The South by Southwest Festival started in Austin, Texas, in 1987, as a gathering of musicians and creatives. This year’s edition spanned 15 “tracks,” including not just Future of Music but also Health and Medtech, and Climate Change. It’s an evolution that has mirrored the explosion of Austin itself, whose population grew at the fastest pace of any major metropolitan area in the 10 years leading up to the COVID-19 pandemic.
Why Austin? The fact that Texas doesn’t impose an income tax doesn’t hurt. Mayor Steve Adler also attributes the city’s popularity to its creative essence. The challenge for Austin has been and will continue to be managing the rapid growth without sacrificing what drew new denizens there in the first place.
“In most cities of the world, if you try something and it doesn’t work out — if you fail — you don’t get a second chance, you don’t get capital a second time,” Adler told Yahoo Finance during SXSW. “This city encourages people to take risks. This is a city where people want a safe place to think differently and to try new things.”
“Keep Austin weird” is the city’s unofficial slogan, and for Adler, that means openness to taking risks, whether in business or the arts.
Elon Musk decided to relocate Tesla to the Austin area from Silicon Valley. The company is building a factory where it plans to employ up to 10,000 people. Adler pointed out that many of those jobs will be middle income, and that he hopes Tesla will hire locals rather than draw people from other areas. (Austin residents regularly talk about the influx of Californians to the city).
But Austin’s unique vibe continues to attract more out-of-staters. The city’s population rose by 21% from 2010 to 2020, to nearly 1 million people. And nearly every recent conversation with locals — from taxi and Uber drivers to a chef at a tech company — included discussions about the downsides of that growth.
“Our existential challenge is preserving the other people in our community, preserving the diversity that creates the friction that creates the innovation, that creates the art and the experiences,” Adler said.
The population boom has done its part to boost Austin’s housing market. Yahoo Finance named the city the hottest housing market of 2021. The median home prices soared 27% in February from a year earlier, to $499,995, in the Austin area, according to the Austin Board of Realtors. The price growth is outpacing the nation. The National Association of Realtors reported that the median sales price of existing homes in the U.S. — its calculation doesn’t include new construction – rose 15% to $357,300 in February.
Adler recognizes this, and the city has been trying to address soaring housing prices.
“In a city like Austin that is growing so rapidly, where affordability is becoming an even greater challenge, our focus needs to be on preserving the people who live here,” he said.
One way to try to keep housing prices down is to build more houses.
“We had a greater number of new homes built in Austin per capita than any city in the country last year – still wasn’t enough,” Adler said. “So we have to figure out how to accelerate that even further.”
Adler also has to figure out how to better transport the city’s residents; traffic is a growing issue. As the Wall Street Journal recently reported, federal highway funding will allow the state to expand highway I-35 through the center of Austin. Adler will have to compete with other areas to win funding for his ambitious mass transit projects.
The trouble is, said Adler — it’s tough to find a city that has smoothly managed the transition from creative arts hub to bustling metropolis.
“The danger is as you get more and more money, and you lose the diversity, you become a city that consumes art, rather than makes art. I wish there was a city that we could go to that had done it right, that had successfully negotiated it, but we can’t find that — which is why we are going to have to try to create it,” he said.
Julie Hyman is the co-anchor of Yahoo Finance Live, weekdays 9am-11am ET. Follow her on Twitter @juleshyman, and read her other stories.
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