Page 87 - ABHR MUD BOOK 2022

UNIVERSITY of HOUSTON

INSTITUTE FOR REGIONAL FORECASTING
A DIVISION OF THE CENTER FOR PUBLIC POLICY
DEPARTMENT OF ECONOMICS

August 23, 2010

Members ofthe Texas Legislature
Austin, Texas

Re: The Importance ofMunicipal Utility Districts (MUDs) to Texas

Dear Legislator:

During the past 6 months, I've been asked by hosts ofnational media representatives why
Texas has fared better than most other states during this recent serious recession. While
there are several valid answers to such a question, invariably I stress the fact that even
though the state had its fair share ofsub-prime mortgages, Texas did not get caught up in
a speculative housing market bubble with home prices far exceeding the financial
capabilities 0 f families.

Ofcourse, the immediate response to that answer is "Why did home prices remain so low
during the excessive national housing boom?" That also has multiple answers, but I
emphasize that the primary reason prices remained subdued is because new housing costs
remained low, and that the latter phenomenon was due to the low costs ofdeveloping
residential subdivisions in Texas compared with most other locations in the country.
Furthermore, I explain that low cost development can largely be attributable to the use of
municipal utility districts in the state.

At the housing market's peak in 2007, Texas home prices were on average about 25%
lower than the national average on a price per square foot basis, and new home prices
were about 32% lower. In comparison to many areas in California, Washington State, and
portions ofthe east coast, prices in Texas were 50% lower. Yet, even now after these
areas have experienced a severe home price correction, Texas prices are still about a third
lower than in those cities that experienced a housing price bubble and then a bust.

Friends in Colorado, where I enjoy a second home, are stunned at the fact that housing in
Houston averages about $70 per square foot, while the same quality home in the greater
Denver area (in fact, all along the Rocky Mountain bench) is over $125 per square foot.

Learning. Leading~M 204 McElhinney Hall Houston, TX 77204-5019 7131743-3869 • Fax: 7131743-3969