Dallas-Fort Worth permitted more housing than all of California in April, according to estimates from the Federal Reserve. While higher interest rates are reducing housing development nationwide, housing experts say less housing is being permitted in California than Dallas because of labor costs and regulations making it harder for California developments to pencil out.
The DFW metropolitan statistical area, which has 8.1 million residents, permitted 7,851 homes in April compared to 7,612 in California, which has 39 million residents. This means DFW permitted five times as many homes per capita as California did. There is an estimated 20,000 unit home shortage in Dallas compared to 4.5 million in California.
“In much of the state nothing pencils right now. I would not be surprised if we see decreased housing production throughout much of California for the foreseeable future,” said said Los Angeles Housing Production Institute director Joseph Cohen to The Center Square.
With interest rates consistent nationwide, Cohen pointed to California’s labor costs and regulations making it more difficult for housing construction to make financial sense for developers.
“Cost of living is much lower in DFW, so construction labor is much cheaper. There’s also a bigger pool of contractors,” Cohen said. “In Dallas you can get a [general contractor’s] license over-the-counter same-day. In California it takes multiple years of experience and taking a difficult test.”
This suggests even if California were to reduce housing regulations to make it easier to build housing, the state would lack the labor capacity to rapidly increase housing production.
Cohen also noted much of the permitted building in Dallas seems to be exurban sprawl, which is much easier and cheaper to build than infill redevelopment, and that one day Dallas could face similar housing production challenges to California.
“We just don’t have the land to sprawl into coastal California like they do in Texas,” Cohen continued. “They’ll be dealing with much higher land costs in 20-30 years, we’re just ahead of them.”
California home permitting dropped 45% from 2022 to 2023, which means it would take over 60 years at current permitting levels to resolve California’s current housing shortage. To afford the mortgage for the typical, $900,000 California home, a family requires an income of $224,000, or almost three times what the typical family makes. 45% of Californians are considering leaving the state due to the cost of housing.
