A Cost and Time Advantage
Developers looking for a competitive advantage in multifamily housing construction should consider Texas, where building costs are significantly lower and timelines substantially shorter compared to states like California.
According to a comprehensive analysis by RAND, multifamily housing construction in California is more than twice as expensive as in Texas. Specifically, the cost in California is approximately 2.3 times higher, driven by lengthy approval processes, stringent regulations, higher land costs, expensive labor, and seismic safety standards.
Clear Cost Advantage
In Texas, developers benefit from dramatically lower municipal fees, averaging less than $1,000 per unit compared to $29,000 per unit in California. This stark difference significantly reduces upfront capital requirements and enhances project profitability from the outset.
Moreover, affordable housing construction in California incurs costs that are more than four times higher than market-rate projects in Texas, largely due to rigorous state-imposed labor wage requirements and extensive architectural and engineering fees.
Speed to Market
Time is money, and Texas excels in this critical area. RAND reports that the average multifamily project in Texas takes just 27 months from inception to completion—nearly two years faster than California’s average of 48.9 months. The quicker timelines not only reduce carrying costs but also allow for faster market entry and accelerated returns on investment.
Developer-Friendly Environment
Texas’s streamlined regulatory environment significantly contributes to its appeal. A Texas state law requiring local jurisdictions to approve or deny project proposals within 30 days exemplifies its commitment to efficient processes. Developers also avoid cumbersome environmental and wage regulations that further complicate and delay projects in California.
Indeed, Texas’s developer-friendly policies and efficient construction timelines are influencing major multifamily developers. Atlanta-based Wood Partners recently exited the California market, further highlighting the appeal of regions with more predictable and profitable development climates like Texas.
At Propel Real Estate Capital, we understand the strategic advantage Texas offers multifamily developers. Lower costs, faster timelines, and a supportive regulatory environment position Texas as an ideal state for multifamily housing development, ensuring projects are not only viable but highly profitable.