Aaron Layman's Katy Texas Real Estate Forum

Chik-fil-A Breaks Ground At New Katy Main Street Location Near Woodcreek Reserve

TDK Construction broke ground this week on the new Chik-fil-A in the Katy Main Street shopping development.  The new Chick-fil-A should be completed in mid March according to a construction representative I spoke with.  Alicia's Mexican Grille is also under construction, and should open shortly after the Chick-fil-A.

Construction Of John Paul's Landing Park Commences With Start Of Grand Parkway Segment E

As part of the development of Grand Parkway Segment E, Harris County Precinct Three will receive a new park to be named John Paul's Landing.  The 867-acre park will be located near the intersection of Katy Hockley Cut Off and Sharp roads.  Ground excavated for the park lake will provide fill material for TxDOT while also providing stormwater drainage for the road project.

TxDot To Hold Public Hearing On Expansion Of Westpark Tollway

The Texas Department of Transportation will hold a public hearing in Fort Bend County regarding the proposed improvements to FM 1093 from SH 99 and FM 1463.  The meeting will be October 27 from 6 to 8 p.m. at Seven Lakes High School, 9251 South Fry Road.

For those traveling along FM 1463, Fry Road is almost connected on the east side of the highway.  The connection through to Cross Creek Ranch should be finished in early 2012.

BP To Add Staff In Three Eldridge Place

BP has agreed to lease the remaining office space at Three Eldridge Place  in West Houston, with occupancy to begin this quarter.  BP will be relocating employees from the Chicago and San Francisco locations as needed. 

Texas A&M's Mays Business School To Open In West Houston CityCentre

Texas A&M has leased roughly 24,000 square feet of space in the new building under construction at West Houston's CityCentre.  The A&M Mays Business School will use the space for its new professional MBA program.  Classes are slated to begin in the fall of 2012.

 

Houston Texas A Model For Affordable Housing; Australia Not So Much

Unlike Texas, many large U.S. metropolitan markets have seen huge swings in prices during the housing bubble.  Australians are currently dealing with a huge housing bubble of their own, partly because self-inflicted restrictive policies which have caused land prices to escalate to unstainable levels.  Some Australians are waking up to the development-friendly policies that make Houston an affordable, stable housing market.

"Australian fringe land values have escalated in price at the same time as lot sizes have shrunk in size, to the point where a typical small fringe housing block sells for more than a full house and land package in Texas:"

The author notes how Texas home prices have avoided much of the volatility during the housing crisis...

 

 

 

 

What's the secret recipe for Texas' affordable housing?  The answer lies in how land-supply is provided and infrastructure is financed.  Specifically, the lack of zoning (as in Houston) and the use of MUD's help to keep supply at reasonable levels and prices stable.  The author points to this paper from Randall O'Toole.  While O'Toole may have exagerated causation, he makes a valid point.

Houston is an example of a place where, with minimal government regulation, the supply curve for housing is almost perfectly elastic. Houston and surrounding areas have no zoning, so developers face minimal regulation when building on vacant land. Once built, most developers add deed restrictions to their properties in order to enhance their value for buyers who want assurance that the neighborhood will maintain a positive character. But these deed restrictions do not impede further growth, as there is plenty of land in the region without such restrictions.

In the suburbs of Houston, developers often assemble parcels of 5,000 to 10,000 acres, subdivide them into lots for houses, apartments, shops, offices, schools, parks, and other uses, and then sell the lots to builders. The developers provide the roads, water, sewer, and other infrastructure using municipal utility districts, which allow homebuyers to repay their share of the costs over 30 years. At any given moment, hundreds of thousands of home sites might be available, allowing builders to quickly respond to changing demand by building both on speculation and for custom buyers…

Houston developers allow homebuyers to pay off infrastructure costs over 30 years, impact fees or development charges require up-front payments often totaling tens of thousands of dollars. The difference is crucial for housing affordability: since development charges increase the cost of new housing, sellers of existing homes can get a windfall by raising the price of their houses by an amount equal to those charges, thus reducing the general level of housing affordability.

Increasing land and housing costs make other things more expensive as well. When housing is more expensive, for example, businesses must pay their employees more so that workers can afford to live in the region…

If lower interest rates increase demand for housing, Houston-area homebuilders respond by building more homes; [by contrast, in supply-restricted cities like the] San Francisco-area, builders respond by filing more applications, which may wait several years for approval. If government purchase of a large block of land for a park or open space restricts supply, Houston-area builders can simply go somewhere else nearby; in the San Francisco area, the nearest alternative building location is more than 50 miles away.

Notice that inelastic supply not only makes housing prices rapidly increase with small increases in demand; it also makes housing prices rapidly fall with small decreases in demand. This is exacerbated by lengthy permitting periods that can put homebuilders out of phase with the market. Thus, land-use restrictions create conditions ripe for housing bubbles.

The author also points to the report from the Dallas Federal Reserve summarizing how Houston's housing market is different from other parts of the country.

In the first phase of the U.S. housing market boom and bust, many large cities (primarily on the East and West coasts) saw a prolonged run-up in prices. Demand for housing, driven by low interest rates and a growing economy, combined with supply restrictions—such as zoning laws, high permitting costs and “not in my backyard” regulations—to contribute to rapid price appreciation…These price increases then fed off themselves. Rising prices—whether for gold, corn or houses—often foster a bubble mentality, contributing to speculative demand…

Atlanta [Georgia], Dallas and Houston [Texas]…weathered increased demand largely with new construction rather than price appreciation because of the ease of building new homes. While some are dismissive of this developer-friendly attitude that allows such rapid construction, the approach clearly carries significant benefits for the homebuyer…

The Houston Example:

Houston saw tremendous job and population growth over the last decade, ranking it high among the 12 largest U.S. metropolitan areas in both metrics…

Given that Houstonians had access to the same new types of mortgages as the rest of the country and that Houston has had greater population growth than other large metros, we might expect price appreciation to be stronger in Houston than elsewhere. However, the opposite has been true.

Houston’s large supply of land means that demand growth primarily results in more construction, not higher prices. Construction levels are limited by the availability of two kinds of developable land: the previously undeveloped, generally found on a metro’s outskirts, and the redeveloping, usually in a city’s interior. In both cases, Houston’s policies are relatively permissive, making the metro friendly toward development.

The most fundamental difference between Houston and other cities lies in how they provide (or in Houston’s case, do not provide) water, sewer and drainage to developments on the urban fringe. In Houston, developers can create a municipal utility district, or MUD, to provide these services on their properties and can finance these with tax-free bonds. Houston requires developers to build MUDs in such a way that they eventually could be connected to the city’s corresponding infrastructure, but they begin as self-sufficient enterprises.

In other cities, developments must be connected to the city’s water and sewer lines, confining new projects to nearby or adjacent land since the cost of building lengthy lines is prohibitive. In metro Houston, by contrast, virtually any large parcel of land can become a new suburb, especially given the metro’s expansive highway system…

Much of the land in metro Houston is not assigned a specific use. So much land is available in Houston that the cost of each incremental unit rises slowly and keeps the average cost below that of more restrictive metros. Even in the face of significant population growth, this large supply keeps land prices in Houston stable, which over time contributes to lower home prices…

Indeed, Houston and other metros such as Dallas and Atlanta that have relatively more permissive development policies have lower housing prices than more restrictive places do.

 

Santikos Theatres Breaks Ground On 22 Screen Multiplex in Long Meadow Farms

Santikos Theatres broke ground earlier this month on a new 22 screen facility along Grand Parkway in the community of Long Meadow Farms.  The new cinema will feature many modern enhancements, including D-BOX seating.  A portion of the seats in the theater will be sitting on hydraulics which move with the action of the movie.  Santikos Theatres currently operates the Silverado 19 in Tomball.

Taylor Morrison Expands Avalon Brand In Cinco Ranch, Riverstone

On the success of their other Avalon related communites in the area, Taylor Morrison has acquired 184 acreas in the master-planned community of Riverstone.  Taylor Morrison recently opened Avalon at Cinco Ranch as a follow-up to their success in Avalon at Seven Meadows.

Toll Brothers Acquires 180 Acres In Katy For 305 Luxury Homes In Silver Oak

Toll Brothers will be building 305 luxury homes in the community of Silver Oak in Katy.  Toll recently acquired a 180 acre tract in Katy, just south of Woodcreek Reserve.  Development of Silver Oak is scheduled for the end of the year.  Toll is currently building in several other Houston area communities such as The Woodlands, Riverstone and West Ranch.

TxDot Ready To Sell Off Grand Parkway Construction To Foreign Companies

The Texas Department of Transportation, which has responsibility for the Grand Parkway in Harris County, is apparently taking input for ideas on construction and funding of the new segments of the Grand Parkway.  Due to recent budget constraints, TxDot is considering P3 (public-private) agreements that could limit local residents control over ownership and management of the assets.

The state made a similar deal with Cintra S.A. based in Spain for the proposed Trans Texas Corridor, which was thankfully scrapped.  Houston area residents can look to other states and municipalities to see how such public-private partnerships have worked out.  The recent sale of Chicago's parking meters shed new light on the pitfalls of such arrangements.

The Grand Parkway Segment E has been cleared for construction, receiving it's final permit from the Corps of Engineers.  TxDot issued a request for information on the Grand Parkway project June 10.  The deadline for responses is Wednesday.