League City, Galveston County’s largest municipality, has had explosive population growth over the last few decades, and the new-housing market is meeting that demand. Several subdivisions are in development citywide and are expected to add thousands of new homes over the next several years as more people move to League City, officials said.
The city’s southwest side in particular is largely undeveloped rice fields. Developers have plans to convert thousands of acres into planned-unit developments complete with commercial, retail, restaurants, entertainment and other attractive amenities in addition to hundreds of homes.
League City has a population of about 106,000. At the rate the city is going, officials expect to have close to 200,000 residents by the time the city is built out by 2040, but that is not necessarily the goal. City leaders want to diversify opportunities and attract offices and businesses to the city to supplement the cost of its rapid growth.
“If you have all single-family houses, you’re in trouble,” said David Hoover, League City’s director of planning and development.
In 1980, League City had a population of about 16,500 people. In nearly 40 years, it has grown to a population of over 100,000, a growth of more than 20,000 residents since 2010, and it is not slowing down. The city still has about 28,000 acres of undeveloped land that make up about 45% of the entire city.
City leaders and developers said League City’s strategic location makes it attractive to homebuyers. The city is about halfway between Houston and Galveston, two popular destinations for work and entertainment. It is not uncommon for a married couple to live in League City with one spouse working at the Medical Center and the other working at the petrochemical plants in Texas City, said Tracy Goza, the president of Lingo Properties, a Bay Area-based development company.
“Location is the most important thing,” he said.
League City is also close to Hobby Airport, the Johnson Space Center and Clear Lake and is within Clear Creek ISD, a school district lauded for its high quality, Hoover said.
“We’re in the right place [at the] right time. We’re the next natural growth ring within that Houston corridor,” Hoover said. “We’re the center of the universe.”
With the city’s growth comes a demand for new housing, and the city and developers are taking advantage of the opportunity.
At least 17 subdivisions comprising thousands of acres and even more home sites are either in design or development or under construction across League City. Most of them are located on League City’s south side, particularly the undeveloped southwest portion of League City where the Grand Parkway extension, still years away, is planned.
In particular are three family-owned parcels: the Lloyd, Duncan and McAlister tracts, all of which are the biggest single potential residential developments remaining in League City. There are preliminary plans to turn these 4,600 acres on the southwest side into planned-unit developments, which Goza said are basically zoning districts that allow developers to ask the city for special considerations for building ordinances.
Goza’s company owns about 30% of the southeastern portion of the Duncan tract. The company will develop about 1,000 homes in the Pedregal subdivision in that section over the next several years, Goza said.
“A lot of the land out there is wide open,” Hoover said. “The opportunities out there are great.”
As a result of demand and opportunities, Hoover said the new-housing market is in a good spot and will continue to climb.
“I think we’ll continually start to go up,” Hoover said.
Goza agreed, citing lower interest rates.
“Right now, we’re on a pretty good uptick,” he said.
HOUSING MARKET WOES
Despite the strong housing market now, it has not always been that way in League City. City officials have seen the housing market rise and fall with hurricanes, the economic downturn of 2008 and other challenges.
Before the recession, developers were starting construction on 1,500 to 1,800 new homes a year. It dropped to about 600 around 2009 and grew to about 800 to 1,000 before dipping again after Hurricane Harvey, League City City Manager John Baumgartner said.
Developers used to ready 200-300 lots at a time, and builders would come in and build that many houses at once. Nowadays, some developers have scaled back and develop only 100 lots at a time to mitigate risk, he said.
Developers save money but also take a risk by developing more lots at one time. If there were a housing market crash and builders never constructed homes, developers would be out the money they spent developing the lots. That risk has prompted some companies to develop fewer lots at once, officials said.
“[Builders] don’t have the same skin in the game [as developers], so to speak,” Hoover said.
Goza’s company still develops 200 lots at a time. He believes the housing market will stay healthy for a while, but he knows it will not last.
“Naturally, there’s an end somewhere. The question is where,” he said.
Despite booming business, not everything is great for residential developers and builders. Goza is not a fan of League City’s recently implemented roadway impact fees, which developers of new construction must pay to the city to help mitigate the cost of roadway improvements necessitated by new development. The fees range from hundreds to thousands of dollars depending on the size of the development, where it is built and other factors.
At a January League City City Council meeting, developers spoke against the fees, calling them another tax. Council agreed but said it would be better to charge developers rather than taxpayers for new construction.
As League City grows, traffic will become more congested, and it makes more sense to charge developers instead of the tax base for roadway improvements, such as extra lanes, that new development will require, said League City City Council Member Larry Millican, who works in real estate management. The fees are capped, and in some cases, the city will pay developers for constructing new major roadways, he said.
“It’s not near as bad as the developers wanna say that is,” Millican said. “It’s a give-and-take proposition.”
Goza said impact fees have their place but that the cost has to be passed onto homebuyers.
“Prices are continuing to go up, and you’re getting the same house,” he said.
While League City could reach a population of 200,000, if city officials do things right, it will cap out around 175,000 or 185,000, Hoover said.
This is because the city cannot have as many residences in the second half of build-out as the first if it wants to sustain itself, he said.
A single-family home is not as profitable to the city as a business because it does not generate as much tax revenue. To afford the infrastructure necessitated by development, the city needs to attract and establish offices, commercial companies and industrial businesses in its undeveloped land along with residences, Hoover said.
“Cities are a business. They cost money,” he said.
League City has about three times as much residential land as it does commercial. The city would benefit by ending build-out closer to a 50-50 split, Hoover said.
League City officials have a sustainability mindset. After a city is built out, it begins redeveloping itself. By the time League City is built out, it will be time to replace infrastructure that will be decades old, Hoover said.
If League City does a good job picking what types of development will come into the community, the city will be in a better position to pay for such redevelopment as income caps out, Hoover said.
That does not mean League City wants to stop residential development anytime soon; officials simply want a healthy mix, he said.
“Doubling exactly what we’ve had is not gonna put together a surplus of what we need going forward,” Hoover said.
View more of our 2019 Real Estate Edition coverage.