GALVESTON

Galveston is famous for reinventing itself. After the 1900 Storm, survivors raised the entire city and built a 17-mile seawall to hold back storm surge.

Islanders managed to defy nature and maintain the architectural charm of their mixed-income neighborhoods. They jacked things up — gas lines, sidewalks, graves and all — filled in beneath and got on with life. The years after 1900 were some of the island’s most prosperous.

But after Hurricane Ike in 2008, a population drain that started in the early 1960s accelerated. Galveston’s population dropped from a peak of 67,000 to 47,000 by 2010. It has edged upward since, but only slightly, to about 50,000.

Since Ike, the island has increased tourism — witness bumper-to-bumper traffic on Seawall Boulevard and Harborside Drive on any given Friday. The University of Texas Medical Branch, threatened with closing down, was rebuilt and rejuvenated. The cruise ship industry has risen to prominence at the Port of Galveston.

And since Ike, changes on the island have altered the housing landscape.

Ike damaged a huge number of island homes, some beyond repair. All public housing was damaged so badly officials decided to knock it down. It still has not been replaced in full.

Owners with insurance rebuilt, some of them improving their homes and sprucing up run-down neighborhood blocks.

Others fled by necessity to the county mainland and beyond. Some came back and many didn’t.

After Ike, rents skyrocketed, changing the public perception that Galveston was an affordable place to live.

Galveston had long been a place where a majority of residents rented rather than owned their homes, and that didn’t change. Before Ike, 56 percent of Galveston households were renters; now it’s 57 percent, compared with 40 percent in the Houston region, according to the U.S. Census Bureau.

At the same time, “For Rent” and “Vacation Home” signs proliferated in Galveston as short-term rental units crept across the city.

After Ike, the need for service workers to support tourism and provide basic services increased, driving a need for affordable rents. In 2018, about one in six of all island jobs were in the accommodation and food services industry, paying an average $19,246 a year, compared with an average wage of $47,734 across all industries, according to the Bureau of Labor Statistics.

Galveston became even more a commuter city than it was before, a place where the population doubles every day when workers drive across the causeway for work, then leave at night for their homes on the mainland.

Housing prices for homeowners in Galveston increased by more than a third in the decade after Ike to a median price in 2018 of $207,800.

Meanwhile, up north in the county, subdivisions sprouted and populations increased exponentially.

These are the housing narratives city leaders, real estate experts, neighborhood organizations, employers and nonprofit planning groups, a decade after Ike, are hearing and attempting to understand, adjust to or rectify.

They are the narratives residents live every day.

WHAT’S NEXT?

Out of this housing narrative, a community-wide conversation has arisen about whether these trends determine what Galveston will be in the future or whether the housing situation can be set on a different course.

The nonprofit group Vision Galveston spent most of last year talking to island residents about these and other issues of livability and sustainability on the island. Affordable housing is the group’s first focus as it moves into 2020, attempting to spur development and redevelopment of low- to lower-middle income housing on the island.

“We’ve hired a Houston firm to dig into the housing picture to give us real data to work with,” said Keath Jacoby, project manager for Vision Galveston. “What do we need that we don’t have? We need more knowledge from the people who work here and the problems they face with housing. We need to address the problems of people who work here and want to live here.”

Service workers to support tourism, school district employees and public workers are at the top of the list of those who appear caught in the gap of what they can afford and what’s available, but that’s anecdotal, not a data-based fact, Jacoby said.

“We want to get a more comprehensive picture of what exists, who owns it, how much it costs, all of that,” she said. “Then the idea is: can everybody agree that this is the reality of housing stock and community space and what can we do to fix it?”

Vision Galveston will work in coming months with city leaders as it polls workers and employers, civic groups and residents across a wide range of income levels about why they do or don’t live here and other housing concerns, Jacoby said.

UNIQUELY GALVESTON

Galveston’s housing landscape is complicated by some factors that reflect the island’s uniqueness. Other factors place Galveston in the same housing pinch as the rest of the country.

In Galveston, lots of older housing is in need of modernizing and extensive repair after decades of abuse by natural elements, neglect or abandonment. The problem has persisted over decades.

Meanwhile, prices for new homes have risen significantly in Galveston, driven by the cost of building materials, increasing insurance costs and strict flood-protection regulations, said Lesley Sommer, association executive of the Galveston Association of Realtors, the trade group that owns and operates the Multiple Listing Service. Sommer compiles and analyzes data about the real estate market for local agents and Realtors.

The median price of a home in Galveston isn’t necessarily higher than elsewhere, but the price per square foot of property on the island is higher than average, Sommer said. A home that sold for $207,800 in Galveston in 2018 translated to $202 per square foot, higher than the $120 median list price per square foot in the Houston metro area, according to Zillow.

More square footage per dollar, bigger lots and, generally, more bang for the buck often drives potential homeowners to the mainland, Sommer said.

The problem of renting is equally as complex.

Higher rents consume more of residents’ disposable and essential incomes, affecting local economies and stressing family budgets, according to studies by the Real Estate Center at Texas A&M University. Generally, people should be spending no more than 30 percent of their income on rent or a house payment each month, and with stagnant wages and rising housing costs, that becomes harder to do.

Tight rental markets in Galveston and other parts of Texas are driven, at least in part, by the rise of Airbnb and other online vacation rental companies, according to the center. When many former long-term rentals are converted into short-term vacation rentals, availability and price become a simple matter of supply and demand — fewer long-term rentals available means landlords can demand higher rent prices.

Changes in the Galveston housing landscape inevitably include the city’s large stock of historic homes, a distinguishing feature of the island. Many of those homes, from tall Victorians to small raised cottages, historically belonged to middle-class working families and were passed down from generation to generation until they became too expensive to maintain or the property tax bill became too large to handle.

After Ike, in addition to lower-income people who lost their publicly subsidized housing and were forced to live elsewhere, a generation of the island’s lower-income residents were displaced from their family homes because the houses were in such bad repair the owners couldn’t afford to keep them.

In some cases, homeowners signed over the deeds to their property to unscrupulous investors for cash at well below market value, leading to the loss of possibly the only financial asset a family owned, said Galveston attorney Tom Dickens who has represented some of these families in court.

‘GOOD LUCK’

For young families starting out, the possibility of buying a home on the island can seem daunting, Sommer said. Or maybe the idea of becoming a homeowner is just no longer a priority, he speculated.

“What is the availability of affordable homes to buy and what does entry-level mean anymore?” he said. “Entry-level for a UTMB health professional is one thing. To be a minimum-wage worker and afford housing on Galveston Island or in the Houston-Galveston metropolitan region? Good luck.”

Recognition of the need for more affordable housing is widespread throughout the county, something Sommer and other Realtors frequently talk about, he said.

“The piece of it that’s hard in Galveston is that, generally speaking, in suburban markets, houses listed for $100,000 to $150,000-plus, it’s understood that they’re ready to move in,” Sommer said. “Here, a house might need another $150,000 of work.”

Another factor recognized nationally, the rise of investment groups buying up housing and turning it into rental property, has not officially been quantified as a driver toward more renters and fewer affordable homes to buy in Galveston, but could be part of the mix, Sommer said.

“It’s a very hard thing to track,” he said. “Unfortunately, we don’t have that data. I wish I did.”

Sommer has worked with Vision Galveston and said the comprehensive study of housing needs and realities will be a welcome source of data for the real estate industry.

“One of the things they’re looking at is who is purchasing existing homes in Galveston and whether we have become a place where absentee investors have bought up much of the housing stock,” he said.

The national trend is well established. A CoreLogic study this year showed that private equity firms, real-estate speculators and investors made up more than 11 percent of U.S. home buyers in 2018, nearly twice the levels before the 2008 housing crash. Investors bought one in five homes around the country in the bottom-third price range in 2018, according to the study.

In Galveston, where the housing crash came at the same time as Hurricane Ike, basically stripping the island’s housing stock down to bare bones prices — a bonus for investors with cash to fix and flip homes — that trend made much sense and, in some cases, hastened the fixing up of homes abandoned by homeowners after Ike and in need of major renovation. But many of those fixed-up houses became short-term vacation rentals, not full-time housing.

Sommer has witnessed a shift in that trend, possibly predicting a change in what’s afoot, he said.

“What I’ve seen were houses that needed a lot of investment, an investor came in and fixed them up then put them in the short-term rental market,” he said. “But eventually those houses went back into the middle-income real estate market for sale. It’s a new model of flipping, using the short-term rental market first, then selling.

“We’ve actually had that model for many years here in Galveston,” he said. “It was called a beach-house rental. Someone rented it and liked it, then eventually bought it. The difference is now you’re seeing that happen with the older homes behind the seawall.”

NOT HOMOGENOUS

Galveston has always been a resort town that, in many ways, wasn’t geared toward traditional starter homes or middle-class affordability. But it also has always been a resort town that’s a real community with a diverse population, said Jacoby, a Galveston native and Ball High School graduate who left the island, then came back to raise her family. She has three young children.

“Why has that changed in 2020?” Jacoby asked. “We need a diverse population here. That’s what always made Galveston a special place. It’s not homogenous. And I feel sure there are enough people who want it to be both rich and diverse.”

Galveston faces many challenges, like being a barrier island subject to hurricanes and rising seas. The overall cost of living is expensive. It’s not like most other places, but it has abundant natural and historic assets, “plenty of clay to work with,” Jacoby said.

“It’s the perfect place to try out some risky projects, to see if they’ll work. Why would you not want to do whatever you can to make this place more livable for everyone?”

Not everything about the housing conundrum is a bad thing, Sommer said.

“For me, the best thing in Galveston right now is that there are so many people concerned about it.”

Kathryn Eastburn: 409-683-5257; kathryn.eastburn@galvnews.com.

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(2) comments

Bailey Jones

"Galveston had long been a place where a majority of residents rented rather than owned their homes..." I was struck by this observation when we moved here. I was raised in a generation that prized home ownership and always lived in communities where it was the norm. I thought maybe the prevalence of renting in Galveston was a recent thing, borne of economic necessity. But when I did historical research on our home, I discovered that it had been built specifically as a rental. From 1914 until the 60s, it was rented out to local working class families and only owner occupied until the 80s, when it became a rental once again.

Gary Miller

Bailey> California is famous for homelessness. As many as half the homeless there are employed mid income citizens who can't afford housing. In Galveston cheap commuting to and from the mainland is available. In California there is no cheap commuting option available. If Galveston adopts California policies people will live on the streets.

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