Austin enacts sweeping reforms to cut down housing costs

By JOSHUA FECHTER | Friday, May 17th 2024

This article was originally written by the Texas Tribune, to see the original article click here. Austin will now allow single-family homes to be built on smaller lots, capping off a slate of sweeping land-use reforms intended to help ease the city’s housing affordability crisis.

The Austin City Council voted Friday to dramatically reduce the amount of land the city requires single-family homes to sit on. The vote came after a two-day hearing that included passionate and often rowdy testimony from advocates pushing for greater housing density and opponents who believe the policy will accelerate gentrification and displacement.

The council also voted to allow apartment buildings to be built closer to single-family homes and denser development along a planned light-rail line.

"Austin has an affordability crisis, and City government has been too slow and inefficient addressing it," Austin Mayor Kirk Watson said on the social media site X after the vote. "We needed to act on Austin’s needs and with real results. Today, we did that."

The move by Austin City Council members is the culmination of a yearslong push by city officials and housing advocates to tame sky-high housing costs. Austin officials have sought for much of the past decade to loosen restrictions on what kinds of housing the city allows, a bid to ease home prices and rents by allowing builders to add more supply. But they have often been stymied by homeowners and neighborhood associations opposed to allowing greater housing density.

Record high home prices and rents brought on by the Austin region’s explosive growth during the pandemic — and pressure from Texas lawmakers to address the city’s housing affordability crisis — fueled a sense of urgency among local policymakers to enact reforms and accelerated a political realignment around housing. That renewed focus has resulted in the most significant changes to what kinds of housing the city allows since the Reagan administration.

Council Member Leslie Pool shepherded the reforms under the banner of the HOME initiative — or “Home Options for Mobility and Equity.” She assembled a coalition of homebuilders, environmentalists, historic preservationists, labor unions, business groups and advocates for older adults to back the reforms.

“The status quo hasn't worked,” Pool said in an interview with The Texas Tribune. “We know this. We have to acknowledge that those pressures exist for many, many households. We can and should do more to reform our zoning code to provide relief. A more affordable, sustainable and inclusive city makes Austin a home for everyone that we all talk about wanting. That's not just for today, but it's for generations to come.”

The reform package also constitutes a major victory for a pro-development coalition of Austin housing advocates and urbanists — typically referred to as “YIMBYs,” an acronym that stands for “yes in my backyard” — who have long pushed for denser housing stock.

The group was instrumental in securing a supermajority of pro-housing City Council members during the 2022 elections. Friday’s vote was a further sign that YIMBYs and their ideas have made significant in-roads at City Hall, where groups traditionally opposed to development have long held political sway.

“I do hope it's a permanent political shift because people suddenly feel like you can't be an entrenched neighborhood person who says ‘no’ [to zoning changes that allow more housing] and win elections in Austin, even in the most conservative districts,” said Felicity Maxwell, a local housing advocate who sits on the board of the Austin urbanist group AURA.

Whether Friday’s victory will last remains to be seen. The reforms will likely factor heavily in the November elections when six council seats, including the mayor’s, are up for grabs. Several opponents of the changes vowed to target those council members who voted for them at the ballot box.

Resistance to the reforms runs deep among some neighborhood groups, anti-gentrification activists and the city’s old guard of environmentalists, all of whom have long opposed efforts to boost Austin’s overall housing density. A group of homeowners has successfully sued to kill past attempts to overhaul the city’s land development code and allow denser housing stock, and they will likely try to reverse the latest batch of reforms.

Detractors are skeptical that the changes will do anything to relieve housing costs. However, research shows that places that allow greater housing construction have kept their home prices and rents in check.

Two City Council members, Mackenzie Kelly and Alison Alter, voted against the lot-size proposal.

Opponents also fear the changes will lead to the demolition of homes that are already affordable only to be replaced by newer, more expensive housing and accelerate the displacement of lower-income residents. Evidence suggests that allowing denser development across a city may help shield residents in those neighborhoods from displacement.

Alter said she anticipated that land speculators and “corporate investors” will be the reform’s primary beneficiaries.

“A group of people will be winners and get ahead and a group of people will be left behind,” Alter said. “I think we only need to look back at history to know that the deck remains stacked against the everyday person.”

Nearly 160 people registered their opposition to the lot-size change alone. Opponents held signs that read “stop the sellout” and “protect affordable housing from luxury development” and called on council members to pass measures designed to prevent lower-income residents from being displaced.

“This is modern-day redlining,” Cindi Reid, an East Austin real estate agent, told the City Council. “You are codifying displacement through code. You are colonizing every current renter and homeowner through code. You are using a machete instead of a scalpel, destroying every single neighborhood instead of really looking at ways to preserve current affordable housing while adding appropriate density.”

Proponents of the changes also showed up in force, with 137 people signing up to express their support. They argued Austin’s current code has prevented the city from building enough homes to meet demand, pricing out longtime residents and keeping young people in need of housing from gaining a foothold.

“I'm taking time out of my day to ask you: Please give us affordable housing,” Chloe Wilkinson, an AURA board member and Austin Community College student, told council members. “We need it. My peers need it. We want to live in this city. We love this city. … We want to work in this city.”

As in other parts of the country, policymakers and housing advocates in Austin have increasingly placed a good chunk of the blame for the run-up in costs on city zoning restrictions that govern what kind of housing can be built and where.

In the past, those restrictions have dictated how much land single-family homes must sit on and how many parking spots they must have, among other things. Housing advocates and experts argue those rules have made it exceptionally difficult for developers to build enough homes in Austin to meet demand as the city boomed — resulting in higher home prices and rents.

For much of the past year, Austin officials have sought to peel back some of those restrictions. In December, they voted to allow homebuilders to put up to three housing units — like duplexes and triplexes — on almost any lot in the city where single-family homes are currently allowed. As of Tuesday, builders have filed 62 applications to build homes that wouldn’t have been possible without the reform, according to City of Austin records. About 60% of them are east of Interstate 35, which historically has separated wealthier white neighborhoods on the city’s west side and neighborhoods of color on the east side.

Austin also became last year the largest U.S. city to get rid of requirements that new developments include a certain amount of parking. Those requirements, advocates and housing developers argue, effectively forced builders to provide parking spots where they may have otherwise built housing.

Austin officials on Friday reduced how much land the city requires single-family homes to sit on, a restriction known as a minimum lot size. Before the changes, Austin required single-family homes in much of the city to sit on at least 5,750 square feet of land.

Researchers have tied lot-size requirements to higher home costs. For one, large lot-size requirements incentivize builders to build larger homes on them and effectively force homebuyers to buy a certain amount of land, resulting in a bigger price tag. Larger lot sizes also reduce the total amount of land a city has to build homes upon, creating a barrier for homebuilders to erect enough housing to meet demand.

The City Council on Friday reduced the lot-size requirement to 1,800 square feet — a move officials said they hoped would benefit first-time homebuyers.

Smaller lot sizes elsewhere in Texas have been associated with lower home prices. Townhomes built in Houston after city leaders relaxed land-use restrictions to allow housing units on smaller lots had lower values than traditional single-family homes, according to research from New York University’s Furman Center for Real Estate and Urban Policy. The median assessed value of townhouses that replaced traditional single-family homes after 2007 was $340,000 as of 2020, according to the study. Traditional single-family homes on larger lots built in that time had a median assessed value of $545,000.

Housing experts and proponents of the Austin reforms consider them a key step in solving the city’s affordability crisis, though not the only one. And they don’t expect the changes to have an immediate effect on home prices and rents. It will likely take years for homebuilders and the market to adjust to the policy and for its effects to become clear, they say.

“It's not like everything is just going to change overnight,” said Jake Wegmann, a professor at the University of Texas at Austin who authored the Furman Center study.

Lot-size requirements, along with racial redlining and private deed restrictions in the 20th century, worked to solidify patterns of racial and economic segregation in U.S. cities by effectively limiting housing access in wealthier and whiter neighborhoods, researchers have argued. Reducing lot-size requirements citywide could help alleviate those entrenched patterns in Austin, some reform advocates say — while also relieving pressure on communities of color under the current land development code by reducing development barriers in more parts of the city.

The lot-size reform also could be used to fight displacement in lower-income neighborhoods. Years ago, a city task force charged with coming up with policy ideas to fend off displacement recommended allowing existing homeowners to subdivide and sell off a portion of their land so they can remain in place.

“We really are ensuring that we are encouraging more homeownership opportunities where it makes sense,” Council Member Vanessa Fuentes, who represents Austin’s predominantly Hispanic southeast side, told the Tribune. “We're easing the development pressures, because right now, what is happening is actively displacing and gentrifying our communities.”

Austin officials also voted to allow greater housing density along the city’s planned light-rail corridor — a part of the city’s voter-approved public transit initiative called Project Connect. Transportation experts have said public transit requires a certain amount of neighboring density to be viable. Increasing density along the corridor is also seen as a key prerequisite to obtaining federal dollars to support the rail line. The council also voted to allow developers to build even taller apartment buildings if they set aside a certain amount of units for lower-income households.

In addition, City Council members voted to loosen restrictions that limit how tall apartment buildings can rise based on how close they are to single-family homes. They also directed city staff to study the “potential impact on displacement of communities of color” resulting from looser zoning restrictions and explore countermeasures.

There are signs in the Austin area that the underlying premise behind the reforms — that boosting housing supply at least helps temper housing costs — holds water. The Austin-Round Rock region in recent years has often permitted more apartment construction than most other major metropolitan regions in the country. Now, rents are falling in the region, according to Zillow data. Home prices, too, have dropped as more houses have remained longer on the market amid high mortgage rates.

“We need more Austins around the country in order to keep housing affordable and to give young mobile workers the opportunity to move where the jobs are,” said Orphe Divounguy, a senior economist at Zillow.

Other Texas cities like Dallas, Fort Worth and El Paso are considering similar reforms to allow denser housing stock to ease their housing affordability woes. Top Texas Republicans, including Lt. Gov. Dan Patrick and House Speaker Dade Phelan, have shown a willingness to explore the possible benefits of curtailing cities’ zoning restrictions when state lawmakers reconvene in 2025.

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