Why is Texas so cheap to live in 2022? Also, why are houses so cheap in Texas? We uncover and explain the real reasons behind Texas’ strong affordability.
To determine what continues to drive the low cost of living in Texas these days, we had to look at all the angles. That includes evaluating the reasons that are more transparent, including things like housing and the cost of goods, but also digging a bit deeper to understand the full infrastructure and economy of Texas.
Texas is a unique state in our nation and has greatly benefited from its physical location as well as its state legislation to make it what it is today.
Let’s take an in-depth look to answer the questions of “why is Texas so cheap?” and “why are houses in Texas so cheap?”
Why is Texas so Cheap – Background Research
Before we start our list of the reasons why Texas is so cheap, we want to note that “cheap” is a relative term and that every city in Texas is not really the same.
There are still expensive places to live across the state, both in relative and absolute terms.
But, if you compare its cost of living to popular places like California or New York, then it will be clear that Texas is more affordable.
Still, there are places in the US (and the rest of the world) that are even cheaper than Texas.
Therefore, for the purpose of this article, we refer to the “cheapness” of Texas as a relative term compared to other large states in the US that offer similar amenities and quality of life.
1. Why is Texas so Cheap? Houses are Inexpensive to Build
The major reason why Texas is so cheap is because houses can be constructed at a low cost in Texas. But, why are houses so cheap in Texas then?
First, it is due to the type of land in Texas. The Lone Star State is mostly flat land with almost no large mountains or rough terrain for developers to contend with.
Also, Texas is huge. It is the 2nd largest state behind Alaska in terms of area, with roughly 270 million square miles of land. That is more than Montana and Arizona combined.
Therefore, developers can buy up cheap plots since there is so much supply of buildable land and construct in virtually every direction away from a core city.
Texas’ zoning laws are also quite lax and generally encourage development rather than restrict the type of buildings that are being constructed.
Since space is not an issue, the premium that a location usually commands gets diluted.
Not only is the land cheap, but the labor is as well. Why are houses in Texas so cheap to physically construct then? That is due to another supply and demand issue. Texas attracts many low-wage workers, including immigrant labor, which helps lower the cost of labor.
The state has been able to rely on these types of workers due to the relatively weak labor laws that help protect workers. Therefore, cheap work remains plentiful.
Finally, the cost of raw materials in Texas is a bit lower than in the rest of the nation. Texas can source many of its own building materials in-state from quarries, sawmills and cement producers. There are less costs for transportation since it is all close by.
Similarly, the cost for energy is lower in Texas, which we will cover later, so transportation costs are lower overall as well.
2. Why is Texas so Cheap? Tax Friendly for Individuals and Companies
Another major reason why Texas is so cheap is because of its low tax structure.
Texas is one of only nine states in the US that does not charge a state income tax on its residents.
It also has quite favorable corporate tax rates, which may allow companies to charge less for the same profits.
As the 2nd largest economy in the US behind California, Texas’ tax-friendly environment also attracts many businesses, which in turn pumps more money into the state and helps improve wages overall.
As a result of these higher earnings, residents can get more bang for their buck as well.
3. Why is Texas so Cheap? Texas’ Thriving Oil and Gas Industry
Texas is the king when it comes to energy production in the US.
The state’s strategic location next to the Gulf of Mexico, along with the natural resources located within its borders, allows Texas to produce a lot of oil.
It produces over 5 million barrels of oil per day, which represents almost half of the nation’s total output.
In the energy industry, the cost to transport oil and gas is usually about 10% to 20% of the total cost per barrel. Since it is all originating within Texas, the cost to transport to customers within Texas is quite cheap.
Therefore, gas stations, restaurants, office buildings, and homes all benefit from having access to cheaper fuel compared to the rest of the nation.
Cheaper gas makes the rest of life cheaper in almost every aspect. As we mentioned above, cheaper fuel allows the transport of building materials to be lower and, therefore, the finished product to be lower in cost.
The cost to ship other types of products, including food, automobiles, electronics, clothing, and furniture, is also lower, which allows the producer to pass the savings onto the end-users.
Ultimately, that helps to make the overall cost of living lower, which we will now detail further.
4. Why is Texas so Cheap? Cost of Living is Lower
The cost of all major consumer goods is generally lower in Texas. How are they able to achieve this?
Let’s look at food as an example. Groceries are a bit cheaper in Texas because the state has lots of land and farmers who are able to locally raise a lot of the food that ends up on the shelves.
Since the food doesn’t have to be transported long distances, producers can save on shipping costs and can pass these savings on to the consumer.
Also, restaurants can buy this cheaper supply of locally-grown food to put on their menus. Restaurants also benefit from our first point about housing since all types of properties are relatively cheaper.
Therefore, restaurants don’t have to pay as much rent or pay as much to own their building, so they don’t have to raise their prices to cover their overhead.
As we noted above, the cost of energy is also lower for all consumers and businesses.
When you add up all of these savings, Texas comes out to be about 5% to 10% cheaper than the US average.
Why is Texas so Cheap? – Summary
As you can see, there are four major reasons why Texas remains so affordable even in 2022. The state was lucky to be located where it is, but also took proactive measures to promote a lower cost lifestyle with less administrative burdens.
If you are looking to move to a lower cost state, then Texas should surely be one of the places that you put on your shortlist.
But, be wary of the consequences that may come with these perceived benefits. Less government interference and lower taxes may be good for your wallet, but may not be so great if you require support or assistance for other things, such as healthcare, education, or safety.
Still, we think that Texas is a great place to eventually call home. If you are interested in the top cities, check out this list of the best places to live in the Lone Star State.
Frequently Asked Questions
Why are Houses so Cheap in Texas?
Houses are so inexpensive in Texas primarily due to the high supply of land, which in turn means there is less demand and lower costs, along with lower input costs for labor, building materials, and transportation.