I invest time at the Austin Board of REALTORS® and TexasREALTORS®, working to improve our industry, to protect property rights for all our clients and customers, and advocating for policies and candidates that support healthy real estate markets. I have also with the Central Texas Water Coalition for several years. The Highland Lakes are an important feature that makes the Austin area and the nearby Hill Country wonderfully attractive and enjoyable. They are also an important part of the region’s economy.
An extensive drought impacted Texas beginning in late 2010, and 2011 became the driest year in Texas history. With no forecast that the drought would abate, the Lower Colorado River Authority released a very large amount of water from the Highland Lakes for agricultural use downstream that year. Without getting into too much detail, you need to know that the LCRA has two classes of water customers: (a) Firm customers, who are guaranteed preset water supplies at all times, and (b) Interruptible customers, whose supplies are subject to reduction if their use would impact Firm customers. In round numbers, Firm customers were paying about $150 per acre-foot of water at that time, and Interruptible customers were paying about $6.50 per acre-foot. Virtually all of the Firm customers are upstream – the Highland Lakes area and south through Austin. With that in mind, here is the impact of that release of water to Interruptible customers in 2011 on the water level in Lake Travis:
The levels of Lake Buchanan and Lake Travis are intended to change for flood control and to supply water demands of LCRA customers, and you can see that the level of Lake Travis had been allowed to fall in previous years. Not only was the impact in 2011 larger, though, but because of the drought it did not recover for almost four years! During that time the CTWC and others were successful in getting emergency orders approved that stopped additional releases to Interruptible customers in 2012, 2013 and 2014.
In 2015 I did some work that became part of an Economic Impact appendix in the Region K Water Plan. With lake levels 40 to 60 feet below normal for most of four years, the values of lake area properties – especially those with “frontage” in normal times – were significantly reduced. The total economic impact of the drought and the unnecessarily low lake levels went far beyond residential real estate, but considering just this aspect, here is an excerpt from the 2016 Water Plan:
“Combining both the loss of value and the lack of appreciation on these lake-related properties creates a total adverse property value estimated impact from very low lake levels of $2-3 billion, and the associated loss of annual property tax revenues that support schools and county services.”
I’m updating that data now for the 2021 Water Plan, so this chart includes that bit of history but continues through May 2019:
Notice that almost eight years after its low point and four years after the lake reached typical operating levels, the median price of a lakefront home on Lake Travis has still not reached its pre-drought status, and was in fact 20% to 40% below the pre-drought peak from 2011 through 2017. As the real estate market strengthened in 2012, coming out of the broader recession, that lakefront market gained ground as well, but lost virtually all of it again in 2014 and 2015.
I do not intend this as a warning for folks who have or want a property on Lake Travis, and over the long-term I remain confident in value appreciation, even for lakefront homes. You should be aware, though, that Lake Travis and Lake Buchanan are used to manage the levels of the other five lakes in the Highland Lakes chain, and their levels do fluctuate as needed. We will have droughts in the future, and we’ll have times (like the last 2-plus years) when there is plenty of rain upstream to recharge the lake system. The Lake Travis area is beautiful and those properties will continue to sell. Just know that if your circumstances cause you to sell when the lake is low you may not see the financial gain you had hoped for.