CDS President Steve Spillette shared the findings with City Council at its Feb. 11 meeting.
“We were interested in determining the level of demand for various types of housing associated with the workforce that is employed in New Braunfels,” Spillette said. “To do that we studied several levels of geography, mostly [the 78130 ZIP code].”
“[Four Rivers Association of Realtors] told us the best way to get [accurate numbers] for the New Braunfels market is 78130,” Michael Prats, a senior market analyst for CDS who led the study, said.
The need for the study
Chester Jenke, vice president of economic development for the New Braunfels Economic Development Corp., said a focus area of the EDC’s 2017 strategic plan is the exploration of affordable workforce housing, adding that the most recent housing study did not contain current data because it was completed in 2011.
In February 2018, city officials told Community Impact Newspaper that New Braunfels was still an affordable place to live compared to other areas despite the region’s rapid growth. However, CDS’ study revealed surrounding cities such as Schertz, Seguin and Universal City offer significantly lower-priced housing options.
Spillette said CDS compared the level of demand to the types and cost of housing supplied in the area relative to the workforce and its housing needs. CDS found the largest and fastest-growing industry sectors—such as retail, accommodation and food service—have lower wages.
Figures in the study were based on the U.S. Census Bureau’s most recent estimates, which indicate 70 percent—or 23,373—of the New Braunfels workforce reside outside the city limits.
Michael Meek, president of the New Braunfels Chamber of Commerce, said one contributor to the city’s affordable housing predicament is that it is a desirable place to live, and that demand drives up home prices.
“It’s an issue everywhere; it’s not just here,” Meek said. “It’s exacerbated in New Braunfels because of our fast growth and because of our tourism industry.”
A commuting workforce
Meek said the number of employees commuting to the city for work presents a variety of issues.
“Seventy percent of our workers are getting their paychecks and going back to Selma, Schertz and Seguin to spend their paychecks,” he said.
Meek added that employers are also negatively affected when employees live further away because absenteeism increases and employee retention decreases because workers often seek employment opportunities closer to where they live.
New Braunfels resident Nicholas Sralla said he finds himself on the opposite end of the spectrum. For more than nine years, he has commuted an hour to his job in San Antonio in order to afford to live in New Braunfels.
When it comes to affordable housing, Sralla said the city is focused on the wrong side of the equation.
“We need to start diversifying our job base and bringing in higher paying jobs,” Sralla said. “When you drive through the city most of the businesses which are here and driving the population boom are from small retail and hospitality jobs.”
Meek also believes bringing higher-wage jobs to New Braunfels will be key moving forward. However, with more retail expected to pop up in coming years, more lower-wage jobs will be created.
“It’s a double-edge sword because do you want them to earn their paycheck and then go to San Marcos and spend their money there?” Meek said.
Sralla said while he believes there is a place for retail and accommodation jobs, the abundance of them in New Braunfels is hurting the community.
“That’s how people start out and that’s a great place to do it,” he said. “As the city grows and matures, you have to think beyond instant gratification.”
As research unfolded, CDS found that 22 percent of owner-occupied units in 78130 are housing cost-burdened, meaning more than 30 percent of their gross household income is spent on direct housing costs. He added that household incomes ranging from $41,780-$60,000 need homes priced $150,000-$225,000, and inventory is low.
“It wasn’t that long ago that you were selling new homes under $200,000, but due to land prices and other cost factors, those housing prices have [increased],” Spillette said.
Spillette also noted the city’s aggressive impact fee increases play a role in driving up home prices because developers must spend more on infrastructure in order to deliver their products.
A shortage of affordable rentals
Beyond the difficulty of homeownership, Spillette stressed the significant financial stress faced by renters.
“It’s your rental situation that’s probably even more of an extreme situation for you, which is the case actually commonly that we’ve been seeing around Texas in other markets,” Spillette said.
He said New Braunfels has some of the highest rental costs per square foot in the area, specifically mentioning the greater ease of affordability in Seguin, which lies 10 miles to the east.
Spillette said also contributing to renter woes is the overabundance of Class A rental units, with more to come in master-planned developments. While these types of properties offer top-class amenities, CDS found that the average occupancy rate among Class A apartment complexes is 88 percent.
“You really want to be up towards 93-94 percent,” he said.
Meek cited the number of homeowners opting to capitalize on the area’s tourism economy by using their homes as vacation rental properties rather than making them available to long-term tenants.
Spillette said more than 5,000 rental units are needed in the city to get more residents out of unaffordable living situations. His firm offered solutions to City Council that will be part of ongoing discussions.
“The city is trying to do something about the issue,” Prats said. “You don’t have that in every city.”
Investing in the preservation of existing affordable workforce housing was one recommendation as well as a temporary worker housing program that could include RV parks, manufactured housing worker camps or mobile tiny homes.
Supporting the construction of income-restricted and subsidized multifamily rental units is also on the list as well as providing a temporary housing support program for the homeless, seasonal employees and low-wage workers.
However, Sralla said he believes low-income housing is not the answer.
“When it comes to this [subsidized] housing argument, what we’re essentially doing is we’re subsidizing the low-income jobs that are coming into New Braunfels,” he said.
CDS said down payment and soft second mortgage financing assistance programs, as well as city incentives for developers to provide new housing in target price ranges could also help tackle the affordable housing problem.
“We want to widely distribute what I consider bankable information to the development community, both single-family and multifamily, because it clearly shows how many units can be occupied or sold or rented if at a certain price,” Meek said.
Sralla said with the proposed affordable housing solutions, he fears his home will depreciate in value.
“Pulte homes is opening 3,000 -square-foot homes for $330,000, and so that is a very stark discount for every other home in the entire city quite honestly,” Sralla said. “... If you actually look at Zillow or Realtor.com, our entire subdivision’s home value has gone down by about $20,000-$30,000 ever since the Pulte home developer started selling homes late last year.”
Beyond housing, transportation assistance programs could also alleviate financial stressors.
“Right now they’re having to live so far out of New Braunfels that the transportation costs are hurting their household budgets,” Prats said.
Meek said tweaking local codes and ordinances that were put in place before the housing issues presented themselves would also be beneficial. He suggests legalizing garage apartments—commonly referred to as mother-in-law suites—which currently is not allowed in New Braunfels.
“I know [the affordable housing issue] seems like it’s insurmountable, and probably in total it is,” Meek said. “But we need to try to make progress on it as much as we can.”