Don Huffines on Housing Costs in Dallas Business Journal

September 3, 2019 FILED UNDER:

Recently our owner Don Huffines was featured in an interview with Dallas Business Journal reporter Bill Hethcock. The interview and accompanying article was published in the Dallas Business Journal on August 28, 2019. See full article below:

Hey, Don Huffines, why do new homes in DFW cost so dang much?

With affordability being the buzz word in North Texas housing circles these days, the Dallas Business Journal sat down with Don Huffines, co-owner of Huffines Communities, to ask him what’s driving the prices up.

Huffines Communities is one of the largest land development companies in the Dallas-Fort Worth area. The company’s focus over the last two decades has increasingly shifted to large, master-planned communities with 1,500 to 5,000 houses and a focus on first-time and first move-up buyers.

In the Q&A that follows, Huffines discusses affordability, the company’s history, and a wide range of hot-button topics:

What’s the background of Huffines Communities?

We do land development. We’re going to be celebrating our 35th company anniversary next year. We started this company in 1985. I’ve always had an affinity for land and land development and graduated from UT in Austin in 1981. I have a finance degree and I worked for Henry S. Miller for three years — 1981 to 1984. I started this company in 1985 with my twin brother, Phillip. I’ve seen a lot of cycles. I saw the big one in the ‘80s. That’s really where our paradigm that we operate under came from. That and the last one.

How does that paradigm shape your strategy?

We’ve seen a lot of people come and go in the business and we’ve been very fortunate to stay in the business. We love land development. We do land development and apartment development primarily. We’ve built everything. I built retail, I built this office building. But primarily we focused on land development. I think we’re very conservative in our investment philosophy. We don’t like taking on a lot of debt. It’s a cyclical business and tomorrow might not be better than today.

How has Huffines Communities evolved?

Over the last decade or two, we’ve shifted more to masterplanned communities, which we define as a large project with 1,500 to 5,000 houses in the community. They’re highly amenitized with a sense of place, a sense of marketing, and in a Huffines Community we have a brand on that. We call it a Signature Community, meaning the consumer is going to receive a lot of value in living there and have a real pride of ownership in living in that community. We have program directors, a lot of activities, and a nice amenity package, and we deal with builders across the spectrum in the DFW area.

How much do you focus on affordability?

Our focus from day one has been delivering a great product in our communities to the first-time buyer.

How do you go about that?

We work very closely with our builder lineup. As the developer of the masterplanned community, we control the restrictions, the homeowner’s association, and we work closely with our builder lineup for them to deliver a nice home at an affordable price. That’s the square footage of the home, the architectural details, things like that. Our communities are very successful. We sell a lot of houses in them. I would say that’s because of not only the lifestyle you live in a Huffines Community, but the quality you get at the price.

What’s driving the prices of houses up?

Government. Far and away the number one issue driving the price of housing up is government. It’s everything from creating barriers to entry for the developers on the land-use side to rules, regulations, impact fees, everything from tree fees, park fees, sewer and water fees, you name it. It all goes in to the price of a home, to the end user. It’s always passed on to the consumer.

What other factors?

Second would be interest rates and third would be consumer demand and expectations.

It’s interesting that you’re not mentioning a labor shortage. Why?

I put labor in with the first category under government policies. Government is comprehensive. We do have a labor shortage of 30,000 people, according to the Dallas Builders Association. That can be resolved through proper immigration reform and temporary work visas for trades that are in demand. We’ve got a large segment of society that are illegal and being employed. That means they’re underemployed and underpaid, and it’s just a big issue. Our immigration issues are a big problem in our states. I think you will see labor inflation, wages increasing, which is good and bad. It’s certainly good for the worker, but it makes the house less affordable.

On the regulation issue, DFW has so many cities so close together that some builders and developers have said that standardization of building regulations would be helpful. What are your thoughts?

I do feel like if you simplify the process any way you can, it will lessen the price of housing. Time is money in the business world. The longer it takes for the builder to complete the house due to government rules and regulations and inspectors, etc., or the longer it takes the developer to complete the subdivision or the community and the lots, it’s all about time is money. So that would help.

Can you give an example?

Land use. Land prices are a big component of the house price, and the more restrictive land use gets by the cites, the higher the house price is going to get.

What cities are particularly difficult, or particularly easy, to work with?

I find that, if cities want to really work on the affordability issue for housing, there’s a lot of improvement needed for working with developers instead of working against them. And by working together, I think the development community and the homebuilding community can, through working with the cities, go a long way toward solving affordability issue. Instead of the cities fighting developers, we should come together and work together. And some do.

What are some of those cities?

We’re seeing more of it than we used to. I’d rather not say which cities do or don’t. There are some that are really anti-development, and some that aren’t.

Circling way back, you mentioned interest rates as one of the factors driving housing costs. What what can you do about that?

Well, not much, but right now we’ve still got historically low rates. It’s a great opportunity for people to buy and it’s an exciting time for our home buyer right now. That’s obviously more of a national issue, but we got good rates right now, and people should take advantage of it.

Will you touch on the consumer demand piece as well?

That’s an interesting one. It’s really more consumer expectations for what they want in a home today. A lot of consumers are leaving new apartments and they’re used to, for instance, granite countertops. They get to a home and they want granite countertops. It used to be a starter home or first-time home was all Formica and maybe you had one-and-a-half baths and three bedrooms. It was a 1,200 square feet on a starter home or less. And today nobody wants an 1,100-square-foot home because their apartment was about that big. They want something bigger and nicer, they want granite and all that. The consumer expectations on what a home will have today are much higher than they used to be. The builders deliver that, obviously, to satisfy that demand.

This interview has been edited for clarity and length.