GoKawiilAfter decades of explosive growth, Austin, Texas, in the 2010s was a victim of its own success. Lured by high-tech jobs and the city’s hip reputation, too many people were competing for too few homes. From 2010 to 2019, rents in Austin increased nearly 93%—more than in any other major American city. And home sale prices increased 82%, more than in any other metro area in Texas.
But starting in 2015, Austin instituted an array of policy reforms aimed at encouraging the development of new housing, especially rentals. The city changed zoning regulations to allow construction of large apartment buildings, particularly near jobs and transit. In 2018, voters approved a $250 million bond measure to build and repair affordable housing. Permitting processes were reformed to speed development and reduce costs.
The efforts worked. From 2015 to 2024, Austin added 120,000 units to its housing stock—an increase of 30%, more than three times the overall rate of growth in the United States (9%).
Rents fell. In December 2021, Austin’s median rent was $1,546, near its highest level ever and 15% higher than the U.S. median ($1,346). By January 2026, Austin’s median rent had fallen to $1,296, 4% lower than that of the U.S. overall ($1,353). This decline occurred even though the city population grew by 18,000 residents from 2022 to 2024. In apartment buildings with 50 or more units, rents fell 7% from 2023 to 2024 alone—the steepest decline recorded in any large metropolitan area. Rents declined about 11% in older non-luxury buildings that cater to lower-income renters, known as Class C buildings.
Austin’s success serves as an important example of how regulatory barriers to building more housing are often varied and interconnected. No single solution can solve a housing shortage, but Austin has taken multiple steps that have helped to unlock large amounts of housing supply in its market and reverse rent growth, including rent for tenants of lower-cost, older apartments. The city continues to take forward-looking steps—among them reforming building codes, streamlining permitting, and facilitating the construction of small apartment buildings—to reduce housing underproduction and improve affordability for existing and future residents.
Austin’s regulatory reform efforts have focused on both new supply and affordability
Over the past two decades, Austin has made myriad changes designed to encourage more housing. These include opening more areas to more types of homes, such as mixed-use buildings and accessory dwelling units (ADUs)—small homes usually located in a basement, backyard, or garage—as well as allowing taller buildings with more units and reducing parking requirements in certain neighborhoods. The reforms include:
Mixed use. In 2007, the city created a new zoning category, Vertical Mixed Use (VMU), which relaxed mandates for projects that met requirements related to building-design quality, eco-friendliness, and other features that the city wanted to incorporate. VMU zoning incentivized construction by allowing more units per site and reducing minimum parking requirements by 60%. As of February 2024, more than 17,600 units either were built or were in the process of being built in VMU-zoned areas. Both market-rate and income-restricted homes are allowed under VMU; most of those built were market rate.
In 2007, the city created a new zoning category, Vertical Mixed Use (VMU), which relaxed mandates for projects that met requirements related to building-design quality, eco-friendliness, and other features that the city wanted to incorporate. VMU zoning incentivized construction by allowing more units per site and reducing minimum parking requirements by 60%. As of February 2024, more than 17,600 units either were built or were in the process of being built in VMU-zoned areas. Both market-rate and income-restricted homes are allowed under VMU; most of those built were market rate. Targeted rezoning. The city strategically modified zoning rules in certain neighborhoods and sites targeted for growth. These areas, including downtown Austin and neighborhoods near the University of Texas at Austin, have added substantial numbers of units through density bonus programs, which increase maximum building heights if developments include income-restricted units. These programs, adopted over the past two decades, have added more market-rate and affordable homes.
The city strategically modified zoning rules in certain neighborhoods and sites targeted for growth. These areas, including downtown Austin and neighborhoods near the University of Texas at Austin, have added substantial numbers of units through density bonus programs, which increase maximum building heights if developments include income-restricted units. These programs, adopted over the past two decades, have added more market-rate and affordable homes. ADUs. In 2015, the city amended its land development code to ease regulations for ADUs by reducing the minimum lot size from 7,000 to 5,750 square feet, removing the requirement for a second driveway, and reducing the number of required parking spaces from two to one. Because of these changes, ADUs, which previously were allowed on only a minority of single-family lots, are now permitted on the vast majority of them. From 2015 to 2024, Austin permitted 2,850 new ADUs, or more than 250 annually—nearly four times the rate of new ADU permits from 2010 to 2014.
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