Plano, TX – Dallas Business Journal

Published: December 11, 2015

Here’s the main reason Toyota is moving from California to Texas

Dallas Business Journal | Bill Hethcock | December 11, 2015

Sure, the low taxes, relaxed regulatory environment and Central Time Zone are nice. But none of those factors tops the list of reasons Toyota decided to plant its North American headquarters in Plano, bringing in more than 3,000 jobs, mostly from California.

The main driver of Toyota’s move from Torrance, California, was housing costs, according to Albert Niemi Jr., dean of the Cox School of Business at Southern Methodist University, who has inside knowledge about the move. Niemi shared the anecdote at an SMU Cox Economic Outlook Panel on Friday morning.

“It wasn’t so much that we don’t tax income,” he said. “It was really about affordable housing. That’s what started the conversation. They had focus groups with their employees. Their people said, ‘We’re willing to move. We just want to live the American Dream.’”

Toyota did the math and found that housing costs in Los Angeles County, where Torrance is located, are three times per square foot the cost of a house in Dallas-Fort Worth.

“They’re paying the same salary,” Niemi said. “So in real terms, they’re going to triple the affordability of housing they can buy if they move to Texas.”

In North Texas, median home prices are three to four times the median income, said Chuck Dannis, real estate adjunct professor at SMU and senior managing director of National Valuation Consultants. In Torrance, Calif., homes cost about seven times the median income.

The median home in Dallas-Fort Worth costs about $210,000, and the median income is roughly $58,000, Dannis said. In Torrance the median home price is $508,000 and the median income is $76,000.

On the bigger-picture housing front, North Texas homebuilders are constructing half the number of homes they were in 2006 through 2008, Dannis said.

Housing costs and availability were among a wide range of topics discussed at the breakfast on the SMU campus. Oil prices made the list as well.

Bruce Bullock, director of the Maguire Energy Institute at SMU Cox, said lower oil prices will prevail next year as OPEC production is expected to remain high. The good news for Texas is that the Permian Basin in West Texas is the “sweet spot” for drilling right now, with the lowest costs and highest returns for oil companies, Bullock said.

The other hopeful note for the energy industry is that companies that do make it through the downturn will be more efficient, which will improve their profit margins, Bullock said. The industry has reduced headcount, lowered capital expenditures, and is positioning for a recovery in the second half of 2016, he said. Bullock characterized the hope for a recovery that soon as “a little bit optimistic.”

“I think we’re looking at another year of low oil prices, somewhere between where we are ($35 a barrel) and $50 a barrel,” he said.

Much will depend on world events, Bullock added. If, for instance, ISIS moves into Saudi Arabia, oil could jump $20 to $25 a barrel overnight, he said.