Texas’s rapid population growth, especially between San Antonio and Austin, drives infrastructure expansion and housing demand, but water shortages, traffic congestion, and labor gaps could limit long-term construction opportunities.
New funding and zoning reforms target housing, transportation, and water challenges, aiming to boost supply, improve mobility, and support sustained construction growth.
Austin’s slowdown raises concerns, but major projects and the Dallas commercial market suggest future economic prospects.
The Texas “economic miracle” has given the state plenty to brag about.
The population grew by 2.1 million from 2023 to 2024, more than anywhere else in the country. This has resulted in a rapid expansion of municipalities.
For example, approximately five million people now reside along the 75-mile stretch between San Antonio and Austin. If current trends continue, the area is projected to have a population of 8.3 million by 2050.
However, any long-term slowdown in the state’s economy could represent a challenge for both the residential and commercial construction industries, at a time of material cost increases due to tariffs and decreasing skilled labor pools due to federal immigration initiatives.
The good news for the construction industry to this point is that increased revenues from local property taxes in recent years have given Texas municipalities like high-flying Austin the resources to expand key infrastructure and add new public amenities like libraries, recreation facilities, and hospitals.
At the same time, rapid growth brings other challenges.
Traffic congestion tops the list for many, particularly on Interstate 35. This key artery runs 500 miles from the Mexican border, north through San Antonio and Austin, and on to Dallas-Fort Worth. According to the Greater Austin-San Antonio Corridor Council, traffic on I-35 increases three to four percent for every one percentage point in regional population growth.
Another issue is the availability of water. Some call it the “New Gold.” Municipalities of all sizes are scrambling to find sufficient water for both their current populations and projected new housing demands.
The state is leading efforts to deal with these two issues, which are critical for future growth, suggesting further good news for Texas construction.
The Texas Department of Transportation, a beneficiary of budget surpluses resulting from the state’s recent economic development, is carrying out major construction and maintenance along the I-35 corridor. High Speed Rail links between major centers, now in the advanced planning stage, could also help address traffic congestion and speed up commute times.
An aerial image of the highway system in Austin, Texas. The state is undergoing efforts to improve traffic congestion and water availability issues, which are critical for future growth. This suggests further good news for Texas construction. Image: Shutterstock
The supply of water, which has become urgent in recent years due to drought conditions in parts of Central Texas, received political attention in 2023 in the form of a $1 billion allocation to the Texas Water Fund. With estimates suggesting the fund will need $150 billion over the next 50 years, the Texas Legislature is considering making annual allocations of $1 billion to the fund.
Whether Texas can continue its pattern of growth also hinges on its ability to supply housing in sufficient numbers and at affordable prices. This has aroused the attention of Texas Comptroller Glen Hegar.
“Texas is grappling with a housing affordability crisis that threatens our prosperity,” Hegar writes. “Texas has proudly led the nation in new building permits since 2008, yet we’re still falling behind. Our population, especially in thriving metro areas, is outpacing our ability to construct homes.”
Hegar references a report from the housing policy advocacy group Up for Growth, saying Texas faced a shortage of 306,000 homes in 2023.
Hegar blames the housing crisis in Texas on what he calls artificial barriers. “Local regulations often choke development, inflating prices by limiting supply where Texans want to live.”
The Texas Legislature has recently responded. Proposed bills such as Senate Bill 840 and Senate Bill 15 would loosen zoning regulations for builders and make it harder for NIMBY neighbors to block development of smaller and more affordable homes in cities and counties with larger populations.
However, these progressive steps in terms of roads, water, and housing have been tempered by news from the U.S. Census Bureau that Austin’s population growth declined to near zero from 2023 to 2024, the slowest among all major Texas cities. This relates to a near 50 percent decline in overall job growth for the city in 2024 versus 2023. Local start-up employment reportedly declined nearly 5.0 percent, while employment at big tech companies fell by 1.6 percent.
On the other hand, regional economic prospects can change quickly. Apple is still building its billion-dollar campus just north of Austin, with new hiring to come. The recent $16.5 billion supplier deal struck between Samsung and Tesla, two established economic giants in the Austin region, has also been heralded as great news by the city’s business community.
Opportunity Austin CEO Ed Latson told local media that the new partnership shows the strength of the region’s economic ecosystem.
And although office vacancies are currently at 25 percent, commercial leasing activity picked up a bit in Q2. At the same time, Austin’s delivery of affordable housing from 2025 to 2027 is expected to top all U.S. metropolitan areas, according to Yardi Matrix. This is critical for a city that has enjoyed prominence as a hi-tech hub.
While slower economic growth in Austin is raising some concerns, it may be isolated. Commercial investment activity in the Dallas area of North Texas has exploded this year, and leads the entire country by a wide margin. Some real estate professionals predict Dallas could overtake New York and LA in 2025 as an investor favorite.
At ConstructConnect, our software solutions provide the information construction professionals need to start every project on a solid foundation. For more than 100 years, our insights and market intelligence have empowered commercial firms, manufacturers, trade contractors, and architects to make data-driven decisions and maximize productivity.
ConstructConnect is a business unit of Roper Technologies (Nasdaq: ROP), part of the Nasdaq 100, S&P 500, and Fortune 1000.
For more information, visit constructconnect.com