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Data says gas, groceries cheap and apartment rents are actually down — so what’s the problem?
Austin is often touted as the dream alternative to high-cost coastal cities, but steeply rising housing prices — and pretty much only that — are threatening the city’s reputation as an affordable place to land.
Earlier this week, U.S. News and World Report announced that Austin once again fell in the rankings of best places to live, coming in at No. 5 on the list for 2021-22. For years, Austin topped the list.
This slip is partly due to affordability concerns, and one of the largest costs of living — housing — has been sharply increasing in recent months as Austin goes through a historic reset of housing values.
Greg Anderson, director of community affairs for Austin Habitat for Humanity, said rising housing costs are a direct result of the city’s failure to update its land development code, which was largely written in the 1980s. The result: big-city Austin is being developed moreso like a mid-size city.
“In Austin, it’s becoming very easy to build a $1.5 to $3.5 million home,” Anderson said. “We’ve made it darn near impossible to build a $300,000 to $400,000 home, and those are the price ranges where we’re just really desperate to produce a ton of inventory. But we need land use reforms to be able to get there.“
However, while single-family home prices rise, rental costs are actually declining. Other costs, including groceries and utilities, remain below the national average.
So are housing costs actually making the city less affordable? It seems to be the only elephant in the room stomping out Austin’s reputation as a low-cost place to live.

Rent.com recently released a report that broke down Austin’s cost-of-living, category by category. Overall, taking into account factors including health care, groceries, transportation and housing, Austin’s cost of living is just 1.8% higher than the national average, according to Rent.com Managing Editor Brian Carberry.
“It really is important to understand all the facets that go into cost of living, because it truly is an average of what you might pay for everything you’re dealing with in your day to day life,” Carberry said.
Housing, of course, is the category in which Austin outstrips the national average by the most — housing is almost 10% more expensive in Austin compared to the national average.
This particular metric takes into account more than just single-family home prices, which often serve as the litmus test for housing affordability in the city.
The report noted that, while housing prices in Austin are escalating, rental prices have actually fallen. Other data sources back up this assertion — according to Apartment Guide, average rent costs for one- and two-bedroom apartments in Austin have fallen in the past year. One-bedroom apartments are down 3.3% on average, while two-bedroom rents fell by 14%.
Mark Roberts, executive director of the Real Estate Center at the University of Texas, Austin, said that while home prices are going up overall in Austin, housing affordability remains competitive relative to the rest of the country, largely because of the active rental market.
In fact, the majority of Austin residents don’t own their homes. As of 2019, only about 45% of homes were occupied by their owners, according to the U.S. Census Bureau.
Economic forecaster CBRE Econometric Advisors reported that at the end of 2020, about 9,000 apartment units were being built in Austin, and analysts expect this number to almost double in 2021.
Roberts attributes falling rental prices to the lack of college students in the city caused by Covid-19. “So many of those students were taking classes online and were going to school at their homes, so yes, apartment rents have come down because there has been that vacancy in the student housing market,” Roberts said.
He added that while transportation has room to improve in Austin, he thinks initiatives like Project Connect — which aims to bring a new rail system and more buses to the city — will ultimately reduce the cost of transportation in Austin and will help keep the overall cost of living down.
Other cost of living factors in Austin remain well below the national average, per Rent.com’s report.
Websites like Redfin and ApartmentGuide.com consistently rank the city in the middle of the pack in terms of transportation. But public transit costs are actually relatively low compared to other large metros. For $2.50, riders can use Capital Metro buses for a full day, half of the cost of a bus day pass in San Francisco.
Utilities have been top-of-mind for many residents since the February winter storm, and ERCOT added fuel to the fire last month, when officials urged residents to curb electricity usage during a heat wave to avoid grid failure. As for costs, though, Austin residents pay below the national average for utilities.
Groceries, too, cost less in Austin than in other metros. A trip to the grocery store will cost Austinites about 8% less than the national average.
As for the future, Roberts is hopeful. He said the fact of people advocating for multifamily housing, density and a modernized land development code will help keep the city affordable in years to come.
“As we open up the economy and some of these other infrastructure projects take place, Austin will continue to not only maintain a competitive cost of living, it will also be an attractive place to live with all of the amenities and activities that the city offers,” Roberts said.
View article at Austin Business Journal