Experts Tell Builders to Watch for Electricity Shortage and Weaponized Water in 2023 Legislative Session

There’s good news and bad news for Dallas-area builders, experts told a crowded room of industry leaders Wednesday morning. 

We’ll start with the good news. 

Housing affordability is at the forefront of state legislative priorities. There might be a $30 billion surplus going into the 2023 session that could be used to buy down property taxes. And the re-election of Texas Gov. Greg Abbott is likely a positive for the homebuilding industry, according to Scott Norman, executive vice president of the Texas Association of Builders. 

Norman was among the panelists hosted by the Dallas Builders Association at a State of the Industry summit to discuss midterm election results and the economic outlook for the coming year. 

“The biggest surprise that I had on Tuesday night was what a big nothing burger it was in Texas,” Norman said. “The cake was baked in Texas. Polling doesn’t mean anything like it used to. Our [political action committee] and our state association supported the Republican incumbents for a whole lot of reasons. Whether they’re Republican or Democrat, our PAC played in 179 of the races that were on the ballot — Texas House, Texas Senate, and all those statewides — and this is the first time ever we’ve batted a thousand. We did not lose one race that we were engaged in, through hook or crook or good luck, I don’t know. No, it was wise planning.” 

Property Taxes

State legislators generally meet for 140 days every other year, which means there’s a lot of work to do. It all starts with a series of meetings next week, said Dallas Builders Association Executive Officer Phil Crone. 

Monday marks 60 days until the session starts, which is when legislators can start filing bills, Norman explained. 

“We’re going to see bills getting dropped in the hopper,” he said. “Lock up your women and your horses and your wallets because the dirty legislature’s coming to town.” 

Abbott is “very supportive” of the building industry, Norman added. 

“We are politically set up good,” he said. “Housing affordability, the challenges that our industry faces, are in the forefront. We also have more allied industry groups than ever before.” 

Sales tax went through the roof during the COVID-19 pandemic, creating a $30 billion surplus in Texas, Norman said, explaining that could translate to property tax relief.

“Property tax is certainly at the top of the list for the statewides and most of the Republicans that were running for re-election,” he said. “The governor and the lieutenant governor both said in their re-election campaigns that they wanted to spend up to half of that $30 billion to buy down property taxes. The only way the state can really do that is to offset the school portion, the ISD portion of your tax.” 

Electricity Shortage And ‘Weaponized Water’

There’s going to be some legislative gridlock created by a Republican House of Representatives and a Democrat in the White House, Crone pointed out. 

Panelists discussed how water could be subjected to federal permitting. 

The Clean Water Act has been around for decades, said Lake Coulson, National Association of Home Builders vice president of government affairs. The Environmental Protection Agency and Army Corps of Engineers are responsible for implementing regulations. 

“In the Clean Water Act, there was a definition of ‘navigable.’ The definition wasn’t exactly clear,” Coulson said. “As time went on, certain lobby groups — the green lobby groups and other water advocacy groups — petitioned the EPA to expand the definition. NAHB has been dealing with waters of the U.S. for as long as I can remember. President Biden and the EPA are in the process of issuing a final rule that would extend the scope of what is defined as navigable waters. That’s a concern for every one of us in the room.”

It means builders have to expend more resources and engineering analysis to determine whether land can be used for construction, Coulson explained. 

Norman added that Congress should go back and amend the Clean Water Act to define navigable waters. 

“They won’t do it because Congress is so dysfunctional,” he said. “It’s maddening. Water, floodplain, wastewater systems, water availability, and supply are being weaponized by the no-growth and the NIMBYs. It’s not just wild-hair, stinky hippie greenies. It’s conservative, Republican legislators who are bringing bills. We had to kill three last session. Retired Houston millionaire oil guys have their ranches in the Hill Country and don’t like the development they see coming west. They’re bringing bills trying to shut it down creatively in the name of river flow and no discharges to stop growth.” 

And electricity may not be weaponized just yet but it’s certainly causing some supply-chain problems, Crone said. 

“We’ve been playing whack-a-mole for the last two-plus years on everything with building materials — lumber, garage doors, windows,” Crone said. “It makes me wonder what’s next. I’m starting to hear a gradual uptick in the conversation about electrical transformers. Basically, this is taking one big electrical line and splitting it out to 10 to 20 smaller ones that serve a house.” 

There’s a shortage of grain-oriented electrical steel, which is related in part to bad policy with Trump tariffs, Crone said. 

“That, to me, is going to be the most acute problem in the supply side going forward,” he said. 

Norman agreed that a lack of electricity can be devastating to potential home buyers who can’t close on a property because it doesn’t have power. 

“We have lots of markets in Houston and Austin where the entire subdivisions are getting built on generators,” he said. “One large-production builder gave me a list of 4,000 lots — about half of them have houses underway, nearing completion in the Houston market — that don’t have power.” 

Components that need to go in transformers are instead going into electric vehicles and chargers.

“We’re aware of [the supply issue with grain-oriented electrical steel],” Coulson said. “I would never say that we’ve pivoted from lumber to transformers, but they’re as important to us as any of the other appliances. We are fighting on your behalf to try to put this in front. We make noise. There’s no bill we can use to address a supply chain crisis.” 

The Road to Austin And D.C.

Dallas BA Director of Government Affairs David Lehde will take a contingent of building industry professionals to Austin in March to lobby for the housing industry. The Dallas BA covers a 10-county region that also works on issues throughout North Texas. The group also pursues industry matters at the state capitol in Austin. 

Norman said it’s important to meet with the newly-elected and re-elected officials as soon as possible. 

“Just like your mom used to tell you, when you go to meet with somebody for the first time, that shouldn’t be the time that you’re asking them for something,” he said. “You want to just get to know them and then when we go down for the session and we’re begging them for things, they will hopefully have seen us before.”