Housing Needs Assessment
Mesquite, Texas, 2023 Q4
This housing needs assessment of City of Mesquite, TX was executed by CommunityScale in 2023. The objective of this report is to explore the people, place, and demand for housing in the community and the region, culminating with recommendations for future housing production that balance capturing new growth with closing the local attainability gap.
Disclaimer: This is a demonstration report addressing an example community to illustrate our approach to housing studies and is not commissioned or endorsed by the City of Mesquite or other entity.
Overview, introducing the purpose of this report and key findings from the analysis.
People, profiling characteristics such as income, employment, household structure, and cost burden.
Place, detailing characteristics such as income, employment, household structure, and cost burden.
Demand, including how many units are needed in total and what is the optimal mix of unit types and prices.
Conclusions, summarizing the housing production volume and mix needed to capture growth and close attainability gaps.
Overview
This report profiles the local community's people and housing stock, establishes an approach to meeting projected demand, and recommends the new housing mix best suited to meet local and expected need over the next 10 years.
The Overview section contains Mesquite's goals for this housing study key report findings including highlights from the Housing needs summary.
What is a housing study?
A housing study is a systematic inventory and analysis of a community's population and housing stock to help inform future planning and policy around housing issues and opportunites. Housing studies typically include:
An overview of local housing policy goals and community priorities.
A detailed profile of local households with emphasis on the characteristics that indicate housing situations and influence housing decisions.
An inventory of existing housing units by cost, bedroom count, tenure (rent/own), and structure type, including subsidized units.
Projections about future growth or other changes to the communities household composition and population characteristics in coming years.
Estimates of the numbers of housing units by cost, bedroom count, tenure, and structure type that will be needed to meet local policy goals and achieve communities priorities in the future.
Why do a housing study?
A housing study provides a range of benefits and insights that can improve the community's ability to better plan for its residents' needs today and and anticipate emerging needs in the future, including:
Identifying populations whose housing needs are underserved helps planners and policymakers direct resources toward filling gaps.
Projecting future population growth trends helps planners and policymakers prepare to meet new housing demand.
Sharing a housing study's observations and findings with the community helps everyone learn more about the needs and preferences of their fellow residents and the state of their local housing stock for a more informed and productive public conversation about policy and investment ideas to improve attainability and foster new development.
How are housing studies used?
Housing studies can support a variety of planning, policy, and development efforts and objectives, including:
Satisfying state and federal housing needs assessment reporting requirements to secure funding for municipal programs.
Underpinning broader planning efforts such as comprehensive plans and neighborhood master plans.
Attracting developer interest in delivering the housing units the study identifies as needed and in demand.
Informing policy changes such as zoning revisions and incentive programs to help foster new housing development and fill identified affordability gaps.
Mesquite's goals for this housing needs assessment
Mesquite's goals are to expand the supply of workforce housing to enable economic development in the community. Furthermore, this growth should support placemaking initiatives in key community areas, such as the downtown and mall area.
Mesquite is projected to grow rapidly in the next decade. The following is a high-level overview of the housing needs assessment:
9,828 new units over the next 10 years are needed to accommodate household growth, replacement needs, and current overcrowding.
The number of workforce jobs is outpacing the development of workforce housing. 8,255 new units below $2,100 per month in rent or mortgage are needed for the growth of households below 80% of the Area Median Income and to address existing cost burden.
5,702 new 1 and 2 bedroom units are needed, which will be a drastic change in course from the typical 3-bedroom house built in the last 10 years.
A diversity of housing structure types, with relatively equal distribution between needs for single-family, attached townhomes, mid-size and large-size multifamily buildings.
Affordability and cost burden in Mesquite
This map visualizes the prevalence of cost burden in and around Mesquite. As explained in the report below, a "cost burdened" household is one that spends 30% or more of their monthly income on housing costs. One important role of this report is to better understand these cost burdened households in terms of their housing needs so future housing production might be calibrated to meet them.
Cost burden by census block group. Interactive map here.
People
The following section profiles the people of Mesquite, detailing characteristics such as income, employment, household structure, and cost burden. These indicators combine to describe the local population's housing needs and preferences which inform this report's recommended strategies for new housing production to meet demand and fill gaps in affordability and attainability.
Mesquite's households profiled by income
The analysis examines housing need in terms of household incomes relative to the local Area Median Income (AMI). For example, households within the "60-80%" group earn between 60% and 80% of the HUD-established AMI for the metro area.
Using these industry-standard income groups helps compare and combine results between the study's wide range of indicators as well as maintain mathematical continuity across timeframes when looking to the past, at the present, and into the future.
Each household AMI group has a different need for monthly housing costs. Importantly, because the analysis focuses on household incomes, the specific jobs and wages of a given household member may not fully constitute the collective household's total annual earnings. In fact, most households contain more than one earner (and some earners may hold multiple jobs) such that the household income is the sum of all earners' contributions.
Mesquite's 2023 median income is $75,600, which is 71.6% of HUD's regional Area Median Income of $105,600. The following figures are specific to the planning area while using the regional AMI as the 100% benchmark:
Very low-income
< 30% AMI
HOUSEHOLD INCOME RANGE
< $31,700
MONTHLY HOUSING COST LIMIT
< $800
TOP 5 COMMON JOBS
Cashiers | Cooks | Housekeeping | Janitors | Retail Salespersons
AVERAGE EARNERS PER HOUSEHOLD
0.8
TOTAL HOUSEHOLDS26,568
Low-income
30-60% AMI
HOUSEHOLD INCOME RANGE
$31,700-$63,350
MONTHLY HOUSING COST LIMIT
$1,600
TOP 5 COMMON JOBS
Cashiers | Truck Drivers | Retail Salespersons | Cooks | Janitors
AVERAGE EARNERS PER HOUSEHOLD
1.25
TOTAL HOUSEHOLDS35,222
Moderate-income
60-80% AMI
HOUSEHOLD INCOME RANGE
$63,350-$84,500
MONTHLY HOUSING COST LIMIT
$2,100
TOP 5 COMMON JOBS
Truck Drivers | Cashiers | Elem-Middle Teach | Retail Salespersons | Customer Service Rep
AVERAGE EARNERS PER HOUSEHOLD
1.51
TOTAL HOUSEHOLDS18,783
Middle-income
80-100% AMI
HOUSEHOLD INCOME RANGE
$84,500-$105,600
MONTHLY HOUSING COST LIMIT
$2,650
TOP 5 COMMON JOBS
Truck Drivers | Elem-Middle Teach | Other Managers | Cashiers | Retail Salespersons
AVERAGE EARNERS PER HOUSEHOLD
1.65
TOTAL HOUSEHOLDS12,090
Upper middle-income
100-120% AMI
HOUSEHOLD INCOME RANGE
$105,600-$126,700
MONTHLY HOUSING COST LIMIT
$3,150
TOP 5 COMMON JOBS
Elem-Middle Teach | Truck Drivers | Managers | Reg. Nurses | Retail Salespersons
AVERAGE EARNERS PER HOUSEHOLD
1.75
TOTAL HOUSEHOLDS10,260
Upper-income
> 120% AMI
HOUSEHOLD INCOME RANGE
> $126,700
MONTHLY HOUSING COST LIMIT
> $3,150
TOP 5 COMMON JOBS
Managers | Elem-Middle Teach | Registered Nurses | Truck Drivers | Retail Salespersons
AVERAGE EARNERS PER HOUSEHOLD
1.91
TOTAL HOUSEHOLDS27,013
This chart illustrates the past, present, and projected household distribution by AMI cohort in Mesquite. Changes in this distribution over the next 10 years help inform what types of housing would need to be produced and at what price points to accommodate expected population shifts through growth and other trends.
This list characterizes the typical AMI groupings in terms of their relative income groups and the degree of subsidy generally required to deliver housing they can afford.
- 0-30% AMI: Deeply subsidized units and public housing developments
- 30-60% AMI: Lower-cost naturally occurring affordable housing (NOAH) and for whom new units require significant subsidy
- 60-80% AMI: NOAH and for whom new development would require subsidy
- 80-100% AMI: Typically occupying “workforce housing” which sometimes requires subsidy to develop depending on market conditions
- 100-120% AMI: Market rate housing except in the tightest markets
- Above 120% AMI: Market rate housing which is often developable without subsidies
The charts below describe Mesquite's households in terms of indicators that influence housing needs and preferences.
Smaller households tend to have lower incomes than larger households for several reasons. 1-person households in particular are limited to an individual's earning potential and be living on a fixed income. Larger households with children are more likely to include parents or guardians closer to prime earning age with higher wages.
Household size and bedroom count are often related. However, higher-income households are more likely to have an extra bedroom than lower-income households.
Patterns between age and income are not always as clear as other indicators. However, older individuals are more likely to be retired and living on a fixed incomes.
While the number of children in a household does not necessarily have a strong relationship to income, it can drive housing cost by requiring extra bedrooms and diverting disposable income from housing payments to childcare and other family costs.
Especially at higher incomes, households often include multiple earners which effectively lift household income above an individual's personal wages or salary. Households registering zero earners might be headed by retirees or people otherwise on fixed-incomes derived from sources outside conventional employment.
Structure type describes the building that contains a given unit in terms of its density and form. For example, single-family attached includes townhomes that share party walls; 2-4 unit buildings include duplexes, triplexes, and quadplexes; 5-49 unit structures are small apartment buildings; and 50+ unit structures are larger apartment buildings. Single-family detached are typically more expensive than multifamily units and thus more readily available to households with higher incomes.
Renters are considered moderately cost burdened when paying more than 30% of their income on rental costs (primarily lease rent). They are considered severely cost burdened when rental costs exceeds 50% of their income. Renter cost burden is typically much more prevalent at the lowest incomes but it can occur at middle incomes as well, albeit at lower rates.
Homeowners are considered moderately cost burdened when paying more than 30% of their income on ownership costs (mortgage, property tax, etc.). They are considered severely cost burdened when rental costs exceeds 50% of their income. Homeowner cost burden is typically much more prevalent at the lowest incomes but it can occur at middle and upper incomes as well.
Place
The following section profiles Mesquite's housing stock and affordability, detailing characteristics such as structure type, bedroom count, and development timeframe as well as household costs and market pricing for local rental and ownership units. See below for an interactive map of the People in Place followed by Current housing mix and Cost of housing.
People in place
The interactive map below visualizes many of the variables described in the People section in terms of how they are distributed across the community. The map includes data for the areas outside the study area as well, allowing comparison between the local community and its regional context.
Current housing mix
The following bar graphs detail today's housing stock by unit in terms of structure type and number of bedrooms.
The four structure types mentioned above are illustrated here. Each structure type group has its own scale and density. Depending on the context and regulatory context, actual development at these densities may vary in form, height, and other characteristics.
The graph at left inventories the local housing stock in terms of each unit's structure type, a characteristic defined as the number of units in the building that contains a given unit.
Households may have different structure type preferences depending on characteristics such as household size, income, employment, presence of children, age of individuals, and lifestyle choices. Understanding the housing stock in corresponding terms helps assess how well existing units align with existing households' ideals.
In most places, ownership units are predominately single family detached. Rental units are typically more diverse, including small- and large-scale multifamily developments. While these trends might reflect market preferences to some degree, other non-market factors also influence what types of units are actually built, such as zoning ordinances, regulatory constraints, and community choices.
The graph at left inventories the local housing stock in terms of bedroom county by unit by tenure (i.e. rent/own).
Household size and the presence of children are primary drivers for bedroom count with, as expected, larger families desiring more bedrooms than smaller households. However, other factors such as income and the incremental cost of extra bedrooms also influence these preferences.
In most places, ownership units are generally offer more bedrooms than rental units. As above with structure type, this is not exclusively a result of the market reflecting household preferences. Few single family houses contain less than 3 bedrooms so, if they dominate the local ownership supply, there will not many small ownership units available. Conversely, most rental units contain fewer than 3 bedrooms so households interested in renting a larger unit may have limited options to choose from. This misalignment is at least somewhat driven by the fact that it is less capital efficient to build small houses and large apartments even if there may be some demand for them.
The figure at left tabulates the age of local housing units in terms of when they were built. This effectively chronicles the community's development history, indicating decades with relatively more or less construction activity.
In Mesquite, nearly 90% of the existing housing stock was built before 2000, suggesting many units might not reflect contemporary preferences in terms of design and layout. Additionally, the pace of construction has slowed considerably since its peak in the 1980s. Depending on the findings of this report, development may need to increase its pace considerably to meet current attainability needs and catch up with projected demand.
The local housing stock includes a mix of supportive housing supported by HUD programs such as Low Income Housing Tax Credits (LIHTC) and Housing Choice Vouchers. For households with particularly low incomes, these units can represent one of the only housing options available to them.
While most of these programs are funded indefinitely, LIHTC units are only required to remain cost-restricted for up to 30 years. After that "expiration" date, the units may convert to market-rate costs, effectively ending their affordability for these low income households.
Cost of housing
The following exhibits examine housing costs, prices, and other measures of affordability. Combined with the indicators described in the report's People section, this data directly relates to the scope and scale of attainability problems such as cost burden and other misalignments between demand and supply.
This chart compares the median listing price in Dallas County with the home value affordable to a household earning the median household income. A wider gap means higher barrier to entry for first-time homebuyers and increased risk that an existing resident might be priced out of the community if they choose or need to move to a different house.
Numerous factors influence this affordability metric, including the following variables and assumptions:- 30-year loan term: 90% of mortgages in the US are 30 year term loans.
- Variable interest rate: This model tracks changing interest rates over time, reflecting the typical rate available at each point in time along the graph. Mortgage rates are a primary driver of affordability: lower rates amplify a household's buying power while higher rates can dramatically reduce it.
- 12.1% down payment: While a 20% down payment is often considered standard, most households pay less. In Texas, the average down payment is 12.1% of the purchase price.
- 0.5% PMI: Private mortgage insurance (PMI) is required by virtually all lenders when the down payment is less than 20% of the purchase price. Rates range widely due to a variety of factors but 0.5% approximates a typical rate.
- 2.22% property tax rate: Property tax obligations reduce the amount of household income available for mortgage payments. The average property tax rate in Dallas County is 2.22%.
This chart tracks the average sales prices over time of homes within the top 33%, middle 33%, and bottom 33% of total prices.
Even setting aside factors such as interest rates and down payments, changes in home sales prices - especially dramatic increases - can significantly limit households' ability to access the housing options they may need or prefer. First-time homebuyers are especially impacted by rising prices because they don't have access to equity in the form of a prior home that they might otherwise be able to sell into the same hot market and derive extra value from.
Here is how example sale prices translate into typical monthly costs based on current mortgage rates, down payments, property taxes, and related factors:- $100,000 home costs $818/month
- $200,000 home costs $1,637/month
- $300,000 home costs $2,455/month
- $400,000 home costs $3,273/month
The home sales prices described above indicate the cost of typical homes in the area upon their sale to a new household. As such, households not recently or currently in the market for a new unit are not experiencing the same cost levels. The graph at left summarizes the distribution of costs across all ownership units in the area, most of which last transacted years ago.
Comparing these costs to those corresponding to the example sale prices listed above, it seems likely most local households would incur a substantial increase in their cost of living should they choose or need to relocate to a different unit in today's market.
This chart tracks the average asking rent over the past several years, revealing overall trends as well as short-term fluctuations in the local rental market. This average rental rate should be understood as the typical cost to a household signing a new lease under current conditions. In reality, because this is a single average value, actual asking rents may vary depending on characteristics such as size, location, and property features but they will collectively track along this trendline.
To provide context to the asking rent indicator above, the distribution of current rental costs refers to the actual housing costs borne by all renting households in the area, not just those who would be signing a new lease now.
Comparing these costs to the current average asking rent above, it seems likely most local households would incur a substantial increase in their cost of living should they choose or need to relocate to a different unit in today's market. In the event the new cost outstrips their ability to pay, this could lead to displacement from the community by forcing them to search elsewhere for an option they can afford.
Demand
In order to calibrate future housing production to best meet the community's needs, two factors must be established: how many units are needed in total and what is the right mix of unit types and prices. The following section addresses each of these factors to inform recommendations that effectively meet local need and reflect the community's values and priorities. This section answers the questions of How many units are needed? and What is the right mix?
How many units are needed?
The magnitude of housing production to plan for is informed by a combination of factors, including projected household growth, existing vacancy rates, and the condition of existing housing stock. While the future might transpire differently than we expect today for reasons that cannot be anticipated now, estimating change based on these growth and market trends is an industry-standard approach to inform short- and long-term planning with reasonable confidence in the meantime.
This organic growth projection estimates the range of expected change in household numbers over the next 10 years.
Net organic growth is projected by measuring the slope of the previous 12 years of documented household change and extrapolating these trends 10 years into the future. The trendline is bracketed by high and low potential values to account for potential variation driven by external economic, policy, employment, and other forces.
The 10-year housing production target translates projected household growth plus the adjustment factors listed below into the number of housing units needed to maintain the existing housing supply and keep up with anticipated new demand.
Regardless of growth prospects, every local market should maintain sustainable vacancy rates and offer hospitable housing stock to best serve community residents. Some housing production is often necessary to keep each of these indicators in a healthy range.
- Household growth: 8,706 units
- Overcrowding adjustment: 870 units
- Replacement housing: 250 units
- Vacancy adjustment: 0 units
- Substandard adjustment: 0 units
Modeling housing preferences
This report predicts housing preferences by measuring and compiling the actual choices of households who have recently moved within the greater region in terms of their income and housing selection (unit count and monthly cost). The resulting model provides a way to predict the choices future households would make if their preferences were available in a given community. The model reflects preference distinctions between newly constructed versus pre-existing units.
Importantly, the housing preference model is calibrated for sensitivity to the distinction between "ability to pay" and "willingness to pay:"
Ability to pay: The maximum monthly cost a household can spend based on their income without incurring cost burden. This is typically considered 30% of monthly household income.
Willingness to pay: The monthly amount a household would choose to spend to obtain their preferred unit type in their preferred locale. For lower-income households in expensive housing markets, willingness to pay may significantly exceed 30% of their monthly income. Conversely, most higher-income households spend less than the 30% threshold.
To account for these two factors, the preference model reflects willingness to pay for all income groups but caps monthly costs at 30% of household income to avoid creating new cost burden.
The charts below the preference model's distribution of monthly costs by income bracket, also reflecting the model's "cap" on prices that would create cost burden for a given income group.
What is the right mix?
Determining the most appropriate mix of new housing types, sizes, and price points requires establishing a clear understanding of what "need"
There are multiple ways to define and measure housing need, each addressing a different subset of the local and regional housing markets. These perspectives include anticipating the needs of new households, closing existing attainability and cost burden gaps, and adapting to emerging trends in the regional housing market.
The following graphs illustrate the type, cost, and quantities of housing production required over the next 10 years to respond most directly to each perspective.
Housing construction that keeps pace with expected demand should reflect the number, needs, and preferences of net new households projected to move into the community over the next 10-years.
The chart at left combines the following factors to derive the housing production mix needed to keep up with demand:
How many units? 10-year production target
What income ranges? Household growth projections by AMI group
What bedroom counts and costs? Regional housing preference model
Building to fill gaps in affordability and attainability requires adding units to offset existing cost burden.
The chart at left combines the following factors to derive the housing production mix needed to close attainability gaps:
How many units? Cost burdened households
What income ranges? Cost burdened households
What bedroom counts and costs? Regional housing preference model
Insights on housing need types
This section translates the People, Place, and Demand sections into a a recommended housing production mix optimized to respond to local need and meet projected new demand in line with the community's values and priorities for the future. This section contains Housing demand scenarios and A change in course.
Housing demand scenarios
The graphs below compare the new housing production mixes that correspond to the different perspectives introduced in the previous section. While all may reflect similar priorities, each is optimized for one goal over others, leading to potentially significant different housing mix outcomes.
The "blended scenario" is designed to reconcile these differences by synthesizing the perspectives into a mix that reflects goals from each.
This chart translates the above "blended scenario" into a detailed housing production program broken down by monthly cost and bedroom count.
For context regarding new ownership units, the table includes a "purchase price range" that translates monthly housing costs into representative sale prices.
The overall production volume is based on the 10-year production target of 9,828 housing units.
8,255 new units (83% of the total production target) are needed below $2,100/month for households earning less than 80% of AMI.
5,702 new 1- and 2-bedroom units are needed to satisfy the needs of the workforce and changing preferences.
Taking the recommended housing production mix a step further, the chart at left breaks down the mix by tenure. This should be taken as general guidance and not necessarily rigidly enforced. Tenure is a challenging factor to regulate and development economics often favor rental over ownership (or vice versa) rather than both at a given time. However, to the extent it can be achieved, this mix would help the local housing stock better align with the tenure mix the broader market prefers.
A change in course
The charts below illustrate the degree to which pursuit of the above housing mix might represent a change in course for the local development community compared to past production patterns. Larger deviations between past and future might require more proactive work by local leadership to help developers adapt to new priorities and/or to attract additional developers to the market who might have more experience building under-represented housing types.
Note that the net new additions analysis does not take into account already permitted units or units in the development pipeline.
Net new additions have been townhomes and larger multifamily developments.
Looking forward, housing development should be more diverse to account for the population's needs.
Net new additions in the last 10 years have been exclusively 3-bedroom units.
Looking forward, development should be more in line with the needs of the future population. This includes more smaller 1- and 2-bedroom units.
Thank you for reading
Follow the these links to view our methodology overview describing the processes and sources behind the report as well as a contact form for any questions or feedback.