Local housing, child care costs remain high as analysts expect strong economy overall

With analysts expecting the U.S. economy to remain strong in the year ahead, local leaders returned to common concerns – housing costs, child care and wages – as the biggest issues facing the Austin economy headed into 2025.

The Austin Chamber of Commerce’s annual Economic Outlook gave attendees some clear indicators of what’s ahead globally and on U.S. soil, though the policy steps that will be taken by President-elect Donald Trump on tariffs and immigration create some concerns over inflation.

Alan McKnight, chief investment officer at Regions Bank, described the U.S. economy as resilient, with steady growth projected for 2024 despite some lingering inflationary pressures.

McKnight noted that while gross domestic product growth is moderate on a national level, Texas – and Austin in particular – continues to outpace the nation.

McKnight also pointed to the role of the Federal Reserve actions in shaping economic conditions, with at least one more round of interest rate cuts possible.

Asked about the possible impacts of Trump’s campaign pledges on deporting undocumented immigrant workers, McKnight said food production and other industries that rely on immigrant labor would see costs increase considerably.

“For those jobs and in those industries and sectors where there’s a large component of an immigrant workforce that is undocumented and that could possibly be deported … to compensate someone for starting to take those jobs, you’re going to pay someone more, you’re not going to pay the same amount or less,” he said. “That I feel very strongly about.”

Monica Medina, CEO of the Texas Housing Conservancy, said the cost pressures of Austin’s housing market have far outstripped local wage growth, with rental rates growing 180 percent over the past 15 years compared to income growth of 72 percent.

“We need to think of the Austin that we want to see in 20 and 30 years, not just the Austin of today,” she said, calling for local businesses to advocate for state-level reforms to stabilize insurance rates that have become a barrier to construction of affordable housing. “Where do we want our children and grandchildren and great grandchildren to be? The properties that we’re preserving as affordable today we’re able to maintain for those generations to come.”

Kristin Marcum, CEO of ECPR Texas, focused on the area’s child care crisis and pointed out that families often spend 20 percent to 30 percent of their income on child care. For context, she said that’s a cost rivaling or exceeding college tuition for most households.

“That’s their second-highest expense, only behind rent or mortgage, so that’s a lot of money,” she said. “And as cost of living increases … a lot of families are making tough decisions, should one parent leave the workforce? And you can’t blame them. Not only is it tough to find something they can afford, but sometimes they can’t even find child care at all.”

Ann Huff Stevens, dean of liberal arts at the University of Texas, took a macroeconomic view, noting that while Austin’s labor market remains robust, inflation has eroded purchasing power, especially for lower-income residents.

“Periods of high inflation hit families living paycheck to paycheck the hardest,” she said, adding that wage growth for lower-income workers has been encouraging but insufficient to offset rising costs, with many younger people unable to move upward economically. “We’ve seen that affordability challenges can trap families, limiting their ability to move for better opportunities.”

Photo made available through a Creative Commons license.

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