Sarah Erickson: Why Companies Are Relocating to Texas

Sarah Erickson

Recently, I had the privilege of hearing Dr. W. Michael Cox, director of the O’Neil Center and former chief economist of the Federal Reserve Bank of Dallas, speak on why companies are relocating to Texas. In real estate, our commissions are based on square footages, which are directly related to jobs. Because our industry and incomes thrive on jobs, I found Dr. Cox’s presentation to be fascinating.

From 2004 to 2008, he said, Texas added 500,000 people—more than any other state. The overwhelming majority came here from within the United States. The biggest loser was California, which saw 148,000 people move to Texas.

Why are so many people and companies relocating to the Lone Star State? Read below for six factors directly contributing to two-thirds of net migration among states. (Texas’ national ranking is in parentheses next to each category.)

1. Climate (11th). After a record-breaking number of consecutive days of three-digit temperatures in Dallas this summer, you might be surprised to know that Texas ranks 11th nationally for climate. The study shows that people desire consistent weather, so the rankings are based on Fahrenheit variability.  Hawaii ranked first with a 2.0 degree Fahrenheit variability.

2. Personal Income Taxes (1st). Texas is one of only seven states without an individual income tax, making Texas a top pick in this category!

3. Union Membership (6th). Many companies like the flexibility associated with the ability to freely make decisions without the pressure of a union, so states with a low percentage of a unionized private sector labor force ranked at the top. Texas ranks 6th at 6.2 percent, versus No. 1-ranked South Carolina at 3.3 percent.

4. Government Spending (18th). This category measures the five-year rise in per capita state and local spending, measured relative to the average of all states.  The study demonstrated that citizens prefer a low tax over more public services. Although Texas ranks 18th in this category, it is still 10 percent below the national average.

5. Housing Prices (6th). Affordable homes are one of the key reasons Texas continues to thrive. In reviewing the four-year median home price for single-family homes, Texas ranks 6th with an average median home price of $148,000.

6. Public Schools (30th). Rankings are based on 2007 proficiency rates for math and reading among eighth grade students.

The reasons behind the remaining one-third of net migration is likely attributable to amenities, public safety, job prospects, income, small business climate, and court system. (See pages 10-11 of this report for specific details.)

So what does all of this mean for North Texas? It means a whole lot more people—and a whole lot more jobs. The Dallas-Fort Worth population has increased 7.4 percent during the last decade. The average annual increase in population over the last 10 years was 148,000. During the last four years, the population growth has increased by 160,000 per year—or nearly 1 million people every six years!

The Dallas-Fort Worth area currently ranks as the fourth-largest metropolitan area in the nation, behind New York City, Los Angeles, and Chicago. If current population trends continue, North Texas will rank as the country’s third-largest market in the nation by 2020.

I recommend reading the full report by Dr. Cox and his colleague at SMU, Richard Alm, “Looking for the New New World.” You can find it here.