In the last few years, there has been a notable migration from California, with hundreds of thousands of individuals leaving the state. Conversely, Texas has welcomed approximately one-and-a-half millionresidents. During this period, while house prices in California increased by over 61%, the rise in home prices in Texas was comparatively moderate, at 25.8%.

This disparity is largely attributed to Texas having a more efficient housing regulatory environment, which has facilitated the construction of more homes than in California. As a result, Texas is anticipated to undergo a house price correction due to the increase in inventory in major metropolitan areas such as Austin, San Antonio, and Dallas.

Housing affordability is a critical driver of a state’s economy and its financial health. Individuals migrating from regions with high housing and rental costs seek locations with lower living expenses. Affordable housing attracts new residents, thereby increasing the labor force, economic activity, and tax revenue. Moreover, the influx of new residents and housing development results in higher property tax revenues, a significant source of income for Texas. The state achieved record budget surpluses in 2023, fueled by rising property tax revenues, sales tax collections, and enhanced economic activity linked to population growth. By mid-2027, Texas is projected to have over $28 billion in its rainy-day fund.

However, despite the relatively slower rise in house prices compared to California, housing costs in Texas remain elevated.

According to an April 2025 Newsweek report, homebuyers continue to face challenges due to a lack of affordability. There remains room for improvement in Texas’s housing market to maintain its appeal to new residents.

Many cities in Texas still enforce outdated or restrictive zoning laws that limit density and hinder new construction. Reducing bureaucratic obstacles could expedite the development of affordable housing options, such as duplexes, townhomes, and accessory dwelling units (ADUs).

State and local policymakers should consider easing regulations like design mandates and excessive parking requirements to accelerate permitting processes, reduce construction costs, increase housing supply, and lower prices for both buyers and renters.

Legislators could even consider lowering property taxes, which would further reduce housing costs

It would also be beneficial for Texans if the Department of Justice withdrew its controversial federal lawsuit against Texas’s rental pricing software, which assists landlords in adjusting rental prices more efficiently.

The DOJ claimed that this AI-driven software drove up rents. What it actually does is help landlords better understand what their properties are worth and respond more rapidly to changing market conditions. That means rents rise faster during market booms, but drop faster during market corrections like the one Texas is currently experiencing. And lower prices should result in even more people moving to Texas.

Additionally, Texas legislators should explore reducing property taxes, which would further alleviate housing costs.

Texas exemplifies the advantages of immigration and the importance of effective housing regulation in capitalizing on these benefits. Transitioning towards a more free-market housing model can transform Texas into an even more desirable destination for Americans seeking a new place to call home.

Nicolas Cachanosky is Director of the Center for Free Enterprise and Associate Professor of Economics and Finance at the University of Texas at El Paso