The 2021 State of Housing in Harris County and Houston

Photo by sandrafdzh/flickr

Building Better Cities Building Better Lives Funded in part by

Research on housing is a core priority area for the Kinder Institute for Urban Research. “The 2021 State of Housing in Harris County and Houston” was made possible by lead funding from Wells Fargo.

June 2021

Rice University Kinder Institute for Urban Research MS 208, 6100 Main St. Houston, Texas 77005 Telephone: 713-348-4132 kinder.rice.edu

For more information, contact [email protected].

Contributors: Stephen Averill Sherman, John Park, Luis Guajardo, Kyle Shelton, Jenna Lessans, Ksenia Mokrushina, and William Fulton

Suggested Citation: Sherman, Stephen Averill, John Park, Luis Guajardo, Kyle Shelton, Jenna Lessans, Ksenia Mokrushina, and William Fulton. “The 2021 State of Housing in Harris County and Houston” Report. Kinder Institute for Urban Research, Rice University. Houston, TX: Kinder Institute for Urban Research, 2021.

DOI: doi.org/10.25611/81sa-pp08 TABLE OF CONTENTS Table of Contents

2 Executive Summary 7 Introduction 13 Section 1. Economic Trends 17 Section 2. Housing Demand And Supply 29 Section 3. Affordability and Access to Housing 38 Section 4. Economic Segregation and Housing Resilience 55 Conclusion

The 2021 State of Housing in Harris County and Houston 1 EXECUTIVE SUMMARY Executive Summary

he 2021 State of Housing in Harris County and Houston uses a range of Tindicators to track the challenges, opportunities and trends in the region’s housing system.

This second annual report and the underlying data it these disasters could lead by examining the trends under- contains allows policymakers, housing providers and way prior to 2020. residents to see the bigger picture of the housing system. COVID-19 has claimed hundreds of thousands of lives Isolating both troubling and promising trends presents across the United States. Attempting to stem the tide an opportunity to craft policy interventions and invest- of the pandemic, many people have spent more of their ments that can target the key issues affecting access to days in their homes more than ever over the past year. safe, affordable and dignified housing for Harris County For those fortunate enough to live in safe, affordable and residents. Further, with knowledge about where improve- internet-connected homes, this was disruptive but not ments have been made, the public and private sector can insurmountable. Yet for those living in substandard, undertake efforts to scale positive outcomes. crowded or disconnected homes, losing access to schools This year’s report tracks the status of the housing system and workplaces increased stress and worsened personal at the county and city levels. Neighborhood level indica- health. For people who still needed to work outside the tors are available at www.datahouston.org on the State of home, going to work also meant potentially bringing the Housing Dashboard. With several key indicators in the infection back home. Meanwhile, the financial stresses report, results from Harris County and Houston are com- caused by the pandemic brought thousands of households pared to other peer cities and their home counties. to the brink of losing their homes.

As with last year’s inaugural report, the 2021 State of Similarly, Winter Storm Uri caused massive damage to Housing documents that, like other major metro centers, people’s homes, forcing thousands into hotels or other Harris County and Houston’s housing sector is failing arrangements. It amplified the realities of deferred main- many and rewarding too few. For higher-income residents tenance for the many homes with exposed pipes, poor and most homeowners, the system is creating large bene- insulation and other neglected systems. Uri also occurred fits and stability. Yet lower-income households, especially alongside COVID-19, which complicated efforts to find lower-income renters, find themselves squeezed into safe, warm housing. On top of all that, many of those unaffordable and often unsafe homes. Access to the ranks affected by Uri were still recovering from previous events of homeownership, and the inherent benefits that come such as Hurricane Harvey and Tropical Storm Imelda. from that status, is growing more elusive. Disruptions such as COVID-19 and Uri lay bare the These divergent paths were also magnified by the ongo- underlying instability many households confront each ing effects of the COVID-19 pandemic and Winter Storm day. Those struggling to pay their rent or mortgage during Uri, which will leave ripple effects on the region’s hous- a normal period will be doubly taxed during a major ing system for years to come. Through this year’s State of disruption. As with the aftermath of Hurricane Harvey, Housing, Kinder staff hopes to better understand where lower-income Black and Hispanic residents experience

2 Rice University Kinder Institute for Urban Research EXECUTIVE SUMMARY slower access to recovery funds, secure less funding and renter household income continued to grow. The county’s have the least private resources (such as insurance and median sales price increased by $9,900 from 2018 to 2019, family financial support) to recover.1 but median household income (MHI) for renters grew by only $1,142. In 2019, the median sales price in the county Housing is an essential building block for wealth creation. was $229,900; however, a renter earning the county’s me- For those with access to the system, ownership of a home dian renter household income could only afford to buy a provides an entrée into generational wealth. People who home costing $135,603, assuming they spend 30% of their can afford higher rents in high-amenity communities income on housing. With housing prices increasing after close to opportunities have more pathways to success. COVID-19, it will likely become even harder for renters to However, for those unable to afford safe homes or build enter homeownership. equity through ownership, there are few avenues to build wealth or create stability. Beyond not being able to own a home, a growing share of renters have difficulty paying the rent Key findings on the homes they already live in.

Overall the affordability gap is shrinking, Renters have a large cost burden, and it is getting worse, but not for renters. jeopardizing Houston’s and Harris County’s statuses as affordable places. Between last year’s report and now, It became harder for renters to enter homeownership in the share of renters who are cost-burdened became the 2019. Although the overall affordability gap for residents majority in both the city and the county (51% in both in the county slightly shrunk because of lower interest geographies, up from slightly less than 50% in 2018 in the rates, the gap between median sales price and median county and 50% in the city. While incomes did increase, they did not increase as fast as rent, which grew around 1 Howell, Junia, and James R Elliott. “Damages Done: The 5% locally.) Houston and Harris county’s renters are more Longitudinal Impacts of Natural Hazards on Wealth Inequality in the United States.” Social Problems 66, no. 3 (August 1, 2019): 448–67. cost-burdened than renters in Dallas, Chicago, Atlanta https://doi.org/10.1093/socpro/spy016. and those cities’ host counties.

Affordable housing price and gap for all buyers, Harris County and Houston, 2018 and 2019

$300,000

$280,839 $12,045 $257,566 $50,939 $250,000 $30,373 $37,566 $260,455 $238,627

$200,000 $140,190 $147,358 $94,297 $92,679

$150,000

$135,603 $132,310 $127,321 $121,642 $100,000

$50,000

$0 2018 2019 2018 2019 2018 2019 2018 2019 Homeowners, Renters, Homeowners, Renters, Harris County Harris County Houston Houston Affordable housing price Affordability gap Affordability gap (excess) for homeowners

Data Source: Houston Association of Realtors, 2020, U.S Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019

The 2021 State of Housing in Harris County and Houston 3 EXECUTIVE SUMMARY

of the largest landlords in the country but much more data is needed to understand who Harris County and Houston residents are renting from and what challenges they face in housing large segments of the population.

Affordable housing supply does not keep up with demand, and rising construction costs suggest this problem will grow.

The supply of affordable units is shrinking. The county lost units with a gross rent less than $1,000 (which are affordable for a renter at the median household income level, or MHI), while the number of units with rents more than $1,500 continued to grow. Meanwhile, there is not an adequate supply of affordable homes for purchase. Median sales prices in the county are around $230,000, meaning that a hypothetical 20% down payment of

Photo by gsloan/flickr $46,000 actually exceeds the 2019 renter household median income ($42,257 in the county, $41,231 in the city). Perhaps because of local renters’ housing insecu- Not only the poor, but middle-income renters and rity, Harris County has a massive eviction rate. buyers are increasingly squeezed, too. Harris County also has a higher eviction rate than the Roughly one quarter of rental households in the county three comparison cities’ host counties. As of 2019, the earning between $50,000 and $75,000 are cost-burdened. eviction filing rate—the ratio of eviction filings to renter The majority of renters with incomes in the range of the households—was 8.8%, meaning that around one in 11 renter MHI—between $35,000 and $50,000—are cost bur- renters had an eviction notice posted to their door. The dened or severely cost burdened. For existing homeown- eviction rate was around 4.5%, meaning that more than ers, buying a new home within the county has become one in 25 of renter households is evicted. While a federal harder, as the ratio of median home value to median own- moratorium during COVID-19 decreased evictions, local er household income continues to increase, particularly leadership did not adopt the type of protections that ap- in the city. Middle-income buyers who wish to stay local pear to have further slowed evictions in other Texas cities. must increasingly pursue homes in more affordable areas, More knowledge about landlords will help likely outside of the county. stakeholders better understand the dynamics of Houston is adding households but losing people, a renter-majority city (and soon-to-be majority showing that households are getting smaller, renter county). while larger households are locating in suburban Landlords are uniquely hard to research. U.S. Census Harris County. American Community Survey (ACS) data does not report While it is often said “Houston is a great place to raise a their demographics as they do for renters. Additionally, family,” the fastest-growing household types are house- for tax and liability reasons, even landlords with few holds without children. The data shows that Houston is properties can set up corporate entities to manage their becoming smaller, more childless and wealthier. The ACS investments; records for these entities are difficult to link shows that the City of Houston gained 27,000 households to larger holding companies. Data does suggest that most between 2018 and 2019, but it actually lost 9,000 residents. local landlords with fewer properties—“mom and pops”— The fastest-growing household types, in both the city have outstanding mortgages on their rental properties, and the county, are single people living alone, followed by putting them at risk of foreclosure during the COVID-19 unrelated people living together. The number of smaller, economic crisis. The wave of nonpaying tenants could higher income households also rose in both geographies place more pressure on these landlords to quickly evict between 2018 and 2019. tenants. Larger institutional landlords have been purchasing foreclosed single-family homes in Harris County’s suburban areas. These large, national trusts include some

4 Rice University Kinder Institute for Urban Research EXECUTIVE SUMMARY

Building footprints and floodplains, Harris County

Data Source: Harris County Appraisal District, 2019.

Houston and Harris County are becoming older suburbs. The city also lost roughly 36,000 foreign-born and less diverse, while the rest of the metro area residents while the county gained 8,000, also suggesting outpaces their growth. suburban movement within the county.

The city’s shrinking population and the county’s lagging Economic segregation and inequality remain a growth highlight the challenge of a declining tax base and pervasive issue that transcends housing and raise questions about how the area’s housing stock is or affects Houstonians’ prospects of upward mobility. is not meeting the needs of changing demographics. The The places where poorer and working class residents can metro area grew at a faster rate than either Harris County buy and rent are increasingly in the outer reaches of the or Houston in the last ten years (19% for the metropoli- county, farther from services, jobs and other opportuni- tan area, 15% Harris County, and 10% Houston). Harris ties critical to upward mobility. Data on mortgage loans County’s share of retirement-aged people grew in the past for affordable housing show that buyers need to “drive year, but the county’s share of people in the 20–24 age until they qualify” and buy homes in these far-flung areas. cohort declined. This intra-regional change also differs by Loan data also show that Black and Hispanic home loan race/ethnicity. In both the county and the city, the share applicants are denied at a higher rate, and when they are of Hispanic residents is growing more than any other of approved, they pay higher interest rates on lower-value the large ethnic or racial groups. Between 2018 and 2019, homes. Living in a service-poor area, paying higher mort- nearly 20,000 Asian Houstonians moved away from the gage payments and living in a home that’s less likely to city, all but erasing any increase since 2010. But the county appreciate also limits one’s chances for upward mobility. gained Asian residents, suggesting movement to close-in

The 2021 State of Housing in Harris County and Houston 5 EXECUTIVE SUMMARY

Total number of severely crowded households by tenure, 2019

Severely Crowded Severely Crowded Renter Occupied Owner Occupied Rental Households Owner Households

Rate of Rate of Rate of Rate of

Geography 2018 2019 Change 2018 2019 Change 2018 2019 Change 2018 2019 Change

Harris 734,584 769,168 4.7% 18,988 23,256 22.5% 865,773 878,216 1.4% 5,158 5,572 8.0% County

Houston 493,513 522,942 6.0% 13,479 17,0 8 4 26.7% 355,592 353,562 –0.6% 2,471 2,837 14.8%

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2019.

Flooding is a growing risk: Homes are still being The suburbs are the site of a growing trend in built in the existing 100- and 500-year floodplains. concentrated poverty

The region had at least three 500-year floods in the past 20 Another truism that State of Housing data challenges is years, yet new homes are still being built in floodplains. that severe poverty and racist exclusion is only a challenge Though concerted buyout efforts have reduced the num- in “the inner city.” Various 2019 data show that housing ber of structures in the current floodway (i.e., the areas instability appears to be a big problem in the suburbs, closest to bayous and other water bodies), the number of too. A large number of the region’s high poverty census housing units in the larger 100 and 500-year floodplains tracts are beyond the 610 Loop and, increasingly, Beltway actually increased between 2018 and 2019. The city and 8 as well. The Community Tabulation Areas (CTAs, county have around $15 billion and $30 billion of residen- census-derived community geographies created by the tial home value built in these floodplains. Units in the Kinder Institute) with the highest number of mortgage floodplain outnumber insurance policies by a ratio of 4 to foreclosures are almost all beyond Beltway 8, in com- 1, meaning that a massive amount of residential wealth is munities like Bear Creek, Spring and Atascocita. The 10 vulnerable to washing away in the next storm. highest eviction rate CTAs are all outside of the 610 Loop and mostly beyond Beltway 8 as well, while evictions are Cost-burdened households have fewer resources growing the most in areas southwest of the Loop. The out- to weather the inevitable next disaster er suburbs also have a large number of the county’s poor COVID-19 and Winter Storm Uri showed that housing elderly residents, stressing the need for targeted policies, instability can make people more vulnerable. In both infrastructure, and social services to reach people in need Houston and Harris County, renters are three times in the county’s edges. more likely to live in severely overcrowded homes than homeowners. Even before accounting for the economic challenges of the pandemic, there was a 25% increase in severely overcrowded rental properties between 2018 and 2019. During the pandemic, overcrowding likely contributed to community spread. Additionally, one in seven unsheltered people in Harris, Montgomery, and Fort Bend counties said the reason they were without homes was because of COVID-19. Even homeowners face housing insecurity challenges, as the county experiences at least 8,000 foreclosures every year. In each of these cases, housing vulnerability contributes to economic instability and greater health risks. Similar patterns will repeat themselves in future disasters. Photo by Josh Hallett/flickr

6 Rice University Kinder Institute for Urban Research INTRODUCTION Introduction

he events of 2020 made clear the importance of having access to stable, safe Tand affordable housing. During a global pandemic and economic crises that altered the lives of residents of Houston, Harris County and the entire planet, home transformed into a place of rest, work, school, exercise and so much more. The global pandemic also affected people’s ability to build and live in stable homes. Construction materials became scarce and expensive. Residential preferences shifted alongside work patterns. Housing instability grew for millions. All of those shifts built upon the system as it was before the pandemic.

This year’s State of Housing weaves together indicators ment and gross domestic product. But the report also about where the regional housing sector stood before highlighted that the local housing system was developing the disruptions of 2020 and will begin to track how the into two different pathways. Down one pathway, mostly system has changed amidst them. higher-income homeowners were benefiting from rising values and higher-income renters had their pick of a As with the inaugural State of Housing in Harris County growing number of units in high-opportunity, ameni- and Houston, this report aims to document shifts occur- ty-rich areas. Down the second pathway, median- and ring from year to year within Houston and Harris County. lower-income households found their housing options The 2021 State of Housing report will use some data that constrained by rising prices and property taxes, rising shows some of the impacts of COVID-19 and Winter rents and a shrinking supply of affordable units. These Storm Uri, but it will primarily narrate the realities of the radically divergent housing outcomes are contributing housing system going into the pandemic and provide a to the growth of the racial wealth gap and increasingly baseline for future analyses. Using the newest available limiting the options of low-income renters. U.S. Census Department American Community Survey (ACS) data, this report will compare critical housing indi- The 2021 report describes many of the same trends from cators from 2018 to 2019 at the primarily city and county 2020’s report. Home values have increased, and there is level but not neighborhood level because of limitations still a good deal of new construction. The number of rent- with the 1-year ACS survey. Where possible, non-ACS in- er households also continues to increase in both Harris dicators from 2020 are included and explicitly highlight- County and Houston. New households tend to contain ed. Throughout this report, indicators that are likely to be fewer people in more expensive homes. Combined with greatly impacted by COVID-19 are also flagged and will the financial impacts of the pandemic, these trends have receive continued attention in future years’ reports. crunched lower-income families even more. Overcrowding has increased locally, and severely overcrowded homes The 2020 inaugural report documented a booming hous- (with more than 1.5 residents per room) increased by ing sector, one near the top of new units built nationally around 25% in the city and county between 2018 and 2019. and a key driver of regional population growth, employ-

The 2021 State of Housing in Harris County and Houston 7 INTRODUCTION

While foreclosures and evictions remained high during the pandemic, targeted policies slowed them. However, KINDER HOUSTON AREA SURVEY the long-term fate of these policies remains uncertain. HOUSING TOPICS

In the future, it appears likely that households that main- # 2021 marked the 40th anniversary of the tained steady income will be able to access stable housing, Kinder Houston Area Survey (KHAS). As it was while households that felt this year’s crises will continue implemented during the COVID-19 pandemic, to see the negative effects accumulate. with the assistance of new associate survey director Dr. Robert Bozick, it was truly a KHAS COVID-19 impact without precedent. Several findings relate directly to the State of Housing and help us As with environmental crises like hurricanes and winter better understand COVID-19’s impact. storms, or economic disasters like the 2008 economic meltdown, COVID-19’s impact is worse for those living # Perhaps surprisingly, this past year local in less stable housing. Because New York City was the residents seemed to have an easier time paying pandemic’s first hot spot in the United States, at first for an emergency (Figure 1). Yet around 20% of many people assumed a link between urban density and local residents still could not come up with $400 the disease’s spread. Yet it was not urban density but in an emergency, the ability to pay varies highly housing density and overcrowding, coupled with exposure by race/ethnicity (Figure 2) and 28% had serious to the virus, that accelerated the contagion. In New York problems paying for housing during the past 12 City and in Houston (as shown in this report), ballooning months (Figure 3). housing costs have forced more people to live under one # Survey data illustrate the virus’s uneven effect roof. Overcrowding means that if one person catches the by race/ethnicity. Black and Hispanic residents disease at work, it is harder to quarantine from other were more likely to know someone who was people in the home, who in turn get sick and lose income personally affected by the virus (Figure 4). (from health care costs, death or lost work time), creating These two groups were much more likely to a negative feedback loop. Researchers consistently found risk exposure to the virus at work, out of the a relationship between housing precarity and COVID-19 necessity of getting a paycheck (Figure 5). transmission: more overcrowding, eviction and foreclosures meant more COVID-19 cases and more deaths.2 # Another surprising finding was that while working from home theoretically would increase Houston’s and Harris County’s housing instability crisis the preference for more space, a majority of existed before COVID-19. Because of this systemic failure, respondents still preferred to live in a smaller the region’s poorest residents were vulnerable to the im- home with more nearby amenities (Figure 6). pacts of the pandemic and will be in a worse state for the next crisis, be it economic collapse, hurricane or winter storm. The housing data in this year’s report come from rents dipped and rental properties stayed empty longer,3 2019 and represent the baseline at the moment COVID-19 while (as shown in this report) an increased supply of made many bad trends much worse. high-end rental units ensured many choices. For buy- COVID-19 had different impacts for wealthier renters and ers, historically low interest rates, plus people wanting buyers. For wealthier renters, the pandemic was an excel- more space because of lockdowns, increased demand lent time to sign a lease: middle-upper and upper-income for homes, which created a white-hot home purchase market.4 Home sales happened more quickly and overall

3 Dulin, M. (2020, June 10). Houston-area apartment rents continue to 2 The list is long but Nande et al. (2021) has a useful literature review fall amid COVID-19 in May. Community Impact Newspaper. https:// and centers specifically on the effects of eviction moratoria on communityimpact.com/houston/heights-river-oaks-montrose/ COVID-19 spread. See Nande, A., Sheen, J., Walters, E. L., Klein, housing-real-estate/2020/06/10/houston-area-apartment-rents- B., Chinazzi, M., Gheorghe, A. H., Adlam, B., Shinnick, J., Tejeda, continue-to-fall-amid-covid-19-in-may/ M. F., Scarpino, S. V., Vespignani, A., Greenlee, A. J., Schneider, D., 4 Feser, K. (2021, April 24). Houston homes “flying off the shelves” Levy, M. Z., & Hill, A. L. (2021). The effect of eviction moratoria on as frenzied, pricey market stays hot. Houston Chronicle. https:// the transmission of SARS-CoV-2. Nature Communications, 12(1), 2274. www.houstonchronicle.com/business/real-estate/article/Houston- https://doi.org/10.1038/s41467-021-22521-5 housing-market-stays-hot-prices-rise-16123695.php

8 Rice University Kinder Institute for Urban Research INTRODUCTION

FIGURE 1 Ability to come up with $400 FIGURE 4 Personally knows someone in an emergency, by year who died of COVID-19,

If you had a $400 emergency cost, would you need to by race/ethnicity borrow money, pay with savings, or not be able to pay? 80% Personally knows someone who has been 71% hospitalized or died from COVID-19 70% 80% 73% 59% 60% 70% 67% 50% 60% 57% 40% 50% 30% 20% 19% 17% 20% 40% 36% 12% 10% 30% 0% Borrow Pay Not be able 20% 2020 2021 White Black Hispanic Asian

FIGURE 2 Would not be able to pay a $400 FIGURE 5 “Very often” put themselves emergency, by race/ethnicity at risk of coronavirus

Not be able to pay a $400 emergency, by because of needing to go to race/ethnicity work, by race/ethnicity 40% 34% "Very often" have had to put themselves at risk of 35% exposure to the coronavirus because they couldn’t afford to stay home and miss work 30% 50% 43% 25% 39% 21% 40% 20% 30% 15% 19% 19% 20% 10% 6% 5% 3% 10%

0% 0% White Black Hispanic Asian White Black Hispanic Asian

FIGURE 3 Had a very serious or FIGURE 6 Preferred area to live, by year somewhat serious problem If you could choose where to live in the Houston area, paying for housing would you prefer: 60% Had a "somewhat serious" or "very serious" problem paying for housing in the last 12 months 55% 45% 40% 50% 40% 37% 35% 45% 30% 28% 40% 25% 35% 20% 17% 15% 30% 11% 2008 2010 2012 2014 2016 2018 2021 10% A single-family home with big yard, where need to drive almost everywhere. 5% A smaller home in more urbanized area, within walking distance of shops 0% and workplaces.

Total White Black Hispanic Asian Source: 2021 Kinder Houston Area Survey

The 2021 State of Housing in Harris County and Houston 9 INTRODUCTION home purchases increased, while increased construction However, different approaches at the local level led to costs tightened supply. Lumber prices increased over significantly different trajectories as the pandemic con- 130% in the first 5 months of the pandemic.5 tinued. According to data from the Eviction Lab, Austin, which instituted a grace period in March of 2020 to allow For poorer people and those in vulnerable popula- renters to catch up on missed payments, has seen far tions, though, the pandemic’s economic crisis put them fewer eviction proceedings than Houston, where a grace at the brink of losing their homes. According to Rice period was not adopted until February of 2021.10 Kinder University’s COVID-19 Registry, local lower-income Institute researchers have found that the grace period renters lived in more fear of eviction and older home- accounted for a 53% reduction in Austin’s eviction filings owners were more likely to fear foreclosure.6 U.S. Census compared to Houston; earlier passage of the grace period Household Pulse Survey data on COVID-19’s impact in Houston could have prevented nearly 9,000 evictions.11 shows that local non-white tenants are more likely to have In the absence of an eviction moratorium, Houston and trouble making rent and mortgage payments. Harris County instituted a $159 million rental assistance Further, overcrowding increased from 2018 to 2019: The relief fund. Houston Mayor Turner and Harris County number of severely overcrowded rental homes increased Judge Hidalgo also started a Housing Stabilization Task by 26.7% in the city and 22.5% in the county.7 Such crowd- Force in summer 2020. The task force helped shape the ing likely contributed to COVID-19 transmission. Lower use of the rental assistance funding and delivered a wide income people are also more likely to work outside the set of policy recommendations to both governments. Each home in high-contact environments. Research finds that local jurisdiction is considering ways to adopt recommen- the highest COVID-19 death rates were not in highly paid dations via pilot programs or funding.12 medical jobs, but lower-paying jobs where people prepare Eviction moratoria affect not only tenants but also land- and harvest food, build homes and sort goods in ware- lords, most of whom own only a few properties. A survey houses.8 These workers then brought the virus to their of “mom and pop” landlords provided by Avail, a na- relatively crowded homes, exacerbating its spread. tional company that develops software to help landlords Local, state and federal governments attempted to stem manage their properties, suggests that a supermajority of these trends by stabilizing housing for the most vulner- the Houston metro’s small landlords still have mortgage able through eviction moratoria and other approaches. payments. Outstanding debt puts these landlords at risk The largest of these policies was the Centers for Disease of foreclosure if too many tenants do not pay, which could Control’s national eviction moratorium, along with limita- in turn accelerate rental industry consolidation.13 tions on evictions for those living in publicly subsidized COVID-19 has an outsized impact on those without units. State and local governments also implemented a homes. According to the 2021 point-in-time census of peo- range of moratoria, and, at least in the early stages of the ple experiencing homelessness conducted by Coalition for pandemic, these efforts slowed the virus’s spread and the Homeless and The Way Home, 1 in 7 local unsheltered helped keep people in their homes.9 people cited COVID-19 as a reason for their status. At the same time, many shelters lowered their occupancy rates

10 Eviction Lab. Eviction Tracking System. Accessed April 28, 2021. 5 Soaring Lumber Costs Affecting Home Prices. (2020, August 28). Princeton University. https://evictionlab.org/eviction-tracking/ Greater Houston Builders Association. https://www.ghba.org/ Protections for Texas Renters: COVID-19. University of Texas at soaring-lumber-costs-affecting-home-prices/ Austin, Entrepreneurship and Community Development Clinic, School of 6 Children’s Environmental Health Initiative, University Of Notre Law. Accessed May 18, 2021. https://sites.utexas.edu/covid19relief/ Dame & Kinder Institute For Urban Research, Rice University. tenant-protections/ (2020). COVID-19 Registry [October 2020 Snapshot] (Version 1) 11 Yang, K. (2021). Providing the Grace Period to Catch Up on Rent: [Data set]. Rice University-Kinder Institute: UDP. Its Impact and Potential to Reduce Evictions Cost in Houston and 7 “Severely overcrowded homes” have more than 1.5 occupants per Harris County. Kinder Institute for Urban Research, Rice University. room, per census definitions. 12 The Entrepreneurship and Community Development Clinic at the 8 Chen, Y.-H., Glymour, M., Riley, A., Balmes, J., Duchowny, University of Texas-Austin School of Law maintains an excellent K., Harrison, R., Matthay, E., & Bibbins-Domingo, K. (2021). clearinghouse of post-COVID-19 renter protections, which can be Excess mortality associated with the COVID-19 pandemic found here: https://sites.utexas.edu/covid19relief/tenant-protections/ among Californians 18–65 years of age, by occupational sector 13 Baiocchi, Gianpaolo, and H. Jacob Carlson. “What Happens When and occupation: March through October 2020. MedRxiv, 10 Million Tenants Can’t Make Rent?” The New York Times, March 3, 2021.01.21.21250266. https://doi.org/10.1101/2021.01.21.21250266 2021, sec. Opinion. https://www.nytimes.com/2021/03/03/opinion/ 9 See Nande et al. (2021) affordable-housing-federal-agency.html.

10 Rice University Kinder Institute for Urban Research INTRODUCTION Photo by Becky Lai/flickr for safety reasons. In response to the virus, Coalition for During COVID-19, the region was also hit hard by Winter the Homeless collaborated with the county and city to use Storm Uri in February 2021. The storm affected life for CARES Act funding for the Community COVID Housing an entire week, and according to FEMA, at least 130,000 Program, which has served 1,110 people since fall 2020. households in the county had damaged homes. In Harris County alone, 31 people died, and millions were without COVID-19 has also compounded existing inequalities power or reliable water. The housing sector’s recovery that result from differing housing conditions. Locally, from COVID-19 may likely be delayed by future environ- Hispanic Houstonians were disproportionally affected mental disasters, like Uri or future hurricanes, that will by the worst of the virus accounting for half of the city’s test the region’s resilience. deaths while being only 42% of the population. Hispanic Houstonians also disproportionately work in the con- Houston will not know the full effect of COVID-19 for struction and food service sectors that have seen the high- years. This report mostly focuses on indicators for est death rates.14 KHAS data shows that local Hispanic 2018 and 2019, because the 2019 ACS is the most re- residents, along with Black residents, were twice as likely cent available major census demographic data source. to “Very Often” work outside of the home and risk catch- Understanding these baseline 2019 factors helps set the ing COVID-19 and bringing it home, when compared to stage for understanding COVID-19’s impact. Future State Asian and white residents (Figure 5). of Housing reports will provide a clearer picture of how this disaster unfolded in the city and county. 14 Tallet, Mike Morris, Olivia P., and Stephanie Lamm. “COVID Is Hitting Houston Hispanics Hard - and It’s Getting Worse.” Houston Chronicle, July 16, 2020, sec. Investigations. https://www. houstonchronicle.com/news/investigations/article/covid-houston- texas-hispanic-data-harris-county-15411614.php.

The 2021 State of Housing in Harris County and Houston 11 INTRODUCTION

Methodology levels. Kinder research staff plan that the 2025 report will employ non-overlapping ACS 5-year data comparing the There has been one major shift between the 2020 State of 2019–2023 and 2014–2018 ACS 5-year estimates, and thus Housing and this one. The 2020 report featured in-depth will feature more trends at the CTA level.16 discussions of data at the Community Tabulation Area (CTA) level. CTAs are neighborhood-like geographies de- There are a few non-ACS indicators, however, where CTA- vised by the Kinder Institute that align with census tract level information is available, for example, data on home geographies, allowing Kinder researchers to link census loans and evictions. In addition, the report’s maps at the data to specific Harris County and Houston communities county and city scale use Kinder’s CTAs as the default unit that are legible to this report’s readers.15 of analysis, though census tract and census block group levels are used to emphasize finer geographic variations. This 2021 report features information at the Harris County and City of Houston levels. Methodological limita- Lastly, many of the indicators highlighted in this year’s tions of the United States Census Bureau ACS 5-year data State of Housing cannot fully incorporate the impacts of necessitated this shift away from CTA-level analysis. The COVID-19 or Winter Storm Uri. Census data available 2020 State of Housing report compared indicators from through the ACS lags by one year, so 2019’s ACS is the 2010 and 2018 and used two distinct ACS 5-year surveys— most recent available year. Therefore any statistics drawn the 2006–2010 and the 2014–2018 estimates—that did not from the ACS will be pre-COVID-19, largely from 2018 have overlapping data years. The Census Bureau discour- and 2019. As with the 2020 State of Housing, this report ages comparing data from 5-year surveys with overlap- features more recent data when it is available. For exam- ping years. Thus, 2019 5-year estimates are available at the ple, this report does include some more recent economic CTA-level at www.datahouston.org but are not used in indicators that reflect the impact of COVID-19, since this report for comparative purposes. much of that data come from non-ACS sources, such as the Bureau of Labor Statistics. Lastly, this year’s State of As the State of Housing is an annual product, this year’s Housing notes specific ACS indicators that are particularly report shifted to using the ACS 1-year estimates. ACS important to understanding COVID-19’s impact (such as 1-year estimates are only for the county and city lev- overcrowding), with the intention of following up on them els, not for any smaller geographies like census tracts, in next year’s State of Housing. which are the building blocks of the Kinder Institute’s CTAs. Therefore, for future reports that use ACS 1-year estimates, trends will be tracked at the county and city 16 For more information about ACS methodology and responsibly making inter-year comparisons, please consult “Understanding and Using American Community Survey Data: What Researchers Need 15 For more information about the CTAs and their exact boundaries to Know.” Washington, DC: U.S. Census Bureau, 2020, in particular and names, please go to www.datahouston.org pp. 15–16. Photo by telwink/flickr

12 Rice University Kinder Institute for Urban Research SECTION 1. ECONOMIC TRENDS Section 1. Economic Trends

his section focuses only on economic trends that most directly relate to the Tlocal housing sector. Changes from 2018 to 2019 provide the baseline for this report, but with so much happening in 2020 with COVID-19, more recent data was analyzed where possible. Therefore, this section contains two parts: 2018–2019 economic trends and post-COVID-19 trends.

2018 to 2019: Steady economic growth Harris County remained the region’s job center. While locally and nationally population growth in the suburbs continues to outpace growth in Harris County and Houston (Figure 7), in 2019 The state and local economy has consistently grown 71% of the MSAs job growth and 77% of the total jobs were since the 2015 mini-recession. Between 2018 and 2019, the still within Harris County. Houston MSA’s and county’s gross domestic products grew by 1.9%, a relatively steady growth rate from prior years.

FIGURE 7 Population growth in metropolitan Houston, 1980–2019

Source: Population of the 100 Largest cities and other urban places in the United States: 1790 TO 1990 (https://www.census.gov/population/www/documentation/twps0027/twps0027.html); The Census Bureau’s Population Estimates Program (https://www.census.gov/programs-surveys/popest.html); Population of States and Counties of the United States; 1790 to 1990 (https://www.census.gov/population/www/censusdata/pop1790-1990.html) and U.S. Bureau 2000 Census, U.S. Census Bureau, 2010 Census, and U.S. Census Bureau 1-Year Estimates, 2019.

The 2021 State of Housing in Harris County and Houston 13 SECTION 1. ECONOMIC TRENDS

FIGURE 8 Jobs added in Harris County, Q1 2018 to Q4 2020, by sector

2018(Q1) – 2019(Q4) 2019(Q4) total 2019(Q4) – 2020(Q2)

Jobs added, Jobs added, 2018(Q1) 2019(Q4) Sector to 2019(Q4) Percent change 2019(Q4) total to 2020(Q2) Percent change

NAICS 11 Agriculture, forestry, 67 4.5% 1,543 –9 –0.6% fishing and hunting

NAICS 21 Mining, quarrying, 926 1.4% 64,992 –8,320 –14.7% and oil and gas extraction

NAICS 22 Utilities 496 3.0% 17,0 0 5 –289 –1.7%

NAICS 23 Construction 15,045 9.4% 174,685 –16,335 –10.3%

NAICS 31–33 Manufacturing 9,202 5.4% 179,794 –13,024 –7.8%

NAICS 42 Wholesale trade 4,527 3.4% 137,402 –9,460 –7.4%

NAICS 44–45 Retail trade –853 –0.4% 213,879 –29,614 –16.1%

NAICS 48–49 Transportation 10,519 8.8% 129,655 –6,872 –5.6% and warehousing

NAICS 51 Information 419 1.6% 27,429 –3,578 –15.0%

NAICS 52 Finance and insurance 663 0.9% 78,056 –1,611 –2.1%

NAICS 53 Real estate and rental 3,695 7.4% 53,721 –5,325 –11.0% and leasing

NAICS 54 Professional and 16,538 9.1% 199,083 –11,011 –5.9% technical services

NAICS 55 Management of companies 172 0.4% 39,296 –1,170 – 3.1% and enterprises

NAICS 56 Administrative and 7,137 4.1% 181,131 –20,954 –13.1% waste services

NAICS 61 Educational services 29,400 71.4% 70,599 –4,214 –6.3%

NAICS 62 Health care and social 32,575 12.8% 287,407 –14,365 –5.3% assistance

NAICS 71 Arts, entertainment, 2,212 9.1% 26,396 –8,361 –46.4% and recreation

NAICS 72 Accommodation and 7,975 3.8% 216,046 –60,400 –38.8% food services

NAICS 81 Other services, 3,385 5.1% 69,921 –13,107 –23.1% except public administration

NAICS 92 Public administration 1,008 2.1% 49,654 416 0.8%

NAICS 99 Unclassified –668 –27.2% 1,788 –29 –1.6%

Total 144,440 7.0% 2,219,482 –227,632 –10.3%

Source: Bureau of Labor Statistics Quarterly Census of Employment and Wages, 2020

14 Rice University Kinder Institute for Urban Research SECTION 1. ECONOMIC TRENDS

Between 2018 and 2019, the county’s employment growth spending actually decreased in 2018–2019, going down was spread across many sectors (Figure 8). Unemployment faster than the national decrease and declining for the remained relatively low (around 5.5%) and labor force-par- first time since 2015 (Figure 9). Based on initial post- ticipation rate remained high (in the range of 67%). Total COVID-19 data, this trend continues in 2020. Despite employment grew 7% in the county during the one-year lower spending overall, 2019 saw an increase in the both period from 2018 Q1 to 2019 Q4, adding almost 150,000 number and the share of multifamily units constructed in full-time, part-time and temporary jobs. The county saw the Houston MSA (see Figure 10). Even so, builders con- the largest employment growth in the educational services tinued to add more single-family than multifamily units, (with an important caveat)17, construction and healthcare and the rolling average of total new units built every sectors. The healthcare sector added the most jobs: 32,575, month showed a stable housing construction sector. which is more than 10% of the total jobs added across the Even prior to COVID-19, homebuyers saw relatively entire county. The retail sector is the only identifiable favorable interest rates. The federal funds effective rate—a sector with any job losses over that period. (However, calculated and highly influential interest rate measuring through quarter two of 2020, COVID-19 related impacts interest rates of bank transactions in the aggregate— led to declines across almost every employment sector.) decreased from 2.27% to 1.55% from December 2018 to Even with a growing local economy prior to COVID-19, December 2019. Likewise, 30-year fixed rate mortgage rates the region’s housing sector saw mixed outcomes between decreased from 4.54% to 3.94%, per Freddie Mac data. 2018 and 2019. In the MSA, residential construction After COVID-19: Early economic indicators 17 The Quarterly Census of Employment and Wages, a Bureau of show mixed results as GDP remains strong, Labor Statistics program from which Kinder gets this employment employment has not fully recovered, and data, regularly suppresses employment data when there are few employers in an industry. The Bureau does this to protect employers’ housing struggles to keep up with demand confidentiality, as employers do not like their employee rolls being public. In the case of suppression, the count of jobs reads as zero. COVID-19’s economic impact was immediately negative, The massive increase in educational employment is because in the and indicators suggest varying signs of recovery. For 4th quarter of 2019, the Bureau stopped suppressing the employment example, GDP numbers remain strong. The U.S. GDP numbers for State of Texas employers in the education sector within Harris County, which they had done previously because there were followed its 2020 second quarter record loss with a third too few state employers in that sector locally. This end of suppression quarter record gain; Texas’s GDP did not sustain as great caused the data to show an increase in roughly 30,000 employees, of a decrease and has recovered faster than the nation’s because Houston’s large public universities are technically state employers and their employee counts were now included in (Figure 11). Quarterly Census data. Therefore the 29,400 employee increase in the education sector should be viewed skeptically, yet this report contains this information in order to be true to the data source.

FIGURE 9 Residential construction FIGURE 10 12-month rolling mean, spending, 2010–2019 new homes constructed, 1.6 Houston MSA and Texas

1.4 New residential units constructed (12-month rolling average), by geography and single-/multifamily 1.2 15,000

1 10,000 0.8

0.6 5,000 0.4

0.2 0 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 0 2018 2019 2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Single-family, Houston MSA Single-family, Texas USA Houston MSA Multi-family, Houston MSA Multi-family, Texas

Source: National data: U.S. Census Value of Construction Put in Place Survey; Local data: Greater Houston Partnership/Dodge Data & Analytics Source: U.S. Census Building Permits Survey

The 2021 State of Housing in Harris County and Houston 15 SECTION 1. ECONOMIC TRENDS

The urban housing market stabilized and quickly in- FIGURE 11 GDP change, Q1 2018– creased after the initial shock of the first lockdowns. Q3 2020 (Q1 2018 = 1.00) Near-zero interest rates and low mortgage rates helped 1.06 this recovery. As of January 2021, 30-year fixed rate mort- 1.04 gage rates hovered around 2.74%, a full percentage point 1.02 lower than the prior year’s already-low rate. Working 1.00 from home also increased the desire for more space.

0.98 According to the U.S. Federal Reserve statistics, debt ser-

0.96 vice payments as a percentage of income have decreased post-COVID-19, signaling that new homebuyers are 0.94 wealthier. Mortgage delinquencies still remain relatively 0.92 low (a rate of 2.74% by the end of 2020, which is far lower 0.90 than the 11.6% peak from the Great Recession). 1 2 3 4 1 2 3 4 1 2 3 2018 2019 2020 Houston and Harris County follow the national trend of Texas USA strong home sales markets. According to the Houston

Source: Bureau of Economic Analysis Association of Realtors, median single-family home prices in Harris County increased 16% from March 2020 to March 2021.18 The total number of sales increased 31.5%.19 Harris County, however, was uniquely vulnerable to the employment effects of COVID-19. As the MSA’s central However, these strong markets have not necessarily county, Harris County’s economy has a greater share of translated into more housing construction starts. Across employees in the service, hospitality, tourism and conven- the United States, private residential construction spend- tion sectors, all of which COVID-19 hit hard. Almost 40% ing increased 9% comparing 2019 and 2020 (October of the county’s jobs in Accommodation and Food Services year-to-date). But in the Houston MSA, such spending disappeared between the end of 2019 and the 2nd quarter decreased 1% over the same period. Even compared to the of 2020 (see Figure 8). Harris County’s unemployment rest of Texas, the Houston MSA has not seen the post- rate remained above 8% at the end of 2020, double the COVID-19 housing construction boom. The multifamily 4.1% at the year’s start. At COVID-19’s onset, the county’s construction growth experienced during 2018 has stopped labor force participation rate, which measures the share locally, which is likely to tighten the rental market. of the working-age population that is employed or looking Related to this slowdown is the rise in construction for work, took a tremendous hit but mostly recovered by material costs: The price of lumber more than doubled the end of 2020, decreasing by only 0.4% by the year’s end. during the COVID-19 pandemic. Reasons for this increase A high labor force participation rate, coupled with a high include disasters—a record hurricane season—slow- unemployment rate, suggests that many people are still downs at materials manufacturing plants like sawmills looking for work and unable to find it. and tariffs on Canadian lumber. Despite the negative employment effects, the pandemic Like other important housing indicators addressed in this was relatively kind to the U.S. economy’s housing sec- report, local GDP and economic data from the Bureau tor and home values. Unlike the last economic crisis, of Economic Analysis was not available to fully evaluate COVID-19 did not drastically decrease home prices. Real COVID-19’s sectoral impact in Harris County. Kinder re- private residential fixed investment, an economic indi- searchers look forward to tracking these and other trends cator that measures the collective value of residential in future reports. property in the United States, more than halved through the course of the Great Recession. But after COVID-19, it only had a brief dip and then resumed increasing.

18 Houston Association of Realtors. “Forces Combine to Keep Houston Real Estate Hot in March,” April 14, 2021. https://www.har.com/ content/mls/?m=04&y=21. 19 ibid.

16 Rice University Kinder Institute for Urban Research SECTION 2. HOUSING DEMAND AND SUPPLY Section 2. Housing Demand and Supply

Demographic shifts inform housing What is clear is that smaller households are becoming demand: changing patterns of household more common, particularly in Houston. In the city, there composition, age, race/ethnicity, income was a net loss of 2,000 homeowner households (which and tenure tend to be larger), offset by a rise in approximately 30,000 renter households (Figure 13). This growth in renter Population growth continued in Harris County, households aligns with trends noted in last year’s report. but Houston’s population shrunk despite ample Residents in Houston and Harris County are household growth. becoming older. Harris County’s population rose by nearly 15,000 resi- The U.S. is approaching the “baby boomer cliff” in the dents between 2018 and 2019 (Figure 12). Conversely, the 2030s, when the elderly population is expected to out- City of Houston lost approximately 9,000 residents—the number children under 18 years of age for the first time in culmination of a slowing of population growth that began the nation’s history.20 In Harris County, the share of resi- in 2016. Population change should be closely examined in dents over 65 years old increased from 8.2% to 10.9% from future years once more pandemic-era demographic data 2010 to 2019 and is projected to grow in the future, which becomes available. A one-year decrease might be an outli- has implications for the county’s tax base and economy. er or it could be a harbinger of future decreases. Locally, a smaller proportion of young adults (under 24 years of age) coupled with a growing aging population of FIGURE 12 Total population, 2018–2019 baby boomers (age 55–73 as of 2021) could make the county’s economy dependent on in-migration of working-age Total Total Population Population adults. As of now, working-age residents remain a sizable Geography 2018 2019 change base of the population in Harris County. Harris County 4,698,619 4,713,325 14,706

Houston 2,326,090 2,316,797 –9,293 20 “Older People Projected to Outnumber Children.” Press release. Washington, DC: U.S. Census Bureau, 2019. https://www.census.gov/ Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019 newsroom/press-releases/2018/cb18-41-population-projections.html.

FIGURE 13 Occupied-housing units by tenure, Harris County and Houston

Harris County Houston

Year 2018 Year 2019 Year 2018 Year 2019

Occupied units 1,600,357 1,6 47,3 8 4 Occupied units 849,105 876,504

Owner-occupied 865,773 878,216 Owner-occupied 355,592 353,562

Renter-occupied 734,584 769,168 Renter-occupied 493,513 522,942

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019

The 2021 State of Housing in Harris County and Houston 17 SECTION 2. HOUSING DEMAND AND SUPPLY

FIGURE 14 Population by sex and age group in Harris County, 2019

85 years and over 80 to 84 years 75 to 79 years 70 to 74 years 65 to 69 years 60 to 64 years 55 to 59 years 50 to 54 years 45 to 49 years 40 to 44 years 35 to 39 years 30 to 34 years 25 to 29 years 20 to 24 years 15 to 19 years 10 to 14 years 5 to 9 years Under 5 years

250,000 200,000 150,000 100,000 50,000 0 50,000 100,000 150,000 200,000 250,000 Male Female

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019

FIGURE 15 Families & living arrangements, 2018–2019

91,761 2018 356,878 405,770 745,948 99,121 2019 352,025 434,529 761,709 HARRIS COUNTY HARRIS 60,278 2018 200,901 262,003 325,923 66,608 189,892

HOUSTON 2019 287,234 332,770

Total number of unrelated, non-family occupants Total number of single parent Total number of households living alone Total number of married-couple family

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019

Married-couple families continue to decrease married-couple family population did rise in both Harris as a share of total households, while the share County and Houston, their growth was outpaced by other of householders living alone or with unrelated types of households by a factor of 2 to 1 countywide and 3 occupants increased. to 1 in Houston.

While the truism states that Houston is a great place to Single-occupant households make up the largest sub- raise a family, the fastest-growing household types are not group from the non-married-couple categories. By “traditional” families. contrast, one area of significant decline was single-parent households. Census estimates show that single-parent People living alone, households with non-related occu- households decreased by 11,000 in Houston and 4,800 pants and single-parent households make up more than countywide. Further study is needed to determine to what six out of every 10 households in the City of Houston, extent single-parent households are moving out of the and their share of the population is growing. While the area or are no longer identifying as single parents.

18 Rice University Kinder Institute for Urban Research SECTION 2. HOUSING DEMAND AND SUPPLY

Houston’s foreign-born and Asian populations are FIGURE 16 Population distribution by decreasing and likely relocating to other parts of race and ethnicity, 2018–2019 the county and region. 99,031 103,734 49,564 47,045 100% Demographic changes are threatening Houston’s diversi- 149,840 328,578 329,430 168,199 ty, and it remains a point to investigate how these changes 90% will affect the housing sector. 876,599 874,005 80% 511,271 518,947 Estimates suggest a nearly 20,000-person decrease in

70% Houston’s non-Hispanic Asian population, negating most of the increase of Asian residents since 2010. The Asian 60% population remained constant in the Harris County, which suggests intraregional migration. Meanwhile, the 50% 2,035,306 2,061,019 1,044,930 1,060,507

40% FIGURE 17 Foreign-born population,

30% 2018–2019

Geography 2018 2019 % change 20% 1,359,105 1,345,137 Harris County 1,230,974 1,238,035 0.6% 552,126 10% 540,458 % of Population 26.2% 26.3% 0% 2018 2019 2018 2019 Houston 691,484 655,105 –5.3% HARRIS COUNTY HOUSTON

White Hispanic / Latino Black Asian Other % of Population 29.7% 28.3%

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019 Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019

FIGURE 18 Foreign-born population of Harris County, 2019

The 2021 State of Housing in Harris County and Houston 19 SECTION 2. HOUSING DEMAND AND SUPPLY

FIGURE 19 Median household income, FIGURE 22 Total households by tenure, 2018–2019 2018–2019 $90,000 355,592 $80,000 Owner Occupied 2018 865,773

$70,000 87,516 83,174 81,164

$60,000 77,058 353,562 Owner Occupied 2019 $50,000 878,216 61,618 $40,000 60,232 52,450 51,203 $30,000 493,513 42,257 41,231 41,115 Renter Occupied 2018 $20,000 39,281 734,584 $10,000 522,942 $0 Renter Occupied 2019 Harris County Houston 769,168 MHI 2018 All MHI 2019 All MHI 2018 Owner MHI 2019 Owner MHI 2018 Renter MHI 2019 Renter Houston Harris County

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019 Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019

FIGURE 20 Housing tenure by FIGURE 23 Population density, 2019 race/ethnicity, 2019 Geography Persons per Square Mile, 2019 WHITE 68% 32% Harris County, TX 2,763

Cook County, IL 5,450 HISPANIC 49% 51% Dallas County, TX 3,021

BLACK 34% 66% Fulton County, GA 2,020

Houston, TX 3,619 ASIAN 61% 39% Chicago, IL 11,848

OTHER 43% 57% Dallas, TX 3,955

Atlanta, GA 3,734 Owner Occupied Renter Occupied

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019 Source: U.S. Census Bureau, American Community Survey 1-Year Estimates

share of Black and Hispanic residents grew in both the FIGURE 21 Housing tenure, 2019 city and the county.

Houston’s foreign-born population decreased by 36,000, with the county’s figure growing by a net 8,000 (Figure Harris County 53.3% 46.7% 17). The geographic concentration of the foreign-born population is largest around Beltway 8 on the west and southeast side of the county (Figure 18). Many of these areas are outside the City of Houston.

Median household incomes rose slightly Houston 40.3% 59.7% overall, though homeowners had a much larger increase than renters, which are predominantly non-white residents. 0% 20% 40% 60% 80% 100% % Owner Occupied 2019 % Renter Occupied 2019 Median household income sits just below $62,000 in

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2019 Harris County and $52,500 in Houston. These figures rose 2% from 2018 to 2019 in both jurisdictions.

20 Rice University Kinder Institute for Urban Research SECTION 2. HOUSING DEMAND AND SUPPLY

Yet when examining income by housing tenure, home- While Houston and Harris County continue to owners earn more than twice as much as renters county- densify in certain areas, both remain low density wide ($87,516 for homeowners, $42,257 for renters in 2019). compared to peer cities and counties. Owner incomes have also grown more: From 2018 to The region continued its long-term trend toward great- 2019, homeowner MHI increased by roughly $4,000, but er population density. As noted last year, population renters only grew by $1,000. Homeowners are dispropor- per square mile in 2010 totaled 2,303 and 3,138 in Harris tionately white in Harris County, meaning that non-white County and Houston, and rose to 2,763 and 3,619, respec- locals are less likely to see these increasing benefits. tively, in 2019. However, both places continue to be less The region has a growing share of dense than peer cities and counties (see Figure 23). renter households. The county’s most densely populated communities (i.e., Renter households are a majority of all Houston house- Gulfton and Westwood, which have more than 15,000 per- holds, and will soon be the majority in the county as well. sons per square mile) are situated in southwest Houston In both the city and the county, the trend continues to (Figure 24). Other notable population density centers, shift toward more renter households. Between 2018 and which have densities above 6,100 persons per square 2019, the county added almost three times as many renter mile, are in southeast Harris County (i.e. Pasadena), areas households (35,000) than owner-occupied households near downtown Houston (i.e. Montrose, Fourth Ward, (12,000), lowering the share of households that were own- Midtown and Museum Park), and in the western Harris er-occupied. County (including Bear Creek, Alief, Sharpstown and Mission Bend).

FIGURE 24 Population density, 2019

The 2021 State of Housing in Harris County and Houston 21 SECTION 2. HOUSING DEMAND AND SUPPLY

New regulations aim to create denser, more pedestrian friendly urban environment in central Houston

This section focuses on the Transit Oriented Development Streets (TOD Streets) and Walkable Places standards passed in August, 2020, which are new regulations that will guide development in the urban core.

These regulations only apply to specifically designated streets and their nearby parcels. These designations cover an estimated 75 square miles and only around 10% of the city’s area, almost entirely in the older, central areas inside the 610 Loop (Figure 25). Kinder staff estimate that these regulations cover around 40,000 parcels, as one cannot provide an exact number given data irregularities.

These two regulations intend to create a more walkable and attractive built environment. Rules minimize required parking spaces and encourage more street-level fenestration, among other regulations, in order to help create a denser urban fabric. Also among the regulations are a required green buffer between the sidewalk and street, which is both more attractive and safer for pedestrians. This is an important goal for a region that has an outsized number of pedestrian-automobile deaths: amongst the 100 largest U.S. metro areas, the Houston MSA has the 18th highest pedestrian death index in Smart Growth America’s Dangerous By Design report.21

21 Bellis, Rayla, Becca Buthe, and Martina Guglielmone. “Dangerous by Design 2021.” Washington, DC: Smart Growth America, 2021. https://smartgrowthamerica.org/wp-content/uploads/2021/03/Dangerous-By-Design-2021-update.pdf.

FIGURE 25 Special regulatory designations, City of Houston

22 Rice University Kinder Institute for Urban Research SECTION 2. HOUSING DEMAND AND SUPPLY

Housing construction, while robust, keep pace with the changes in household composition. In is still not meeting the demands of a the same period, Houston added 27,399 households, while changing community adding 15,463 units. (see Figure 26)

Houston and Harris County added more Building age data and construction/demolition pat- households than newly built homes. terns also suggest that supply is not meeting demand. Both demolition and construction permitting activities The number of households outpaced the growth in hous- increased in Harris County and Houston (Figure 27). ing units between 2018 and 2019. The fast-growing num- But compared to Harris County, Houston issues fewer ber of households caused rising housing prices and re- construction permits relative to demolition permits. A sulted in low vacancy rates, particularly in the city. Harris large share of the county’s housing stock is 40 years old or County added 47,027 new households between 2018 and older (Figure 28), and it remains to be seen if builders will 2019, while adding 37,755 new housing units—showing eventually fully replace the older building stock that is that despite modest construction, it was not enough to being demolished.

FIGURE 26 The ratio of building permits FIGURE 27 Authorized residential units, to household growth, Harris Harris County and Houston, County and Houston, 2019 2018 and 2019 50,000 20,000

16,000 40,000 12,000 30,000 8,000 20,000 4,000

10,000 0 Demolition Construction Demolition Construction 0 Permits Permits Permits Permits Harris County Houston (# of 1,899) (# of 15,954) (# of 2,806) (# of 18,688) Authorized housing units in 2019 2018 2019 City of Houston Harris County (Excluding Houston) Household Difference between 2018 and 2019 Source: U.S. Census Bureau, Building Permits Survey and American Community Survey 1-Year Estimates, 2018 and 2019 Source: Harris County Appraisal District, 2020

FIGURE 28 Existing housing units in 2019 in Harris County, by year built

70,000

60,000

50,000

40,000

30,000

20,000

10,000

1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Source: Harris County Appraisal District, 2020

The 2021 State of Housing in Harris County and Houston 23 SECTION 2. HOUSING DEMAND AND SUPPLY

FIGURE 29 Authorized housing units, FIGURE 30 Percentages of permitted Harris County and Houston, residential units, Harris 2018 and 2019 County and Houston, 40,000 37,755 2018 and 2019 34,149 35,000 48% 53% 59% 67% 30,000

25,000

20,000 15,463 15,000 13,237

10,000

5,000 52% 47% 41% 33%

0 HARRIS COUNTY HOUSTON Harris County Houston Single-family Multi-family 2018 2019

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019 Source: U.S. Census Bureau, Building Permits Survey, 2018 and 2019

More new housing units were built in New single-family and multifamily units are Harris County, and most of them were mostly built beyond Beltway 8 to the west, added in the suburbs. while the western 610 Loop has extensive multifamily construction. Harris County has 1.8 million total housing units, and about 54% of those units are in Houston. In 2019, of the The areas outside of the city that are seeing more con- 37,755 units built in Harris County, 22,292 units (59%) were struction tend to be amenity rich suburbs, such as Katy. added outside of the city boundary while 15,463 units were As the maps show (Figures 31 and 32), most single-fam- built in the city, or 41% of the total. However, the city did ily home construction occurred in the county’s western add housing at a faster rate than the county, as residential fringes. Many multifamily units were built along major construction increased by 11% in the county as a whole in highways, including new upscale apartments in the west- 2019 over 2018, compared to 17% in the City of Houston. ern section of the Inner Loop.

Multifamily construction is robust in Houston and Affordable housing supply does not keep has been trending upward in Harris County, where up with demand, and rising construction it surpassed single-family construction in 2019. costs suggest this problem will grow Both the city and the county are seeing an increase in Harris County and Houston do not have affordable multifamily construction relative to single-family con- housing for its lowest-income households. struction. In Harris County, the number of multifamily units constructed in 2019 exceeded the number of The county and city lack homes for extreme low-income single-family units—a switch from 2018. In the City of (ELI) and very low-income (VLI) renters. ELI households Houston, 63% of all new units were multifamily, com- make less than 30% of the area median family income, pared to 59% in 2018. This shift may be caused by several meaning they earned $25,100 in 2018 and $25,750 in 2019 factors, including dwindling land supply, increasing land (per definitions from the U.S. Department of Housing and prices and the growing population of smaller households. Urban Development). Very low-income households (VLI) make less than 50% of the area median family income, That is a continuation of the solid multifamily construc- which was $37,450 in 2018 and $38,150 in 2019. tion market shown in the 2010s, as cited in last year’s State of Housing, but should be tracked in future reports to In Harris County and Houston, only one affordable unit is follow how the post-COVID-19’s housing market, along available for every five ELI renter households (An “af- with changing household composition, alters construc- fordable” unit is one in which the ELI renter spends less tion patterns. than 30% of their income on rent.)

24 Rice University Kinder Institute for Urban Research SECTION 2. HOUSING DEMAND AND SUPPLY

FIGURE 31 Newly built single-family homes in 2019, Harris County

FIGURE 32 Newly built multifamily units in 2019, Harris County

The 2021 State of Housing in Harris County and Houston 25 SECTION 2. HOUSING DEMAND AND SUPPLY

FIGURE 33 Affordable housing available to ELI and VLI renters

Extremely low-income (ELI) renters Very low-income (VLI) renters

Affordable Ratio of units to Affordable Ratio of units to Households (#) Households (#) housing units (#) households (%) housing units (#) households (%)

Houston, 2018 38,830 156,557 24.8% 191,197 232,619 82.2%

Houston, 2019 32,784 159,911 20.5% 184,258 240,986 76.5%

Harris, 2018 54,756 219,716 24.9% 263,550 331,574 79.5%

Harris, 2019 47,9 8 3 218,839 21.9% 254,252 338,883 75.0%

Note 1. Our calculation shows that ELI income limits are $628 in 2018 and $644 in 2019. The VLI income limits are $936 in 2018 and $954 in 2019, and the number of affordable housing units was proportionally calculated using the ACS housing unit estimates by rent range. Note 2. Households (#): estimated number of ELI or VLI renter households based on the U.S. Department of Housing and Urban Development (HUD) ELI or VLI income limits. The number of households was proportionally calculated using the ACS renter household estimates by income range.

The availability of affordable housing units to very Amid the COVID-19 pandemic, it is important to note low-income (VLI) renters is also inadequate. While more that this overcrowding (which was recorded before the affordable housing units were available to the second pandemic started) contributes to the community spread most vulnerable income group, the number of VLI renter of infectious diseases. households (338,883 in the county) outnumbered the The rental vacancy rate declined while the number of affordable units (254,252 countywide). ownership vacancy rate increased slightly. Severe crowding is growing rapidly in renter The rental vacancy rates dropped in both the county and households, a sign that supply and affordability city in 2019, while homeowner vacancy rates slightly are not meeting needs of low-income renters. increased, which shows a more robust demand for rental Severe overcrowding, defined as more than 1.51 occu- units in the Houston area.22 As renters’ turnover occurs pants per room, is an increasing problem. Harris County more frequently than homeowners, renter-occupied experienced a rise of 4,200 severely crowded rental units have higher vacancy rates than their owner-occu- households, an increase of 23% over 2018. (By compar- pied counterparts. ison, the total pool of renters grew by only 5% in the county.) Of the county’s 4,200 new severely overcrowded renter households, 3,600 (or 85%) were in Houston, disproportionately in areas beyond the 610 Loop. The most likely reason for this increase in crowding is because 22 However, with COVID-19, the rental vacancy rate in 2020 is expected people are deciding to live with others to save money. to be higher than the 2019 vacancy rate, especially within the city of Houston and in newly built luxury apartment units.

FIGURE 34 Total number of severely crowded households by tenure, 2019

Severely Crowded Severely Crowded Renter Occupied Owner Occupied Rental Households Owner Households

Rate of Rate of Rate of Rate of

Geography 2018 2019 Change 2018 2019 Change 2018 2019 Change 2018 2019 Change

Harris County 734,584 769,168 4.7% 18,988 23,256 22.5% 865,773 878,216 1.4% 5,158 5,572 8.0%

Houston 493,513 522,942 6.0% 13,479 17,0 8 4 26.7% 355,592 353,562 –0.6% 2,471 2,837 14.8%

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019.

26 Rice University Kinder Institute for Urban Research SECTION 2. HOUSING DEMAND AND SUPPLY

FIGURE 35 Severely crowded rental housing, Harris County

FIGURE 36 Vacancy rates, Harris County and Houston, 2018 and 201923

12 10.0 10 9.5 8.7 8.3 8.4 8 7.2 6.5 6.1 6

4 Vacancy Rate (%) Rate Vacancy 2.8 2.2 1.7 2.0 2

0 2018 2019 2018 2019 Harris County Houston

Homeowner vacancy rate (%) Rental vacancy rate (%) Combined vacancy rate (%)

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018–2019

23 The combined vacancy rate was computed using homeowner and rental vacancy rates, which is different from the US Census Bureau’s vacant housing unit percentage. The vacant housing unit percentage is higher than our combined vacancy rate because its percentage includes units that are vacant for seasonal, recreational

and occasional uses, migrant workers and other purposes. Photo by Lenny DiFranza/flickr

The 2021 State of Housing in Harris County and Houston 27 SECTION 2. HOUSING DEMAND AND SUPPLY

Rising construction costs present mounting challenges to future affordability.

During the pandemic, the cost of lumber and other construction materials increased dramatically. Lumber remains the largest material cost for single-family home construction (around 15%-20% by industry estimates). Lumber prices remained relatively stable in the past decade, spiking in summer of 2018. However, after COVID-19 led to widespread economic lockdowns in the U.S. in March 2020, prices increased 130% between April and August of that year, some of the largest price increases in recent recorded history.

Construction labor costs have also increased. Through the 2010s, construction worker salaries in the Houston MSA increased nearly 20%. It remains difficult to gather extensive data on worker salaries and shortages after the pandemic. The strong home construction market would theoretically lead to increased labor demand and subsequent increases in worker salaries, though this does not always occur in reality.24 Regardless, any construction labor and materials cost increases would be passed onto the home- buyer, adding to the challenges lower-income Houstonians face when trying to purchase a home in the city.

24 Doussard, Marc. Degraded Work. Minneapolis, MN: University Of

Minnesota Press, 2013. Photo by Sarah/flickr

FIGURE 37 Historical closing lumber prices per 1,000 board feet (NASDAQ: LBS), January 2018–March 2021 $1,200

$1,000

$800

$600 Closing price Closing $400

$200

$0 01/02/2018 02/02/2018 03/02/2018 04/02/2018 05/02/2018 06/02/2018 07/02/2018 08/02/2018 09/02/2018 10/02/2018 11/02/2018 12/02/2018 01/02/2019 02/02/2019 03/02/2019 04/02/2019 05/02/2019 06/02/2019 07/02/2019 08/02/2019 09/02/2019 10/02/2019 11/02/2019 12/02/2019 01/02/2020 02/02/2020 03/02/2020 04/02/2020 05/02/2020 06/02/2020 07/02/2020 08/02/2020 09/02/2020 10/02/2020 11/02/2020 12/02/2020 01/02/2021 02/02/2021 03/02/2021 Date

Source: NASDAQ

28 Rice University Kinder Institute for Urban Research SECTION 3. AFFORDABILITY AND ACCESS TO HOUSING Section 3. Affordability and Access to Housing

Housing sales price and values are FIGURE 38 rising, making it more difficult for median Affordable housing price income households to buy a house. and gap for all buyers, This is especially true for renters. Harris County and Houston, 2018 and 2019 Renters face a growing home purchase affordability $300,000 $110,438 $104,189 gap in Harris County. Median-income households $250,000 $32,169 cannot afford to buy a median sales price home in $33,478 Houston and Harris County. $200,000

The housing affordability gap—the difference between the $150,000 $197,731 median sales price and the housing price that a resident $100,000 $186,522 $168,311 earning the median wage could afford—is so large in both $158,562 $50,000 Harris County and Houston that the median income earn- er cannot afford a home. $0 2018 2019 2018 2019 Yet despite an increase in median sales price (4.5% in the Harris County Houston county and 1.3% in the city), the affordability gap shrunk Affordability gap for all buyers Affordable housing price for all buyers for the overall median income household. This occurred Data Source: Houston Association of Realtors, 2020, U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018–2019 because of a lower mortgage interest rate and higher

FIGURE 39 Affordable housing price and gap for homeowners and renters, Harris County and Houston, 2018 and 2019 $300,000

$12,045 $250,000 $50,939 $30,373 $37,566

$140,190 $200,000 $147,358 $94,297 $92,679 $150,000 $260,455 $238,627 $257,566 $280,839 $100,000

$135,603 $127,321 $121,642 $132,310 $50,000

$0 2018 2019 2018 2,019 2018 2019 2,018 2,019 Homeowners, Renters, Homeowners, Renters, Harris County Harris County Houston Houston

Affordable housing price Affordability gap Affordability gap (excess) for homeowners

Data Source: Houston Association of Realtors, 2020, U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018–2019

The 2021 State of Housing in Harris County and Houston 29 SECTION 3. AFFORDABILITY AND ACCESS TO HOUSING

FIGURE 40 Annual median sales price by CTA, Harris County, 2019

Data Source: Houston Association of Realtors, 2020

FIGURE 41 Median sales price change (%) by CTA between 2018 and 2019, Harris County

Data Source: Houston Association of Realtors, 2020

30 Rice University Kinder Institute for Urban Research SECTION 3. AFFORDABILITY AND ACCESS TO HOUSING median household income (see Figure 19).25 The net over- single-family development was concentrated in the 2010s all gap (for renters and owners combined) still exceeds (Figure 40). On the opposite end of the spectrum, several $30,000 in the county and $100,000 in the city. lower-income CTAs on the east side of Harris County had no sales in 2019. When observing the different affordability gaps for homeowners and renters seeking to buy, however, one notices a Between 2018 and 2019, the median sales price in the east- divide (see Figure 39). Because Harris County renter house- ern suburbs rose, but it also rose in several gentrifying holds have a lower median income that increases at a lower Inner Loop communities, such as Third Ward and Near rate, their affordability gap actuallygrew in Harris County. Northside (Figure 41). In general, affluent communities in The gap shrunk for renters in Houston, likely because the western part of Downtown recorded a decline in the Houston renter households have a faster-growing income. median sales price between 2018 and 2019.

Homeowners continue to have benefits accrue to them. Harris County’s home prices have risen more than its Their affordability gap shrunk in both geographies, and peer counties’ since 2000, continuing a recent trend. in Harris County there is actually no affordability gap Other indicators show that home sales prices have for current homeowners. This means that people who increased at a faster rate in Harris County and Houston. already own homes can more easily buy a home higher than the median price.

Given growing home prices, anticipated inflation and the FIGURE 43 Annual median sales price by consistent high demand for homes after COVID-19, how- housing type, Harris County, ever, the affordability gap is likely to grow. 2018 and 2019 300,000 Median sales prices vary across the county, 250,000 evidencing economic inequality. 200,000

The most costly housing units remain in Houston’s 150,000 traditionally affluent communities on the west side of 100,000 Downtown, including River Oaks, West University and ($) Price Sales Median 50,000 Memorial Villages, and some suburban areas where new 0 2018 2019 2018 2019 2018 2019 2018 2019 25 Freddie Mac 30-year fixed-rate mortgage annual average was used. It is originally 4.54% in 2018 and 3.94% in 2019. Retrieved from: http:// Residential Single Family Townhouse Condominium (SF/COND/TH) www.freddiemac.com/pmms/pmms30.html Our affordable home Harris County price calculation assumes that median-income households buy a home with a 3.5% down payment and spend 30% of their income on Data Source: Houston Association of Realtors, 2020 housing monthly.

FIGURE 42 Annual home price index, FIGURE 44 The number of annually closed Harris County, Dallas sales listings by housing type, County, Fulton County, and Harris County, 2018 and 2019 Cook County, 2018 to 2020. 60,000 220 50,000 2,771 2,974 3,013 200 2,930 40,000 180

160 30,000 44,637 46,236 140 20,000 Colsed Sales Listings (#) Listings Sales Colsed 120 10,000 100 (Year 2000 = 100) Jan 2018 Jan 2019 Jan 2020 0 Harris Dallas Fulton Cook 2018 2019 County County County County Single Family Townhouse Condominium

Data Source: U.S. Federal Housing Finance Agency, All-Transactions House Price Index Data Source: Houston Association of Realtors, 2020

The 2021 State of Housing in Harris County and Houston 31 SECTION 3. AFFORDABILITY AND ACCESS TO HOUSING

Figure 42 shows the annual home price growth index in Inventory months is a typical indicator for the strength Harris and peer counties, in which the year 2000 rep- of a home sales market. It measures how many months it resents the baseline of a 100 index score. So if one year’s would take to sell all of the active listings in a certain area, index is 150, that means that homes are 50% more expen- assuming no new listings came into the market and sales sive than in the year 2000. continued at the average pace of the previous 12 months. Texas A&M University’s Real Estate Center views six In Harris County, prices have more than doubled in months of inventory as a balanced market, less than six 20 years, as the index in 2020 now exceeds 200. Harris months as a seller’s market, and more than six months as County’s house price index is higher than the three peer a buyer’s market. counties—Dallas County, Fulton County, and Cook County. Both the county and the city are seller’s markets, but Single-family homes were the most popular Harris County was more so (3.1 months compared to 4.1 in housing type for purchase prior to the pandemic. Houston as of the end of 2019). In both areas, single-fami- The county’s single-family home market is strong and ly homes sold faster than other housing types and stayed will likely continue to be, given COVID-19 and increased on the market less time (see Figure 45). Even before the demand for standalone homes. As Figure 43 shows, the pandemic hit, the inventory months were decreasing for median sales price for single family homes increased by single-family homes but increasing for condominiums, 4.7% from 2018 to 2019. Single family homes were also the suggesting buyers were already looking for larger homes. largest (and growing) share of listings in the county and Houston is also experiencing fast-growing city (see Figure 44). Simultaneously, the townhouse and home value, with a median home value condominium median sales price declined slightly in the approaching $200,000. county (5.9% and 1.5%, respectively). A similar pattern played out in the city.26 While information about actual home sales is critical, it only provides insights about those homes that are on the Single-family homes on the market have the market. Looking at ACS data for estimated home value shortest inventory months among all housing adds another layer to sales by showing shifts in the assets types, and Harris County is more of a seller’s and tax burden for existing homeowners. It also shows market than Houston. the value of local fixed residential property.

According to ACS data (Figure 46), Houston’s home value 26 It is important to note that single-family homes here also include small-lot residential (i.e. under 5,000 square feet) in the city of increased more than Harris County’s (9.3% versus 5.5%), Houston. These homes can often be confused with ‘townhomes’ continuing last year’s trends. Although historically, home due to their physical resemblance being 3–4 story, yet freestanding values have been higher outside the city, median home structures, and are permissible on lots as small as 1,400 square feet.

FIGURE 45 Inventory of for-sale homes FIGURE 46 Median home value, (months) Harris County and Harris County and Houston, Houston, 2018 and 2019 2018 and 2019 6 $250,000 4.9 4.74.7 5 4.7 4.6 4.24.2 4.3 4.1 4.1 3.93.9 $200,000 4 3.2 3.1 3.12.9 3 2 $150,000

Inventory (months) Inventory 1 0 $100,000

$50,000 Townhouse Townhouse Single Family Single Family Condominium Condominium

Residential (All) Residential (All) $0 Harris County Houston 2018 2019 2018 2019

2018 2019 Harris County Houston

Data Source: Houston Association of Realtors, 2020 Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018–2019

32 Rice University Kinder Institute for Urban Research SECTION 3. AFFORDABILITY AND ACCESS TO HOUSING

FIGURE 47 Home value distribution, Harris County, 2018 and 2019

200,000

180,000

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0 Less than $50,000 to $100,000 to $150,000 to $200,000 to $250,000 to $300,000 to $500,000 to $1M or more $50,000 $99,999 $149,990 $199,999 $249,999 $299,999 $499,999 $999,999

2018 2019

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018–2019 value in the two jurisdictions is now almost equal, reflect- burdens are growing for existing taxpayers. Growth in ing growing demand for homes in the City of Houston property taxes can be particularly problematic for low-in- and the construction of higher-value homes there. come homeowners.

Harris County is gaining many housing units While both home value and household income valued more than $150,000 and losing lower- are increasing in Harris County and Houston, valued units, lessening the stock of available the ratio of median value to median income is homes for lower-income buyers. also growing, indicating homes are becoming more unaffordable to middle-class residents. Harris County continues to lose affordability. About 70% of homes in Harris County are worth more than The ratio of median home value to median owner house- $150,000, and that number is going up while the supply hold income shows how accessible the housing market is of lower-value homes shrinks (see Figure 47). The de- for median-income homeowners. It tracks the growth in cline means that fewer homes are likely to be available at home price relative to the growth in income. In addition affordable asking prices if they go up for sale, and that tax to affordability gap statistics, the ratio helps show wheth-

FIGURE 48 Ratio of median home value to median owner-occupied household income

Harris County Houston

Year Year 2018 Year 2019 Year 2018 Year 2019

Median home value (MHV) of owner-occupied housing units 187,10 0 197,40 0 179,100 195,800

Median household income (MHI) for owner-occupied housing units 83,174 87,516 77,0 58 81,164

The ratio of MHV to MHI 2.25 2.26 2.32 2.41

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019

The 2021 State of Housing in Harris County and Houston 33 SECTION 3. AFFORDABILITY AND ACCESS TO HOUSING er a median-income level household can afford to buy a FIGURE 49 Cost burden by tenure, house locally. If the value to income ratio grows too high, Harris County, 2018 and 2019 it signals that homes are becoming unaffordable even for 60.0% middle-income residents. 50.0% Particularly in Houston, home values are increasing fast- 40.0% er than incomes. The city’s ratio grew more than Harris 25.1% 24.2% County’s between 2018 and 2019. While rising home val- 30.0% ues will generate more property taxes, the faster growth 20.0% of values compared to income also signals that aspiring 9.4% 8.3% 24.8% 26.8% homeowners may be unable to purchase a local home in 10.0% their price range. 12.7% 12.0% 0.0% Owners Renters Owners Renters Beyond not being able to own a home, 2018 2019 renters have difficulty covering existing Spent 50% or more on Housing rent payments Spent between 30% and 50% on Housing

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018–2019 In 2019, a greater share of renter households in Harris County have become cost-burdened, while the number of cost-burdened homeowners Renters’ cost burden is worsening for both poorer has declined. and middle-income renters, as a majority of renters earning less than $50,000 are cost burdened. In 2019, more than half of all renters in the county were identified as cost-burdened, meaning they spent more Not just poor renters but middle-income renter house- than 30% of their income on housing. Of these cost-bur- holds face a growing cost burden. In 2019, more than a dened renters, nearly half were severely cost-burdened, quarter of renter households that make between $50,000 meaning they spent 50% or more of their income on and $75,000—or 80% to 120% of the county’s median housing. The share of the cost-burdened renters slightly income—are cost burdened. This was a significant in- increased from 49.9% in 2018 to 51.1% in 2019 (Figure 49). crease from 17% in 2018 to 26% in 2019. And more than half of renter households earning between $35,000 and Homeowners do not have as high of a cost burden as $50,000—which is the range that includes the median renters, showing the benefits that accrue with homeown- renter household income ($42,000) in 2019—are consid- ership. About 20% of county homeowners were cost-bur- ered cost-burdened. dened in 2019, a decline from 2018.

FIGURE 50 Household income by gross rent as a percentage of household income, Harris County, 2019 100% 6% 3% 12% 90% 9% 12% 80% 48% 70%

60% 55% 83% 50% 95% 98%

40% 85% 85%

30% 46% 20% 34% 10% 16% 6% 0% 5% Less than $10,000 $10,000 to $19,999 $20,000 to $34,999 $35,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 or more

Spent More than 50% on Housing Spent Between 30% and 50% on Housing Non Cost-burdened

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2019

34 Rice University Kinder Institute for Urban Research SECTION 3. AFFORDABILITY AND ACCESS TO HOUSING

FIGURE 51 Median gross rent FIGURE 53 Evictions by month, distribution, Harris County, January 2018–July 2020 2018 and 2019 4000 200,000 3500 180,000 160,000 3000 140,000 2500 120,000 100,000 2000 80,000 1500 60,000 40,000 1000 20,000 500 0 Less than $800 to $1,000 to $1,250 to $1,500 or 0 $800 $999 $1,250 $1,499 more Jul-18 Jul-19 Jul-20 Apr-18 Oct-18 Jan-19 Apr-19 Oct-19 Jan-20 Apr-20 Feb-18 Feb-19 Feb-20 Mar-18 Mar-19 Mar-20 Nov-18 Dec-18 Aug-18 Nov-19 Dec-19 Aug-19 May-18 May-19 May-20 Sept-18 Sept-19 June-18 June-19 2018 2019 June-20

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019 Source: January Advisors, Harris County Justice of the Peace

Median gross rent is rising, and the area is adding When compared to peer counties and cities, more expensive rental units. Harris County and Houston are more unaffordable to renters and becoming worse. Median gross rent grew more in Houston than in Harris County, as the demand for rental units in Houston was In both local geographies, the ratio of median income to substantial. The median gross rent rose by 4.9% in the median rent increased from 2018 to 2019, suggesting that county and 6.1% in the city between 2018 and 2019 (Figure people here are spending more money on rent. 50). In addition to a rent increase, the city had a significant Every other peer city (except Atlanta) and county had de- drop in rental vacancy rate (from 10% to 8.4%, see Figure 36 clining ratios, signaling that the peer cities were becoming above), indicating a competitive rental market in Houston. more affordable to renters. The ratios suggest that rental Alongside rising rents is a connected decline in affordable affordability in both Harris County and Houston is an units. For example, Harris County lost roughly 20,000 important issue not only for low-income renters, but for units that cost less than $800 monthly, while the share of median-income renters as well. units that cost more than $1,000 increased from 56% to 61% in one year. These trends are consistent with those observed in last year’s report. This reflects not just rising rents on existing units, but also the new construction of higher priced rental units.

FIGURE 52 Median gross rent as a percentage of household income, comparisons including Harris County and Houston, 2018 and 2019

Geography Counties Cities

Year Harris Dallas Fulton Cook Houston Dallas Atlanta Chicago

Year 2018 29.9 28.8 29.2 29.3 30.1 29.2 29.6 29.4

Year 2019 30.6 28.3 28.2 28.5 30.7 28.6 30.3 28.5

Difference 0.7 –0.5 –1.0 –0.8 0.6 –0.6 0.7 –0.9

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2018 and 2019

The 2021 State of Housing in Harris County and Houston 35 SECTION 3. AFFORDABILITY AND ACCESS TO HOUSING

FIGURE 53 Evictions by CTA, 2019

FIGURE 54 Total eviction rate by CTA, 2019

36 Rice University Kinder Institute for Urban Research SECTION 3. AFFORDABILITY AND ACCESS TO HOUSING

Perhaps because of local renters’ recent years, evictions tended to peak in summer months. cost burden, Harris County has a Evictions accelerated in 2018 and 2019 (see Figure 53), de- massive eviction rate spite a strong economy. After the pandemic hit, the Texas Supreme Court ordered a halt on eviction proceedings, In 2019, the county processed 64,257 eviction filings. Harris which then started again in May 19, 2020, after the court County’s eviction filing rate was 8.8%, meaning that in 2019 lifted its moratorium.28 Kinder has eviction data only there was roughly one eviction filing for every 11 rental through July 2020, and therefore this report could not households in the county. These represent only filings, assess the September 2020 CDC eviction moratorium. which are legal notices of eviction proceedings in court that appear on a renter’s door, and not actual evictions of which As of 2019, certain CTAs in the north, southwest, and there were 32,924. The actual eviction rate is 4.5%, meaning east have the highest number of gross evictions. Note that that more than one in 25 rental households gets evicted. these CTAs that have both 1) many large rental complexes that cater to lower-income residents and 2) many immi- Of the counties with the five biggest cities in the U.S., no grant households. Therefore, an eviction filing notice on single county had a higher eviction rate. Only New York a resident’s door requesting their appearance in court City had slightly more total evictions, but note that New may be even more complicated and intimidating than it York City contains five counties, has twice as many peo- would be for a U.S. citizen and/or native English speaker. ple, and has a larger share of renter households. Tenants may not know their legal rights or how to pursue The 32,924 eviction count does not include eviction-like counsel for the court appearance. events. For example, a renter who receives notice of an When examining eviction rates (which divides evictions eviction filing might do an emergency, last-minute move by the number of renter households), one sees a clear east- to a family member’s home before they are formally evict- west divide in the county, with most of the high eviction ed. Such disruptive moves are effectively “eviction-like” rate CTAs being located in the county’s east. but are not recorded in that 4.5% statistic.

The 2019 eviction numbers fit into the region’s established pattern. Evictions increased rapidly during the 2000s and have remained at a high rate in the past decade.27 In 28 Houston Public Media. “Houston Renters Among First In The Country To Face Evictions After COVID-19 Moratoriums.” May 27 Reichman, Jeff. “Why Houston Should Care About Evictions.” 19, 2020. https://www.houstonpublicmedia.org/articles/news/ January Advisors, March 15, 2020. https://www.januaryadvisors. houston/2020/05/19/370004/houston-renters-are-among-the-first- com/why-houston-should-care-about-evictions/. in-the-country-to-face-resumed-eviction-proceedings/

FIGURE 55 Top 10 CTAs, 2019, eviction rate and total evictions

Rank Top 10 CTAs (eviction rate) Top 10 CTAs (total evictions)

1 1960/Cypress Creek North (14.8%) Spring Southwest (1,467)

2 East Little York/Homestead (.129) Greenspoint (1,338)

3 Aldine Northwest (9.9%) Pasadena (1,004)

4 Greenspoint (9.6%) 1960/Cypress Creek North (955)

5 Edgebrook (9.2%) Baytown (948)

6 Meyerland (9.1%) Eldridge/West Oaks (926)

7 Clinton Park Tri-Community (9.0%) Alief (901)

8 Nassau Bay (8.9%) Briar Forest (834)

9 Minnetex (8.9%) Westchase (800)

10 Spring Southwest (8.8%) Aldine Northwest (728)

Source: January Advisors, Harris County Justice of the Peace 2019 ACS 5-year data

The 2021 State of Housing in Harris County and Houston 37 SECTION 4. ECONOMIC SEGREGATION AND HOUSING RESILIENCE Section 4. Economic Segregation and Housing Resilience

Economic segregation and racial inequality Since 2010 Harris County and Houston have remain a pervasive issue that transcends made inroads in income diversity, though both housing and affects many Houstonians’ rank below peer counties and cities. prospects for upward mobility Income diversity is one way to measure economic di- Houston’s geographic distribution of income versity in neighborhoods. As defined by the New York is persistently marked by a clear east and University Furman Center for Real Estate and Urban west divide. Policy, the income diversity index is generated by dividing the income earned by the 80th percentile household by the Higher income residents live in the “arrow” west of income earned by the 20th percentile household in a given Houston’s urban core (Figure 56), and in the fringes of the geography. A higher ratio means that there is more income county between Beltway 8 and the Grand Parkway, partic- diversity, while a lower ratio reflects less income diversity. ularly in the northwest and southeast. (The “arrow” is an affluent area shaped like an arrow that can be seen on most The city and county is less income diverse than most maps of Houston depicting socioeconomic conditions.) peer geographies. As of 2019, the income diversity ratio was 4.89 for Harris County, and its outer county suburbs In contrast, poverty dominates the eastern half of Harris showed a pattern of income homogeneity, though it has County, the same area where a higher share of affordable trended toward increasing diversity since 2010’s 4.82 housing subsidies are located. In 2019, residents with ratio. When compared to peer counties, Harris County incomes below the poverty line were concentrated on the is third in income diversity while Dallas County came eastern side of Harris County between the 610 Loop and in last. Houston had a similar third-place ranking when the northern part of Beltway 8. compared to peer cities. Photo by Keith Ewing/flickr

38 Rice University Kinder Institute for Urban Research SECTION 4. ECONOMIC SEGREGATION AND HOUSING RESILIENCE

FIGURE 56 Median household income, 2019

FIGURE 57 Poverty rate, 2019

The 2021 State of Housing in Harris County and Houston 39 SECTION 4. ECONOMIC SEGREGATION AND HOUSING RESILIENCE

Furman Center for Real Estate and Urban Policy, the FIGURE 58 Income diversity index, 2019 racial diversity index measures the probability that two 9.00 randomly chosen people in a given geographic area will be 8.00 of a different race. A higher racial diversity index means 7.00 7.65 more racial diversity in a population.29 6.00 6.38 5.00 5.74 When using the index to measure racial diversity across 5.46 5.33 4.00 4.89 4.89 the county, one sees highly diverse areas in the west and 4.31 3.00 in many other areas beyond Beltway 8. Compared to other 2.00 races and ethnicities, the share of Hispanic residents in 1.00 Harris County increased by almost 1 percentage point 0.00 from 2018 to 2019, accounting for 44% of the population. Dallas, TX Chicago, IL Atlanta, GA Atlanta, Houston, TX Cook County, IL Harris County, TX Dallas County, TX Fulton County, GA

Source: U.S. Census Bureau, American Community Survey 1-Year Estimates, 2019

29 The racial diversity index was developed by the New York University Racial diversity is higher in Harris County, Furman Center for Real Estate and Urban Policy. If a given including suburban areas, while income diversity, geography is inhabited by a single racial/ethnic group, its RDI would which is more prominent in the urban core. be zero. If the population of a neighborhood is evenly distributed among the five groups (20% white, 20% black, 20% Asian, 20% Similar to last year, Harris County maintained the same Hispanic, and 20% other), its RDI would be 0.8. However, it’s more likely given the small proportion of residents who fall into the Other level of racial diversity in 2019, as shown in the racial di- category that an evenly distributed neighborhood would have an RDI versity index. Also developed by the New York University around 0.75 (roughly 25% for each of the major race/ethnic groups).

FIGURE 59 Income diversity index, 2019

40 Rice University Kinder Institute for Urban Research SECTION 4. ECONOMIC SEGREGATION AND HOUSING RESILIENCE

FIGURE 60 Racial diversity index, 2019

FIGURE 61 Home loan originations as a share of owner-occupied households

The 2021 State of Housing in Harris County and Houston 41 SECTION 4. ECONOMIC SEGREGATION AND HOUSING RESILIENCE

Non-white Harris County residents are denied FIGURE 62 Harris County home loan mortgages at a higher rate and receive worse originations and denials by loan terms, yet banks are more likely to issue race/ethnicity and gender, loans to higher-debt non-white borrowers. 2018–2019 Data on home loans bring to light gender, racial and Race/ethnicity Denial-to-origination ratio ethnic divides in who receives loans. These loan patterns Asian 0.15 help inform an understanding of the local geography 30 Black or African American 0.25 of segregation.

Hispanic 0.22 Unsurprisingly, home loan originations are most common in hotter real estate submarkets—outside of Beltway 8 and Other 0.19 inside the 610 Loop in high-demand areas such as The Unknown 0.16 Heights and Lazybrook / Timbergrove (see Figure 61). White 0.10 In terms of race/ethnicity, Figure 62 shows the divide in who receives a loan origination for owner-occupied homes. (An “origination” is a successful loan application.) The de- Gender Denial-to-origination ratio nial-to-origination ratio is highest for Black Harris County Female 0.18 residents, followed closely by Hispanic, other ethno-racial Joint 0.14 identity, Asian, then white. Further tracts with high rates of loan denials are disproportionately in communities of Male 0.17 color throughout Harris County (see Figure 63). Gender Not Available 0.19 30 In this section, unless specified we analyze loansonly for people

Source: Home Mortgage Disclosure Act, Snapshot National Loan Level Dataset looking to buy homes for their primary residence, and not second homes or investment properties.

FIGURE 63 High denial ratio census tracts, 2018–2019

42 Rice University Kinder Institute for Urban Research SECTION 4. ECONOMIC SEGREGATION AND HOUSING RESILIENCE

FIGURE 64 Harris County home loan FIGURE 65 Harris County, debt burden terms, by race/ethnicity, of home loan denials by race/ 2018–2019 ethnicity, 2018–2019

Avg. Avg. Avg. Percentage loan interest loan Avg. debt-to- of denials that Race amount rate months Race income ratio are high debt

Asian $285,018 4.28 327 Asian 0.47 70%

Black or African Black/African $222,791 4.62 353 0.48 73% American American

Hispanic $191,210 4.79 349 Hispanic 0.46 67%

Other $276,214 4.52 349 Other 0.47 69%

Unknown $291,071 4.39 344 Unknown 0.45 64%

White $312,481 4.45 343 Source:White January Advisors, Harris County Justice of the0.43 Peace 59%

Source: Home Mortgage Disclosure Act, Snapshot National Loan Level Dataset Source: Home Mortgage Disclosure Act, Snapshot National Loan Level Dataset

Harris County women applying for loans for owner-occu- Mortgage foreclosures are well-understood: They oc- pied homes have a slightly higher denial ratio than men, cur when a person is delinquent on their mortgage loan and joint filings have the lowest denial rate. payments. Tax foreclosures, a much smaller share of foreclosures, occur when a property owner does not pay However, the data tells a more complicated story when their property taxes over a long period of time, often on considering other loan terms, like dollar amount and non-residential or abandoned properties. In cases of an interest rate. While denied at a higher rate, non-white and occupied residential property facing tax foreclosure, non-Asian Harris County residents also tend to receive owners have many relief options and often enter into higher-interest loans. While Hispanic borrowers do not extended negotiations with the taxing authorities in order have the highest denial ratio, they are paying the highest to prevent being displaced. interest rates on the least expensive homes. This has the effect of putting certain Hispanic and other households Data from each foreclosure come from different sources. into more unstable financial situations. Tax foreclosure records are public. Texas law does not require mortgage foreclosure records be public; there- Analyzing existing borrower debt complicates the issue fore, Kinder acquired data from New America’s 2020 further. The average debt-to-income ratio on a denied ap- “Displaced in the Sun Belt” report, which processed plicant, for each racial/ethnic group, is higher than 0.40, data with the assistance of DataKind and Foreclosure which is the Federal Reserve’s definition of a high debt bur- Information and Listing Service Incorporated. den. While white Harris County residents are denied less frequently and have more favorable loan terms, those white New America unfortunately lacks mortgage foreclosure applicants who are denied have a lower existing debt-to- data for certain census tracts, so this report contains data income ratio (Figure 65). Lenders tend to accept higher only for the tract-level and does not aggregate a city or debt burdens for non-white loan applicants, which may county-wide rate. Missing foreclosure data also makes it be associated with the fact that, as shown previously, non- impossible to accurately estimate foreclosures at the CTA white borrowers have less favorable loan terms (i.e., higher level, so this report does not include those numbers. Like interest rates), putting them at a higher risk of foreclosure. evictions, these data are “lumpy” and thus are averaged across years. Through 2017–2019, the county recorded on Mortgage foreclosures are most common in average at least 8,193 mortgage foreclosures per year. suburban areas, but areas with longer-term, non-white owners also saw high rates of both Across the county, the most mortgage foreclosures mortgage and tax foreclosures. occurred in suburban areas around Bear Creek and Atascocita. Many high-mortgage foreclosure CTAs also This report presents data on two types of foreclosures: had extensive flooding during Hurricane Harvey. It tax foreclosures and trustee (or mortgage) foreclosures.

The 2021 State of Housing in Harris County and Houston 43 SECTION 4. ECONOMIC SEGREGATION AND HOUSING RESILIENCE

FIGURE 66 Total mortgage foreclosures by tract

FIGURE 67 Mortgage foreclosure rate by tract

44 Rice University Kinder Institute for Urban Research SECTION 4. ECONOMIC SEGREGATION AND HOUSING RESILIENCE

FIGURE 68 Tax foreclosure rate by CTA

remains a point to investigate further if there is a relation- Housing subsidies are concentrated in Houston, ship between flooding and mortgage foreclosures. primarily in high-poverty neighborhoods.

Many areas with high mortgage foreclosure numbers are Despite ongoing efforts to bring subsidized homes into in suburban areas with many single-family homes. When higher opportunity areas, subsidized housing units re- calculating the mortgage foreclosure rate (total mortgage main disproportionately concentrated in under-resourced foreclosures divided by number of owner-occupied homes areas, which reinforces racial and income segregation with a mortgage), however, one finds that central areas in patterns. From 2018 to 2019, three out of every four the eastern part of the county have particularly high rates subsidized housing units in Harris County were added (see Figure 67). This may be due partly to the lower num- in Houston city limits. Each of these trends are continua- ber of homeowners in these areas and the relatively high tions of those since 2010. Housing Choice Voucher (HCV) level of financial risk that new homeowners are taking on. and Low-Income Housing Tax Credit (LIHTC) programs are the largest affordable housing programs that provide Tax foreclosures represent a much smaller set of fore- rental assistance.31 The fair housing and poverty dispersal closures, with fewer than 710 total foreclosures (on all focus of HCVs is evidenced in that nearly half are split types of properties) in 2019. The geography of residential between Harris County and Houston, whereas the LIHTC tax foreclosures resembles that of mortgage foreclosures, and other subsidy programs’ homes are overwhelmingly with many inner areas to the east of downtown having inside Houston. high numbers. Two CTAs had more tax foreclosures than “traditional” home sales, showing that they have uniquely moribund real estate markets. These are also areas where ownership and title issues among families with long-term 31 Each subsidy category is not mutually exclusive. Many HCV units ownership are often complicated, which can lead to many can be double-counted with other subsidy programs.The number properties entering into a legal limbo. of LIHTC units indicates the number of units built with the LIHTC program or often with one or more other subsidy programs. The number of other subsidy program units indicates the number of units built with other subsidy programs but not with the LIHTC program.

The 2021 State of Housing in Harris County and Houston 45 SECTION 4. ECONOMIC SEGREGATION AND HOUSING RESILIENCE

More knowledge about landlords will FIGURE 69 Number of subsidized help stakeholders better understand housing units by affordable the dynamics of a renter-majority city housing program type, (and soon-to-be majority renter county) houston and its suburbs in Harris County, 2019 It is important for Houston’s housing advocates 40,000 and professionals to not only understand 7,966 renters but also landlords. Most landlords 30,000 are smaller enterprises who are uniquely 20,000 stressed during COVID-19. 9,161 3,262 29,172 10,000 Because many landlords—even “mom and pops”—have 13,931 15,921 independent LLCs listed as the owners of each individual 0 HCV UNITS LIHTC UNITS OTHER SUBSIDIZED property, it remains very difficult to quantitatively trace UNITS ownership patterns countywide. Houston, 2019 Harris (excluding Houston), 2019

Source: HCV - HUD, Pictures of Subsidized Households, 2020, LIHTC and other housing programs— Therefore, one must search for baseline information from National Housing Preservation Data (NHPD), 2020 national research, such as a recent national study of “mom and pop” landlords by the Urban Institute in Washington, Figure 70 shows communities with large numbers of units D.C.32 These landlords’ profits are smaller than larger land- in other public subsidy programs besides HCV. While lords’, and their buildings tend to be older (and thus have there is a concentration of subsidized units within the 610 Loop’s eastern and northern CTAs, there is a larger 32 Choi, Jung Hyun, and Caitlin Young. “Owners and Renters of 6.2 concentration of units in CTAs where poverty surpass- Million Units in Small Buildings Are Particularly Vulnerable during the Pandemic.” Urban Wire, Urban Institute (blog), August 10, 2020. es 30%, such as: Sunnyside, Settegast, Greenspoint and https://www.urban.org/urban-wire/owners-and-renters-62-million- Intercontinental Airport. units-small-buildings-are-particularly-vulnerable-during-pandemic.

FIGURE 70 Subsidized housing units

46 Rice University Kinder Institute for Urban Research SECTION 4. ECONOMIC SEGREGATION AND HOUSING RESILIENCE more maintenance costs). This implies that smaller landlords would be more vulnerable to COVID-19’s economic fallout and other shocks, as they have a higher likelihood of having tenants who would feel the brunt of these crises.

Survey data is an important tool for understanding local landlord practices. Avail, a Chicago company that sells portfolio management software to smaller landlords, issued a survey of its clients across the country during the pandemic to understand its impact. From a limited sample of the company’s 24 clients in the Houston MSA, 22 had an existing mortgage on their rental properties, a much higher proportion than the 36% in the national 2,400-landlord sample. While a 24-landlord sample is very small, the supermajority signals that Houston’s landlords may be disproportionately at risk of foreclosure during COVID-19, a period of many non-paying tenants.

The local city-county Housing Stability Task Force had a working group specifically focused on crafting policy to help smaller landlords through the crisis. The work group’s final report33 issued recommendations that included direct financial assistance, developing deferred-payment loan programs and expanding landlord participation in the Section 8 Housing Choice Voucher program. These recommendations are still being consid- Photo by Bill Jacobus/flickr ered by both the city and county. reasonable estimate.34 After the foreclosure crisis, newer Major real-estate investment trusts (REITs) REITs began to focus on SFRs. These REITs’ business have a large presence in Houston, largely in model usually entails buying inexpensive (and often neighborhoods with many foreclosures. foreclosed) homes to rent in Sun Belt metropolises like Houston, where long-term prices are expected to be high- Because of the foreclosure crisis, many previously owner, and then re-selling the home after the market recovers. er-occupied single-family homes became rental properties. This raises questions about who the new property Critics believe SFR REITs to be faraway landlords who owners are: While most landlords are smaller operations, outbid local landlords or potential owner-occupiers, and corporate entities, such as real-estate investment trusts certain SFR REITs have received negative national press (REITs), are increasingly entering the property manage- accusing them of poor maintenance and aggressive fee-is- ment business. suing practices.35 Others note that these national investment trusts had the uniquely large resources to assure A crucial difference between a REIT and a “traditional” that more homes could remain occupied and therefore landlord is their business model. Traditionally landlords un-blighted, a particular concern after 2008.36 have one source of income: a rent check. REITs have two. Besides rent, they also earn revenue from issuing 34 National Rental Home Council 2019 data cited in Fields, Desiree. rental-backed securities, akin to the mortgage-backed “Automated Landlord: Digital Technologies and Post-Crisis securities that helped cause the 2008 crisis. However, Financial Accumulation.” Environment and Planning A: Economy and Space, May 1, 2019 https://doi.org/10.1177/0308518X19846514. single-family REITs are a miniscule sector of the rental 35 See for example Mari, Francesca. “A $60 Billion Housing Grab by market, less than 2% of all single-family rentals (SFRs) by Wall Street.” The New York Times, March 4, 2020, sec. Magazine. 33 “Landlord and Property Stabilization Work Group Final https://www.nytimes.com/2020/03/04/magazine/wall-street- Recommendations.” Final recommendations. Houston, TX: landlords.html. COVID-19 Harris County Housing Stability Task Force, February 36 Curry, Kerry. “How Invitation Homes Became the Biggest Owner of 5, 2021. https://housingstabilitytaskforce.org/wp-content/ Rental Houses in the Country.” D Magazine, April 2018. http://www. uploads/2021/02/HCHSTF_Landlord-Property-Stabilization-Final- dmagazine.com/publications/d-ceo/2018/april/invitation-homes- Recommendations_02.05.21_.pdf. rental-dallas/.

The 2021 State of Housing in Harris County and Houston 47 SECTION 4. ECONOMIC SEGREGATION AND HOUSING RESILIENCE

FIGURE 71 Major REIT-owned parcels and total residential foreclosures, 2017–2019, by CTA

As of October 2020, these two major SFR REITs owned FIGURE 72 Percentage of loan applications at least 3,075 homes in Harris County. They certainly own from investors, 2018–2019 more, as these estimates only include homes owned by the 12 LLCs Kinder staff could confidently trace back to these Percentage of loan County applications from investors two specific REITs. This 3,075 is also a small share of the 169,668 detached SFRs in Harris County. Additionally, Fulton County, GA 9.12% Kinder researchers hypothesize that many of these Cook County, IL 9.13% companies may be rapidly selling their rentals during the strong post-COVID-19 home sales market. Dallas County, TX 8.08% Confirming other research, this report finds that these Harris County, TX 7.34% companies own homes in high-foreclosure areas, particu-

Source: Home Mortgage Disclosure Act, Snapshot National Loan Level Dataset larly in western and northeast Harris County. Among the CTAs with the largest Invitation Homes/American Homes 4 Rent presence are the CTAs with the highest foreclosure SFR REITs have a presence in Houston. It is difficult to rates, places like Aldine Northwest, Spring Southwest, track their local footprint because of the different LLCs and Bear Creek. they use. Kinder researchers were able to identify 12 LLCs associated with two of the largest SFR REITs—Invitation Home Mortgage Disclosure Act (HMDA) data provides Homes (under the Blackstone Group) and American insight into other investor home acquisition activities. As Homes 4 Rent—by using corporate records to trace own- mentioned, REITs tend to operate more in Sun Belt cities. ership of certain LLCs back to these companies. By most Yet compared to peer counties, HMDA data shows that estimates, Invitation Homes is the largest SFR landlord Harris County has seen fewer loan applications for invest- in the country. Tracking these two companies’ activities ment rental properties. is therefore important for understanding the local REIT presence and the SFR market per se.

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However, this data has an important qualifier: HMDA evictions happening at once, causing occasional one- only records loan applications and does not capture in- year spikes for certain neighborhoods. Averaging helps stances when investors may buy properties outright with account for these trends. The 3-year average was used to cash on hand, which a large investment trust is theoreti- compare to the 2019 eviction numbers. cally able to do. Figure 73 shows that while the east side may have had The suburbs are the site of a growing higher eviction rates, evictions appear to be growing the trend in concentrated poverty most in the county’s west and southwest areas beyond the 610 Loop and Beltway 8. These “eviction growth” areas As noted above, the suburbs contain a large share of the also include many predominantly immigrant communi- challenges of poverty, deprivation and housing insecu- ties, suggesting the need for targeted interventions for rity. Foreclosures are highest in suburban CTAs beyond tenants with tenuous immigration status and/or non-na- Beltway 8, while many high-poverty census tracts are be- tive English proficiency. These sites of growing eviction yond the Beltway as well. Cost-burdened and overcrowd- also include many newer outer-ring suburbs with newer ed renters are concentrated in many of these communi- and higher-amenity buildings, suggesting that even medi- ties, too, despite being at the urban fringe of the county. an-income householders are also struggling to pay rent. Below, the report explains specific trends illustrating the Loan records show that affordable homes for suburbanization of poverty. purchase are disproportionately in far-flung, Evictions are already high in the suburbs and high-poverty suburban areas on the east side, are growing. which has implications for upward mobility.

The geography of evictions appears to be moving to In order to assist low-income homebuyers, the Federal southwestern suburban areas. Housing Administration (FHA) insures some loans with lower down-payment and credit score requirements than The 3-year average was compared to the 2019 eviction most conventional commercial loans. As of 2020, FHA numbers. Eviction data can be very “lumpy,” with many

FIGURE 73 Change in evictions by CTA, 2016–2018 to 2019

The 2021 State of Housing in Harris County and Houston 49 SECTION 4. ECONOMIC SEGREGATION AND HOUSING RESILIENCE

FIGURE 74 Tracts with large share of FHA loans

FIGURE 75 Elderly population in poverty, 2019

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FIGURE 76 Housing unit percentages by floodplain, Harris County and Houston, 2018 and 2019

0.5% 2018 9.2% 13.3% 77.0% (1,741,349 units)

0.5%

Harris County 2019 9.2% 13.2% 77.1% (1,765,497units)

0.7% 2018 11.3% 14.0% 74.0% (929,964 units)

0.7% Houston 2019 11.3% 13.9% 74.2% (939,508 units)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Floodway 100-Year Floodplain 500-Year Floodplain Outside

down payments are 3.5% of home purchase price, much Unfortunately in 2019, statistics show that the elderly lower than the traditional 10%-20%. This helps borrowers poor are residing in the suburban areas of Harris County with lower cash reserves buy homes. Per loan regulations, (i.e. between Beltway 8 and the Grand Parkway) in far in 2019 FHA loans must be for homes that cost less than greater numbers. These places lack mass transit and $331,000 in Harris County. non-automobile mobility options that these elderly residents currently need, and will only need more as they age. Mapping FHA loan patterns can help us understand where low- and moderate-income buyers are actually Flooding is a growing risk: Homes are purchasing homes. still being built in the existing 100- and The FHA data show that lower-income purchasers dis- 500-year floodplains proportionately purchase homes in the suburbs (Figure More families may be placed in harm’s way even as 74). Buyers often “drive until they qualify” for a loan in the overall share of at-risk housing is decreasing. a home in the Beltway 8 area or beyond, largely in the county’s eastern half. These are predominately high-pov- Federal Emergency Management Agency (FEMA) flood erty areas far from many amenities. Research shows that zones are based on different levels of flood risk and vul- residence in such communities has negative implications nerability to flooding events. The “floodway” is the area for upward mobility.37 that has the highest risk of floods, such as the channel of a bayou and the land next to it. The 100-year floodplain Elderly residents in poverty live in the outer is an area with a 1% annual chance of flooding, while the reaches of Harris County. 500-year floodplain has a 0.2% annual chance of flooding The suburbs are also the site of many poor, elderly resi- and has the lowest flood risk. dents. Earlier sections of this report showed that the city In Harris County, homes continue to be built in flood- and county have a growing elderly population. Knowing plains—about 2,000 homes countywide in 2019—although where aging populations reside helps policymakers the share of housing units in the floodplains dropped. understand the challenges and opportunities around the About 10% of the total homes are within the current 100- elderly population’s housing, transportation and physical/ year floodplain and floodway. A revision of the 100-year mental health needs. floodplain boundary will likely include the current 500- year floodplain, which means that about one in every four 37 Chetty, Raj, Nathaniel Hendren, Patrick Kline, and Emmanuel Saez. “Where Is the Land of Opportunity?: The Geography of homes in the county will be likely included in the elevated Intergenerational Mobility in the United States.” The Quarterly flood-risk area. Journal of Economics 129, no. 4 (November 1, 2014): 1553–1623. https://doi.org/10.1093/qje/qju022.

The 2021 State of Housing in Harris County and Houston 51 SECTION 4. ECONOMIC SEGREGATION AND HOUSING RESILIENCE

FIGURE 77 Building footprints and floodplains, Harris County

In general, the share of homes in the 500-year floodplain This pattern means that many people who need flood cov- declined in 2019. However, the unit numbers slightly in- erage do not have it: locally, there is only about one policy creased. The increasing number of single-family and mul- for every four units in a floodplain. The 83,322 and 55,197 tifamily units in flood-prone areas can impact Houston’s policies in the county and city, respectively, are drastically most vulnerable communities, who are less likely to have less than the 404,273 and 242,670 units in the floodway, savings as a cushion after a disaster. The growing number 100- and 500-year floodplains in the same areas. While the of housing units in the floodplain could also deteriorate number of policies increased after Harvey (from roughly many Houstonians’ safety and quality of life after the 66,000 to 74,000 from 2017 to 2018), the number of homes type of severe flooding event that the city and county will at risk and without coverage remains considerable.38 certainly experience in the future. Potential declines in property values in Not nearly enough local homeowners have flood floodplains are a threat to wealth building insurance protection, as the number of flood and economic mobility. insurance policies is roughly only one-fourth of Without adequate flood insurance protection, the im- the number of units in the floodplains. mense amount of capital invested in homes in the flood- Despite being on a coastal plain in a hurricane-prone area, plain may likely be washed away. Kinder staff estimate many Harris County residents do not have flood insurance policies. Area residents tend to purchase policies only 38 When comparing the NFIP policy count to the number of housing after a disaster threatens them, and purchases decline as units, one must consider an important qualification. NFIP data show storms recede from memory. According to National Flood the total count of flood insurance policies. In the case of multifamily properties, it is possible that both a property owner and tenant each Insurance Program (NFIP) data, many Houstonians pur- purchase flood insurance policies. Property owners policies cover chased insurance after Hurricane Ike but numbers dipped structural damage, while renters purchase policies to protect their until after Hurricane Harvey, when policy purchases belongings because renters insurance may not cover flood damage. Therefore, while a comparison may be imprecise, the very large gap increased again, up 16% from before the storm. between total policies and units in Harris County still signifies that we do not have adequate coverage.

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the only people conducting the count were professionals FIGURE 78 Residential property value in (and not volunteers like inpast years). Because of the dif- Houston and Harris County ferent methodology, these agencies discourage inter-year in 2018–2019 comparisons with the 2021 results. In 2019, the point-in- Residential Property Value in Houston and Harris time count showed 3,938 homeless residents, down from County in 2018-2019 35 4,143 in 2018. Yet in 2021, the point-in-time count (with 30 25 a different methodology) showed that 3,055 people are 20 experiencing homelessness in Harris, Fort Bend, and 15 10 Montgomery counties, of which 51% have shelter but not 5 stable housing. 0 Residential Property Value, $B The second possible reason may be that targeted poli-

100YR 500YR 100YR 500YR cy and funding helped provide emergency shelter. The

FLOODWAY FLOODWAY number of unsheltered people getting rapid re-housing 2018 2019 and permanent supportive housing decreased in 2020, Harris County Houston partially because shelters needed to decrease occupan- Source: Harris County Appraisal District cy rates. An increase in the number of rapid re-housing units from 2015 to 2017 also helped meet demand. Lastly, the county and city have $29.5 billion and $14.5 billion federal CARES Act funding supported the local COVID worth of residential property, respectively, located in the Community Housing Program, which provided housing floodway or the 100- and 500-year floodplains. Moreover, for 1,170 people, including roughly 800 people (or one the value of these properties increased from 2018 to quarter of the local unhoused population) prior to the 2019, similar to the rise of property values overall. About night of the point-in-time count in 2021. This also makes one-fourth of Houston’s residential property value, and inter-year comparisons between point-in-time counts diffi- one-fifth of the county’s value, are located in flood-risk, cult, because 2021’s count was irregular, but demonstrates damage prone areas. that dedicated policies can successfully provide shelter.

During disasters, financially stressed Citizens returning from prison face many households have less resources to challenges and must rely on friends and family, weather the crises and are increasingly who are more likely to be facing the worst of the vulnerable to the next disaster COVID-19 crisis. The protest movement that followed George Floyd’s COVID-19 is leading to more homelessness, murder brought renewed attention to inequities in the leaving more people vulnerable to future disasters. U.S. criminal justice system. Post-incarceration housing is People are frequently experiencing homelessness because one major area where housing policy and criminal justice of a disaster: As mentioned, 1 in 7 unsheltered people policy intersect. According to the Texas Department of during the 2021 local point-in-time count cited COVID-19 Criminal Justice, 7,134 parolees from state prisons moved as the reason for their state, with many citing decreased to Harris County in 2019 after serving their sentences. work hours due to the virus. Fourteen percent cited a nat- This sum represents only parolees, and does not include ural disaster as the reason for their homelessness. All of fully discharged people with no parole stipulations or these newly homeless people were in turn more vulnera- recently released people from out-of-state prisons; there- ble to the February 2021 winter storm. fore, the true number of returnees is certainly larger.

Curiously, the numbers for the 2021 point-in-time census These thousands of returnees have difficulties securing showed decreasing overall homelessness, and there may be stable housing. First, per Texas policy, they are dis- two reasons for this. charged from prison with only $50 upon release, and thus need to rely on family or friends for money, placing fur- The first reason for the decline may be methodological: ther stresses on Houston’s non-white communities, which COVID-19 caused changes in how the Coalition for the are over-represented in the returnee population and more Homeless and The Way Home conducted the count, likely to be negatively affected by COVID-19’s health and making it difficult to compare different years. Among the economic impacts. Second, as emphasized in this and last changes were that the count occurred over more days, and

The 2021 State of Housing in Harris County and Houston 53 SECTION 4. ECONOMIC SEGREGATION AND HOUSING RESILIENCE Photo by hey tiffany!/flickr year’s reports, Harris County and Houston have a severe is also far less than the total number of returning people undersupply of affordable homes. Additionally, landlords cited in Figure 79. conducting background checks have it within their rights Research finds that stable housing is often associated to deny leases to people with criminal records, making it with decreased recidivism in the US. New Hope Housing, harder to find housing. working with the University of Texas Health Science Certain service providers help to address returning cit- Center at Houston School of Public Health, conducted izens’ needs, but their resources are limited. For exam- a recidivism study on their own residents. According to ple, New Hope Housing maintains slightly over 2,000 preliminary findings, only 12% of New Hope Housing single-room occupancy units in Greater Houston. These residents with recent felony convictions received anoth- affordable, furnished units are available with far less er conviction within a comparable period after move-in, stringent background checks. However, the rooms lack which is roughly half of the statewide recidivism rate.39 the amenities and space of a typical one-bedroom apart- New state regulations have made matters more difficult ment (e.g., they usually only have twin-sized beds). 2,000 for the released to secure subsidized housing. In Fall of 2020, the Texas Department of Housing and Community Affairs created a regulation that barred people with cer- FIGURE 79 Texas parolees returning tain violent and drug-related felony records from acquir- to Harris County, 2019, by ing homes in supportive affordable housing for a set num- gender and race/ethnicity ber of years after release. Curiously, the rule only applies to “supportive” housing with specific services, and not Race Female Male Total regular affordable housing, meaning that it only applied Black 369 3,432 3,801 to more vulnerable people with criminal records.40

Hispanic 132 1,838 1,970 39 HSC-SPH-19-0387. Witte, L., Link, A., Tsai, J. Cuccaro, P., Cox, V., Schick., V. (2021). The Association Between Residency and Criminal White 223 1,091 1,314 Justice Involvement Among Residents of an Affordable Housing Provider in the Southern US. Other 4 45 49 40 Garnham, Juan Pablo. “A Controversial Rule Limiting Housing Total 728 6,406 7,134 Options for Homeless Texans with Criminal Records Was Softened, but It Still Worries Advocates.” The Texas Tribune, November 6, 2020. https://www.texastribune.org/2020/11/05/texas-housing-criminal- Source: Texas Department of Criminal Justice record-rule/.

54 Rice University Kinder Institute for Urban Research CONCLUSION Conclusion

ouston’s housing sector remains both a sight of promise and instability. HThis report has highlighted four key themes. There is not one housing sector but two. Can the housing supply meet Houston and Harris For wealthier locals, or even people earning the overall County’s new needs? Harris County and Houston add median, their owner-occupied houses accrue in value; if many new homes each year, yet it may not be enough, they are renters, they have a wide variety of new rental particularly because market-rate housing development units to choose from. Their income increases fast enough caters increasingly to higher-income households. Renter to keep track with rising housing costs. For those earning incomes decrease while the city and county only add the median of a renter household’s income or less, there is expensive rentals. Also, the average local household is a lack of affordable homes to rent. If one is able to save up becoming smaller and older, and thus may not want a for a down payment and has not had their income affected single-family home that happens to be the hottest com- by a disaster, then the homes that qualify for an FHA loan modity at this specific moment. Single-family homes are are in the county’s underserviced suburbs or, more likely, also harder to build in a city with more expensive land, outside of the county. This dual housing sector com- and homeownership and its down-payment requirements pounds the economic and racial segregation that harms may be out-of-reach in the county for poorer residents. our region. Is the area’s housing ready for the next disaster? Renters face difficult challenges. This should be Housing is not only a roof and walls, it is also a refuge particularly concerning because Houston is a majori- during pandemics, hurricanes and winter storms. Yet not ty-renter city, and Harris County is soon to follow suit. enough households have flood insurance, more homes There is a $40,000 difference between a median owner’s have been built in the floodplain, working-class and dis- and renter’s household income, and a shrinking supply proportionately non-white locals bring the pandemic back of homes that even a middle-income renter can afford. to their homes because they do not have the luxury to Probably the strongest evidence of the crisis facing local work from home, and Winter Storm Uri left many homes renters is Harris County’s enormous eviction rate: rough- powerless and waterless. Households still recovering ly one in 11 renters had an eviction notice on their door in from one disaster must face another. Even if a person can 2019. If you see three fourplexes next to each other, odds secure a financially stable home, only policymakers can are that one unit has had an eviction notice pinned to ensure the region has the resilient tap-water, electrical, their door. While homeownership can be a policy goal and stormwater and public health infrastructure to withstand is a starting point for building generational wealth, it is a disaster. Even wealthy homeowners had frozen pipes crucial not to forget the needs of renters. because of power outages. The shrinking city population cited in the 2019 ACS 1-year survey—while an outlier— should worry policymakers. Frequent disasters threaten not only residents’ mental health, but perhaps also the ability of the city to prosper in the long term.

The 2021 State of Housing in Harris County and Houston 55 The Kinder Institute thanks the following supporters for their transformational support of our mission to build better cities and improve people’s lives.

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