Hitting Its Stride Or Hitting A Wall? South Texas At a Watershed Moment

South Texas is getting a lot of attention these days, both good and bad. It is on the front lines of the contentious immigration issue. It has emerged as a hotspot of both eco-tourism and eco-activism. It has received praise as one of the last bastions of affordable housing in the United States. The region’s cities, often perceived as mere waystations, are consistently ranked as some of the fastest-growing in the country.

The area’s population surge has been variously attributed to a combination of immigration and in-migration, a growing population of cost-conscious retirees and, more recently, shifting supply chains that have drawn more economic activity and workers to the international border. The region’s economy has lately been buoyed by major investments in medical institutions, education, and border security. Even SpaceX has set up shop there. And, despite horrific reports about the fate of immigrants and drug cartel activity on the Mexican side of the border, this area has continued to receive accolades for its scrappy economy and rich Tejano culture: All of this despite its portrayal in the national media as mostly a dusty and militarized police state overrun with migrants and INS agents. 

So what’s behind the region’s unlikely rise — and how sustainable is it? One major concern is water or, more specifically, the lack of it. Another is that it remains one of the poorest regions in the nation. Beyond that, things look decidedly undecided. 

Some background 

The region known as South Texas stretches some 200 miles along the Rio Grande River from Laredo, Texas to the Gulf of Mexico. Its most heavily populated sub-region is called the Rio Grande Valley; an 80-mile conurbation — second only in overall population size to San Diego/Tijuana in all of North America — that stretches out along Interstate 2, paralleling the Rio Grande River and linking together a collection of cities from McAllen-Edinburg, Texas/Reynosa, Mexico on the west to Brownsville, Texas/Matamoros, Mexico on the Gulf Coast. The “Valley’s” combined binational population currently stands at about 2.8 million people, with 1.3 million in Texas. Some estimates indicate that it will double in size to over 7 million people (2.4 million in Texas) by 2045. 

The region’s current growth spurt can be traced back to the early 2000’s and the opening of Interstate 69, the then-called “NAFTA Highway” linking the region to the interior of the United States and helping give rise to the maquiladora factories of Northern Mexico. These factories caused rapid urbanization in Northern Mexico and positioned the cities of Brownville and McAllen — at less than two hours from Mexico’s second-largest city, Monterrey — as major ports of entry for imported goods. 

One of the area’s fastest-growing cities is Edinburg, Texas. The city abuts the larger city of McAllen, a major port of entry into the United States. Edinburg is the seat of Hidalgo County, one of the region’s most populous and fastest-growing population centers. The most conservative population projections indicate that the city will grow by nearly 53 percent (to approximately 153,000) by 2045, no small concern in a city already struggling to find ways to pay for critical infrastructure. Its growth can be partly attributed to its role as the home to one of two flagship educational institutions that make up the University of Texas Rio Grande Valley (UTRGV), including the university’s young medical school founded in 2013. The medical school has helped spawn the creation of a miles-long medical corridor comprising several large medical institutions stretching from the UTRGV-Edinburg campus to just north of the Mexican border in neighboring McAllen. 

Due in large part to its medical economy, the McAllen-Edinburg metro area has added, on average, well over 4,000 new housing units per year over the past several years, and local officials in Edinburg are weighing various methods to pay for necessary capital upgrades whose costs are estimated to exceed $260 million, including new water treatment and sewage treatment plants. The city’s growth pressures are forcing a reexamination of the city’s regulatory regime and utility fee structures — a long overdue process, and one sure to be unpopular with the region’s powerful development community when recommendations are eventually rolled out, according to some area planning officials. There is no definite timeframe yet for when these recommendations will be presented. 

Retirees, RNs, and rocketeers

Besides its emerging eds & meds economy (driven in no small part by the region’s unusually high incidence of obesity and diabetes as well as growing retiree population), the United States’ recent uptick in trade with Mexico, caused by supply chain realignments, has been a bright spot for the regional economy (Mexico is currently the U.S.’s largest trading partner with a reported $800 billion of trade 2023). As evidence of this, the Port of Laredo surpassed the Port of Los Angeles in 2023 as the busiest port in the nation in terms of the value of traded goods. Previously, it had the distinction of being the largest inland port in the country. 

And while most of the “value-adding” production work associated with the cross-border trade remains in Mexico due to the lower wages there, regional economic leaders on the U.S. side are reexamining tools such as duty-free Foreign Trade Zones (FTZs), which are experiencing renewed interest due to the re-emergence of trade tariffs, to help draw more manufacturing to the U.S. side. (FTZs allow the suspension or waiver of duties on imported goods until they either enter, or are re-exported from, the U.S. market, respectively.) The controversial federal “greenbacks for green cards” program known as EB-5, which awards green cards to certain foreign investors in U.S. projects, is also being promoted to help lure more foreign investors to the region. Meanwhile, the main port of entry cities of Laredo, McAllen, and Brownsville have seen their retail economies expand due to the growth of day shoppers from south of the border. 

The region landed what is perhaps its biggest economic coup with SpaceX’s 2014 decision to construct its combined manufacturing, testing, and launch facility, Starbase, in the coastal flats near Brownsville at Boca Chica, Texas. This was followed up in January of 2024 to relocate the entire Space X operation to the 1500-acre site. The facility is reported to employ around 3,400 people and is being looked to by area leaders to position the region as a hub for aerospace research and commercial air travel. 

Despite Space X’s huge investment in Starbase (estimated to be over $300 billion and growing), it has yet to spawn any significant developments outside of the expansive Starbase compound. Still, the addition of hundreds of well-paid engineering jobs to the region, along with increased tourism, has greatly boosted the region’s economic profile, especially in the technology sphere. The halo of SpaceX (along with other major investments Elon Musk has made elsewhere in Texas including relocating Tesla’s headquarters to the Austin area) has allegedly caused some political leaders to also look the other way after accusations that the company badly polluted some Gulf coast estuaries near Brownsville after two separate rocket explosions in 2023. In March of last year, the Texas Wildlife Commission agreed to a controversial land swap with SpaceX, giving them 43 acres of environmentally sensitive coastal property in the Boca Chica State Park adjacent to the Gulf of Mexico, for 477 acres of inland property in an area called the Lower Laguna Madre next to the Port of Brownsville. It remains murky what SpaceX intends to do with the property. 

The region’s fast economic ascent has regional economic development leaders thinking about how the region’s economy can continue to grow and diversify beyond the agriculture and government jobs that have historically dominated the region. “We have to do a much better job matching our educational programming to in-demand occupations, especially in the STEM fields,” says Pedro Salazar, a former banking official and former Executive Director of the Edinburg Economic Development Corporation. “Our area workforce development system needs to adapt to the needs of a rapidly changing world especially as it relates to things like automation, artificial intelligence, and climate change. We need to be looking at how to transform our liabilities such as our susceptibility to drought, into new economic opportunities in things like water conservation, water reclamation, and carbon capture. It’s hard to do that when less than 25 percent of area college students are pursuing STEM fields.” 

Adventures in housing 

Although the region’s relative housing affordability has been a major bright spot, housing prices are currently increasing faster than local wages are rising. This is a matter of grave concern in a region that is considered one of the most impoverished in the United States. It is hoped that the rapid expansion in new housing supply that the region is currently experiencing will begin to reverse this trend. On the flip side, the brisk pace of new housing development is causing growing traffic problems and land use conflicts as new development hopscotches around tracts of active industrial and agricultural lands. 

There is also a growing backlash against the rapid spread of a highly utilitarian form of apartment housing called fourplexes. Although marginally a form of “gentle density,” these ubiquitous developments have been allowed to squeeze in between tracts of single-family homes, creating heartburn among community groups for, among other reasons, their outwardly raw and defensive aesthetics. And although they provide a needed source of affordable housing, it’s hard to see that time will ever be as charitable to this vernacular apartment type as, say, New York’s once-scorned tenements or LA’s mid-century “dingbats.” These issues and others have prompted a renewed examination of many of the region’s historically permissive land use practices which have come to the fore in recent years. 

Perhaps the most pervasive of these is the region’s legacy of colonias – the largely unregulated, pre-1980s neighborhoods that proliferated mainly on marginal, unincorporated lands that were unsuitable for agriculture due to poor soil quality or propensity for flooding. 

Many of these informal settlements have existed for many years without basic services such as running water, sewers, or electricity. Although Texas state laws have evolved over the years to now mandate sewer and water service and formal platting in all new subdivisions, many of the older settlements remain woefully substandard and have become overcrowded, with their groundwater sources depleted or contaminated. Many have been inundated during storms, causing outbreaks of Zika and other waterborne illnesses. Some have experienced avoidable losses of life due to fires caused by faulty electrical equipment stemming from illegal hookups and a lack of basic building standards and codes. 

Some colonias have sought to be annexed by their nearest municipality so that they can receive services. However, it is usually cost-prohibitive for local governments to extend infrastructure in elongated tentacles that skirt large stretches of unincorporated land (although such “strip annexations” are a fairly common practice in Texas). The economics of annexation is made even worse by the very low tax bases of these settlements, as many colonia residents cannot afford to pay the taxes that would come with annexation.  

The region’s counties, meanwhile, are left to deal with many of the problems facing the older settlements, as well as underregulated newer ones that are also becoming overcrowded or poorly maintained, with very limited resources and regulatory tools. Counties in Texas do not have automatic zoning authority, and many are loath to try to institute such powers for various cultural and political reasons. They also are unable to institute basic building codes in unincorporated areas under current Texas statutes.

The result has been the continued spread of shoddily constructed rural subdivisions which threatens to overwhelm the counties’ ability to address basic public safety concerns, according to Anthony Uresti, Director of Planning for Hidalgo County. “This is really just setting the region up for more problems down the road,” he says. “The laws currently do not allow us to do some pretty basic things that would help us forestall future problems. We issued almost 4,000 plat approvals in 2023 and we’re on-track to exceed that number this year. The growth is great, but we just don’t have the regulatory tools or enforcement capacity to handle increasing incidents of dangerous housing conditions and rural blight. I’m worried that the county will be overrun with a lot of poor development that will take a long time to correct.” 

Meanwhile, some Valley municipalities are reticent to institute additional land use controls over subdivisions within their extraterritorial jurisdictions for a host of reasons, not least of which is political pressure from developers. The exercise of their ETJ authority has also occasionally come under threat by the state’s Republican-controlled legislature who, at the urging of rural landowners, has obliquely threatened to strip them of these powers. 

Hoping for hurricanes

Perhaps the biggest brake on future housing development is the region’s susceptibility to drought and its overreliance on the over-tapped Rio Grande River to service the majority of the region’s water needs. Much like other regions in the American Southwest, the combination of frequent droughts, extreme heat, and thirsty new developments have pushed the region’s water supply to the brink. Some regional reservoirs have reached as low as 12 percent of their total capacity this year due in part to a lack of major storms. 

The drought problem is worsened by the region’s reliance on an inefficient system of agricultural irrigation districts to distribute water to urbanized areas via a circuitous system of channels originally intended to serve farm fields. South Texas cities are forced to purchase water rights from dwindling reservoirs, and much of this water is lost in transit through evaporation and ground seepage. Some of the purchased water is also essentially unusable because of the need to “top-up” the system to a minimum volume to enable the water to physically flow. Some blame has also been directed at the Mexican government for falling behind on its promised annual deliveries of water from river tributaries on the Mexican side to Texas reservoirs as agreed to in a 1944 treaty. This same treaty also redirects “American” water from the Colorado River to northwestern Mexico. Mexico blames climate change for a persistent drought that prevents them from making good on their treaty obligations. 

Systemic inadequacies were brought to a head during the current drought, and since the water rights system gives preference to cities, the region’s agricultural economy has been forced to pay the price in closed sugar mills and fallow farm fields. 

To address the problem, several of the region’s cities have instituted basic water conservation measures such as restricting sprinkler use and the non-commercial washing of cars. Some are exploring the development of new water reclamation projects designed to recycle stormwater runoff and tap more groundwater using reverse osmosis and desalinization, as the region’s groundwater has high salinity due, in part, to the infiltration of depleted groundwater aquifers by coastal seawater. 

All of these techniques are hugely expensive for one of the nation’s poorest regions. Costs for Hidalgo County’s proposed Delta Reclamation Project, designed to recycle stormwater, is estimated to be in the $60 to $70 million range. Desalinization has also raised the ire of environmentalists due to disposal problems with concentrated salts as well as its high energy consumption. It isn’t certain whether the region’s cities will be able to muster the political will and raise the necessary funds without major increases in taxes (never popular, but even less so in conservative Texas). It is hoped that various government grants will help offset some of these costs. 

Between extreme heat, flooding, drought, and the vagaries of politics and international trade, there is a growing fear that the Valley’s boom times could come to a grinding halt — or worse, that the region will experience the same type of climate-related exodus that has pushed many of today’s current immigrants to its doorstep. An even bigger question is whether the region has become a harbinger of mounting international tensions over shrinking resources that are expected to play out with more frequency in coming years. If only some of the gathering clouds held the promise of a gentle soaking rain. 

Greg Flisram is a Principal with the Kendig Keast Collaborative - a Texas-based national planning and economic development consultancy. He has worked extensively throughout Texas and the United States.