT.

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