The Future of Houston
Capitol One
Imagine Houston's Future

Open-ended & unpredictable, Houston's future requires preparation for the possibilities

Open-ended & unpredictable, Houston's future requires preparation for the possibilities

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The future is open-ended. No one knows what it will bring. But we need to consider all the possibilities in order to be prepared for whatever future does emerge.
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Where will these people live? While no precise estimates are available, the metro area will probably continue to expand as it has throughout its history. But more people will not drive to offices, but will telecommute from home. Courtesy credit
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The Houston area will likely continue to grow faster than the U.S. in general. It will get older and more Hispanic.
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The future is unpredictable. That much we know for sure. But we need to prepare for it nevertheless.
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The future is unpredictable. That much we know for sure. But we need to prepare for it nevertheless. We need to think about how the future could be even though we have cannot be sure how it will be. So where this great city is heading and where it might end up instead?

Let’s begin with the people. In order to tell how many people will live in Houston in 2040, we first have to define what “Houston” is. There are really three “Houstons ”– the City of Houston, Harris County, and the Houston-Sugar Land-Baytown SMSA (the metro area).

In 2010, the Texas State Demographer estimated that about two and a quarter million people live within the city proper, just over four million live in Harris County and almost six million people live within the 10-county SMSA. Houston is the fourth largest city in the U.S., just behind Chicago and just ahead of Phoenix, and Harris County is the third largest in the country behind Los Angeles and Cook (Chicago) counties.

Houston grew about 15% over the last decade, the County 20% and the SMSA 25% or about between 1.5% to 2.5% per year. That is faster than the U.S. in general, which only grew a little more than 1% per year. It also shows how Houston spreads out since the 10-country SMSA grew much faster than the City itself.

But what about the future? Will that growth continue for the next 30 years?

Older and more Hispanic

Well, it depends, mostly on what we believe the immigration rate to be—both domestic and international immigration, legal and illegal. Without immigration, the population of Harris County is expected to be only 4.3 million, not much increase at all. But using the immigration rate from 2000 to 2007, Harris County is expected to be 6.8 million, a 70% increase or almost 1.8% growth per year. The SMSA is expected to grow even faster, from 6 to over 11 million by 2040

And who are these people? The few projections we have tell us that we will be older and more Hispanic. The county is currently a little more than 25% under 18 (children), 65% 18-64 (adult) and 7.5% over 65 (retired). By 2040, the proportion of children will drop to 20%, and the proportion of older people will just about double to 13%. That is higher than the proportion of older people in Florida today.

In terms of ethnicity, Harris County is already 44% Hispanic and heading for a majority Hispanic population around 2015. By 2040, almost seven of 10 residents of Harris County will be Hispanic. Even the SMSA, which includes the more Anglo outlying counties, will be majority Hispanic by 2040.

More expensive oil and fewer commutes

Where will these people live? While no precise estimates are available, the metro area will probably continue to expand as it has throughout its history. The availability of inexpensive land and relatively inexpensive transportation allow people to own their own homes. The degree to which this continues, however, depends on two important factors – the cost of transportation, particularly fuel, and the requirement to commute to work.

Petroleum will be quite expensive in 2040. It won’t be gone completely; it never will. But it will be much more expensive to produce from marginal fields and extreme deepwater, not to mention oil sands and oil shale, if we are still mining those. Fuel oil will increasingly come from biological sources, corn and sugarcane as we do today and shifting to algae in the future. The cost of commuting long distances might be financially prohibitive depending on the cost of fuels, even if the mortgages are affordable in the outlying areas.

The other factor in how far Houston spreads out is whether people have to commute to work at all. The potentially high cost of transportation and the increasing productivity of information technology make it possible for a high proportion of people to work from home or from a remote office closer to their home. While rush hour will still be fact of life for many people, it will not involve as many people as it does today.

People at home will be working on computers even more than today. Much of manufacturing, particularly that which involves manual labor, has already been outsourced overseas. The countries that are getting that business today (China, India, etc.) will have begun their own outsourcing to even lower wage countries as their wages rise. Even Africa could be a booming place of business by 2040.

Staying competitive through Intelligence, creativity and productivity

Workers in Houston will not be able to compete on a wage basis with the other six billion workers in the world. Houston will only be competitive if it maintains an edge on intelligence, creativity and productivity. Premium work and wages are a function of the tools that workers use and the skill they have in using them. If Houston, and the U.S. in general, invests in productive technologies and in the education to use it intelligently, Houston workers will do fine. If not, we won’t exactly become a poor country, but we won’t be as rich as we have been either.

Houston’s economy has been based on trade (the Port and railroads), agriculture and energy (oil and natural gas). Barring a dramatic increase in the price of fuel and/or a collapse of the global economy, Houston will still trade in food and manufactured goods as it has. By 2040, however, Houston workers will begin to see the twilight of the petroleum industry. Even as the industry consolidates here, the total size of the industry declines worldwide.

Low investment in high tech could hurt

Again, choices abound. Will Houston become the Pittsburgh and Detroit of the 21st centuries?

Those cities rode their industries into the ground—first Pittsburgh and the steel industry in the 1970s and Detroit and the auto industry today. Or will Houston invest in the diversified technologies of the 21st century?

While Houston has lots of money, Houstonians do not invest as much in high technology investment as investor do in Dallas-Fort Worth and, of course, Austin. Houstonians know what a good real estate or oil deal looks like, but they don’t know nearly as much about a bio- or nanotechnology investment. For comparison, Austin has about three times the venture capital investment even though its economy is only a fraction of the Houston economy.

Two industries in particular might the targets of that investment.

The information technology will have largely been exploited by 2040, unless a whole new technology like quantum computing becomes feasible. At any rate, Houston has never been a leader in information technology anyway. Rather it is the biological technologies that promise the next wave of technological innovation, and the Texas Medical Center could be a platform for participating in the growth of that industry.

The high tech spinoff from the Medical Center, however, has been disappointing to date, perhaps because of the relatively low venture funding in Houston. Talented entrepreneurs with good ideas and technologies need to move to the coasts to get funding. Will Houstonians stop this brain drain by 2040 or not?

Engineering capital of the world

The other basis for the Houston economy in the future is not really an industry per se, but rather a competency. We think of Houston as the oil or even the energy capital of the world. But Houston is also the engineering capital of the world, particularly large-scale engineering. Oil rigs, pipelines, tankers – all require a high level of specialized engineering to build and maintain.

So even as oil declines as a resource, the world will be building the infrastructure to house and support the billions of people streaming into the cities of the world throughout this century. Capitalizing on that opportunity will be more difficult than focusing on the specifics of biotechnology coming out of the Medical Center, but large-scale engineering projects will be a big business for a long time to come.

A crucial experiment: How low can taxes go?

Texas will probably still be an attractive location for those and other businesses given its low taxes and relatively light regulation. But Texans will also be conducting a crucial experiment over the next 30 years, testing the limits of how low can those taxes and that regulation go and still maintain a place where middle class workers and their bosses want to live.

The 2011 Legislature will cut already sparse state services even more severely over the next biennium because of the financial collapse. Are those services, particularly in education, transportation and health care, essential for a prosperous economy or can we reduce them even further in order to free money for private consumption and investment? The Texas Experiment with radically smaller government will have its effects into the 2040s however it turns out.

The future in unpredictable, and these glimpses of 2040 are just one of many possible futures for Houston. More challenging futures could emerge if we have another and more severe economic recession involving a run on the dollar, if the atmosphere changes abruptly due to greenhouse gases, or if we experience a paralyzing global conflict, perhaps involving nuclear weapons. In those cases, the relatively modest changes described here come right off the table.

And on the other side, some extraordinarily good things could happen by 2040 to make the future even brighter and easier to manage — a medical breakthrough such managing cancer or retarding the aging process, a new energy source or a breakthrough in energy storage, transmission, or efficiency, or more astounding breakthroughs in information technology that puts machines on par with humans in managing the world.

The future is open-ended. No one knows what it will bring. But we need to consider all the possibilities in order to be prepared for whatever future does emerge.

Peter Bishop is an associate professor of Strategic Foresight and coordinator of the graduate program in Futures Studies at the University of Houston.