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With the response to the COVID-19 pandemic lessening and a long-term plan in place to address the city’s homelessness issues, attention from Austin leaders could soon shift to a third crisis that has taken a back seat to the other two — housing affordability.
The market for homebuyers continues to go bonkers, with the median sales price within Austin’s city limits reaching a record $575,000 in June. That is an increase of 42% from 12 months earlier, when that same home went for $407,000.
Of the roughly 1,200 homes currently on the market within the city limits, nearly 1 in 5 is priced at $1 million or more, according to an analysis of homes on the real estate website Zillow.com. The crisis might best be encapsulated in the listing for a 1,300-square-foot home in the Bouldin neighborhood just south of downtown. The listing has no photos of the home’s interior, probably signaling the need for a down-to-the-studs renovation or even for tearing it down. It sits on a modest lot of 5,700 square feet.
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It was listed at $900,000. On Saturday, it went under contract after five days on the market.
Although city leaders are being pressed to address the issue, a number of forces driving the increased costs are beyond their control, they say. Austin’s place as a major tech hub and reputation for quality of life continues to fuel rapid population growth, attracting newcomers with a lot of money to spend in the housing market.
Short of placing a ban on Tex-Mex food or cementing over Lady Bird Lake, Austin is primed to continue to lure large corporations and the high earners they employ.
But there are things that can be done, the most controversial of which is reviving the contentious fight to update the city’s land use rules to allow for the development of more housing units. An earlier effort ended up in a courtroom with the city coming out on the losing end against preservationists who pushed back against the intrusion of multifamily homes in their neighborhoods. The ruling, from March 2020, is on appeal.
More:As Austin’s home prices soar, here’s where you can still buy for less in the city
The last comprehensive rewrite to land use rules was completed in 1984, when the city’s needs were much different from what they are today. The population was under 400,000; it’s now about 1 million. Google and Facebook had not yet arrived in town, or, for that matter, on the internet. Three current members of the Austin City Council had not been born, and a fourth was born that year.
The council is likely to revisit the rules in the months ahead, according to numerous council members. It would be a larger splash after they dipped their toes into the water earlier in the year in passing ordinances to increase density along major transit lines and to revise the fee structure in a program that allows downtown developers to exceed normal building height restrictions in exchange for contributing to affordable housing. The proposed budget from City Manager Spencer Cronk for the upcoming fiscal year includes $79 million earmarked to provide more affordable housing options.
Two schools of thought
But achieving comprehensive change in the city’s land use rules is far from certain, as many of the same disagreements that imperiled previous efforts are likely to resurface this time. All the council members agree that the rules must be updated; they are split on the most responsible way to do that.
Their first meeting after a six-week summer layoff will be a work session July 27.
“We need more housing supply in the city, and we need more housing in the city that isn’t just a big home replacing a scraped home,” Council Member Greg Casar said.
Casar is in the camp that believes relaxing development rules would lead to the construction of more homes, specifically those that are within reach of a higher percentage of Austinites. Those include duplexes, fourplexes, accessory dwelling units and town homes, all of which are typically priced lower than single-family homes but prohibited in many parts of the city under the current code.
Those homes are needed, advocates say, to increase available housing inventory to a level comparable to the number of people looking to buy. Industry experts define a healthy market as when supply is equal to demand and neither the seller nor the buyer has the upper hand. That requires six to 6½ months of supply, meaning it would take that long for the market to be depleted if no new homes were listed. In Austin, the supply has been hovering around two weeks, according to the Austin Board of Realtors.
There are competing thoughts on whether loosening the restrictions to allow for those housing options actually would drive down costs.
Those who say it wouldn’t believe that any new housing unit, even in multifamily structures, is likely to be gobbled up by big earners and priced too high for, say, a teacher. The benefits of increased housing inventory would eventually trickle down to more typical homebuyers, they say, but that process could take decades.
Lawyer Fred Lewis, president of the pro-neighborhood preservationist group Community Not Commodity, helped kill the revision of the city’s land code in 2020. He disputes the idea that more housing availability will equal more housing affordability.
“The housing market is not like a widget. There are only so many houses you can put in the central area,” he said. “There will be no affordable housing in the central core. The supply being created will be for affluent people because that’s who’s moving here.”
Lewis and others say that the rising housing costs seen now were always going to come but were expedited by the coronavirus pandemic.
Throughout the country, fewer homes have come on the market during the outbreak, reflecting concerns by owners about visitors touring their properties. The economic downturn from the pandemic led to fewer people moving for jobs, and the ones who did often were desperate and found themselves in bidding wars that ended with homes in Austin going for 20% or more over asking price. Winning bids went to buyers who could pay with cash and didn’t require a home loan. In addition, it became more difficult to build homes because of rising costs for lumber and supplies.
“None of those are factors of any code changes we might make in a land development code rewrite,” said Council Member Kathie Tovo, who opposed past proposals for widespread zoning changes.
Previous failures
A fix was supposed to come from a California consulting firm in 2012 in the form of a comprehensive rewrite called CodeNext. Eventually reaching nearly 1,400 pages, it sought to define what could be built, where it could be built and how big it could be built.
But the plan proved divisive, sparking a fight between homeowners who were in favor of preserving the identity of single-family neighborhoods and urbanists who wanted to squeeze more multifamily structures into those areas. The back-and-forth often focused on development in so-called transition zones, the areas separating single-family home neighborhoods from major transportation corridors.
CodeNext was killed in August 2018 by the City Council. The move was a political winner for Mayor Steve Adler, who three months later cruised to reelection against an opponent who campaigned against the shortcomings of CodeNext. Flushed away was $8.5 million in taxpayer money to the consulting firm.
Moving forward with their own plan on land use, Adler and six other council members nearly reached the finish line in early 2020. But, like CodeNext, it also fell short. After the council approved the first and second readings of the proposed code, both by 7-4 votes, the city was hit by a lawsuit from neighborhood preservationists with the third and final vote weeks away.
The eased restrictions under the proposed rules were conducive to building 135,000 additional housing units over the next 10 years — a goal established by the city in 2017 under the Austin Strategic Housing Blueprint. Of those homes, 60,000 were to be affordable housing units for those making less than 80% of the median family income
But the preservationists argued that the proposed code violated homeowners’ protest rights in that the city failed to provide required notice to property owners whose zoning would be altered.
Travis County state District Judge Jan Soifer sided with them, a crippling blow after years of effort to revise the code.
Soifer’s ruling came down in March 2020. It’s on appeal before the Houston-based 14th Court of Appeals. A date for oral arguments has not been set.
“Part of why the politics are so difficult is even in a community of people who care about housing affordability, or say they do, there is no consensus on whether more density and more multifamily homes would help anything,” said Jake Wegmann, an associate professor in the University of Texas’ School of Architecture.
Wegmann, who has published numerous journal articles on land development rules, said Austin’s reliance on single-family zoning has made it difficult to build anything other than single-family homes.
He said he’d like for Austin to adopt policies similar to Houston’s, where it’s generally easier to build town homes and homes on smaller lot sizes. According to the Houston Association of Realtors, the median home sales price in Houston in June was $314,500 — a jump of 20% from 12 months earlier, but an amount that was $260,500 less than in Austin.
The preservationists’ pushback continues to burn Conor Kenny, an affordable housing developer who at the time of Soifer’s ruling was the vice chair of the city’s Planning Commission. Kenny, who later became chair before leaving the board, said more town homes and multiplex homes are desperately needed, and that, by his estimates, they would cost 25% to 40% less than a traditional single-family home in that same space.
“That will be an immediate relief for middle-class homebuyers who are now pretty much priced out of Austin,” he said. “The bad news is it will take a lot of supply to catch us up to where costs are driving costs of housing rather than scarcity driving costs of housing.”
Small changes likely?
Greg Anderson, who was a member of the planning commission until recently, said small changes to the rules might have to do for now, as a comprehensive rewrite appears unlikely. He has vowed not to cut his hair until “Austin legalizes responsible land use.” His last haircut was in fall 2019.
“Every single incremental thing we can do, we have to do it,” he said. “We got into this mess incrementally, one day at a time, one bad policy at a time. If we have to get out of it that same way, so be it, but it sure would be better to do a whole lot at once rather than incrementally.”
To comply with Soifer’s ruling, a supermajority vote of nine of 11 council members is needed to approve both individual zoning changes and comprehensive changes to the 1984 code. As it stands, that’s going to require a lot of give and take. Five members are committed to the sweeping changes sought in 2020, five others are opposed, and another, Vanessa Fuentes, hasn’t taken a firm position publicly.
A bill was filed in the Texas House in response to Soifer’s ruling during the recent regular legislative session. It sought to clarify that comprehensive code rewrites are not subject to the same process that property owners can use to block individual zoning changes. In other words, the 1984 code could have been rewritten with just six council votes instead of nine. The bill died in committee.
Common ground among council members could be found in certain sections of the code. There appears to be a consensus for increasing development along major corridors — but not the transition zones immediately off those corridors — and allowing for more housing opportunities in mixed-used developments.
But Wegmann, the UT professor, warns of another option for the council: inaction.
“I guess to be a little bit brutal about it, when people say something has to be done about it, I think the truth of it is nothing has to be done about it,” he said. “There’s no reason why Austin’s economy is going to implode if something isn’t done about it. If we don’t build more housing inside the city and urban core, that will just fuel more growth of subdivisions. I don’t see anything stopping that from happening.”
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