Austin, Texas, City of Cranes

Austin, Texas, City of Cranes

Austin is booming. Previously an academic and legislative backwater, the Violet Crown is now consumed by a tidal wave of condominiums and hotels. Fueled by tech companies, tourism, and annual events like SXSW, the city is overflowing with newness. Each week sees the opening of a new restaurant, the announcement of a new development, or, worse, the shuttering of a longtime local institution. An economic frenzy is exciting, but also presents serious issues of affordability. With over 900,000 residents—and a metropolitan population nearing 2 million—Austin welcomes an estimated 70 new residents daily. Where will these new citizens live?

Fast growth has triggered a surge in housing price, but despite the wave of multifamily construction, the cost of housing continues to skyrocket. The city’s recent Housing Market Study, released in 2014, reported a deficit of 48,000 affordable housing units for individuals earning less than $25,000 per year. This number ignores the portion of the population that remains below the region’s Median Family Income (MFI) which in 2015 is listed by the Department of Housing and Urban Development at $53,750 for a single person household. With this expanded figure in mind, the need for affordable housing deepens into a more widespread crisis.

Downtown Visions

Development emanates from downtown Austin. Though small in area, measuring only 1.6 square miles, it is the city’s strongest economic engine. Since 2011, The Downtown Austin Plan (DAP) has set the vision for Austin’s core. Its section on Housing focuses on affordability, with the generic mandate to “support the production of affordable housing,” including a goal of 225 units for very low-income persons. An appendix of the plan goes further, delivering ideas for both short-term and long-term initiatives. It also explains the obvious truth that subsidized housing is simply more expensive downtown than in other neighborhoods.

Currently, about 15,000 residents live downtown, up from only 4,000 fifteen years ago. Most residents are moving here from within the city, and they fall into two demographic groups: young professional couples without children, and active empty-nesters. About 5,500 condo and apartment units have been built since 2000, with at least another 1,600 planned. Entire districts, like the Seaholm Power Plant and Greenwater Treatment Plant sites, are under construction. Nearby, at Third Street and West Avenue, The Independent, designed by Austin’s Rhode Partners, is slated to include 370 units, ranging in price from $300,000 to $3 million. At 685 feet tall, it is advertised as the tallest residential tower west of the Mississippi. Kevin Burns, CEO of Urbanspace, a real estate company handling the tower’s sales effort, said that the building is already 96 percent under reservation. These future developments are bigger and better, and their success only further highlights the need to build affordable resiliency into Austin’s marketplace.

Jim Robertson, a co-project manager for the DAP and currently the manager of the Urban Design Division at the City of Austin, reviewed the mechanisms in place for funding affordable housing with me in late June. As prescribed by the DAP, the city initiated the Density Bonus Program (DBP), which gives developers a reliable pathway to increase the FAR allotment from the base zoning, enabling them to build taller projects. A previous program was more shadowy in how it parceled out awards, leading one consultant to compare it to a “Turkish market.” Through the new DBP, a residential developer gains entitlements in exchange for providing public benefits. A minimum of 50 percent of the trade must be delivered in the form of affordable housing, either to locate affordable units onsite, or to make a fee-in-lieu payment. The restraints for non-residential development are significantly less stringent, with a 50 percent increase in FAR given outright to applicants.

How has DBP fared in its first two years? To date, three projects have enrolled. Neither of the two participating residential projects have elected to build affordable housing units onsite. Their fee-in-lieu payments will total about $1.3 million, collected when certificates of occupancy are issued. This money can be spent toward affordable housing anywhere within the city limits.

Additional data arrives from Rainey Street in southeast downtown, which became part of the CBD in 2005, prompting rapid development of the neighborhood. A similar density bonus program was offered to generate affordable units in the area. According to reporting by The Austin Monitor, the plan created 51 units, but only required them to be listed at set affordable rates for one year. After the program was updated in early 2014 to ensure units were affordably priced for 40 years, no further units were built, meaning that developers have chosen not to seek increased density entitlements. In this case, the provision for onsite affordable units backfired, and no further funds or units have been created.

A separate, more lucrative civic mechanism to subsidize affordable housing is also in place. Since the late 1990s, the City of Austin has been selling downtown parcels for private development. The Seaholm and Greenwater sites are part of this process. A city ordinance dedicates 40 percent of the property tax revenue from these parcels to a Housing Trust Fund that underwrites affordable developments. As of 2013, the program had generated $2.5 million in funds. The City of Austin Budget Office, according to Robertson, estimates that the program will yield between $19 and $51 million between 2014 and 2034, resulting in a major stimulus to the Housing Trust Fund. In their agreements, developers of The Independent, which is set to rise on a former Austin Energy site, have agreed to donate $2.7 million to the same Housing Trust Fund, more than double what the DBP has promised to generate to date.

The parade of numbers evidences that downtown is not well suited to support affordable housing projects, but that downtown economics can be leveraged to fund affordable initiatives. Given the competition, developers, with their desired returns in mind, have demonstrated that they are willing to pay fees but are unwilling to further reduce their profitable square footages. The city’s efforts will continue to make an impact, but pale in comparison to the shortage at hand.

A Case Study

One affordable downtown project, however, has made an impact. Capital Studios, adjacent to the grounds of the Texas state capitol on 11th Street, is the first downtown affordable housing project in almost 50 years. The project, designed by Austin firm Dick Clark + Associates, contains 135 single room occupancy units for residents at or below 10 percent MFI. It is a permanent facility, meaning residents can stay as long as they qualify for the income requirements. Some tenants are disabled, or are recovering from disease or homelessness.

Foundation Communities, a non-profit affordable housing developer in Central Texas, is the project’s owner/operator. Sunshine Mathon, their Design + Development Director, toured me around the complex. It was key, said Mathon, to locate supportive housing in a transit-rich area, close to jobs and services for their residents. The building, like their other developments, was principally funded by federal tax credits, with a small portion coming from state or city resources. As required by the competitive conditions of the tax credit, the building was realized on a tight construction scheme, only barely finishing in December 2014.

The massing organizes around two central courtyards, resulting in light-filled hallways and meeting rooms. The project includes sustainable features like a VRF air conditioning system, rooftop solar thermal energy for hot water, and 79 percent of its construction waste diverted from the landfill. Impressed with the technology, Scott Ginder, the project’s architect, used some of the green strategies on his own home. With his office Forgecraft Architecture + Design, he has designed another ground-up single room occupancy facility for Foundation Communities on South Lamar, set to begin construction this summer.

Capital Studios succeeds, but it is an anomaly. The site was severely limited by multiple Capitol View Corridors, rendering it impossible to develop with a for-profit developer. As part of the agreements of its sale, the property was required to provide 120 parking spaces for an adjacent office building. It does so with two stories of structured parking below grade, but as a result there are no parking spaces for tenants. This leaves the units to be marketed as a “community with a car-free lifestyle,” which works well with the target demographic of possible residents. While forward thinking, this scenario won’t be possible for commercial developers for a long time.

Looking Ahead

Robertson admits that efforts for downtown affordable housing have had “limited” progress, a predicament largely driven by the high cost of land. The number of actually developable sites in the CBD is also extremely limited. City, county, state, and federal governments own a notable percentage of sites, especially north of the Capitol. The Capitol View Corridors severely limit building height throughout the city, but are the jurisdiction of the state legislature and were expressly off-limits for the DAP. Additional historic overlay districts further limit building height and the entire northwest corner of downtown, Judge’s Hill, opted out of the DBP, preferring to remain a mix of single-story structures. Without territorial expansion, the CBD has nowhere to go but up.

These are not complaints—restrictions are healthy checks on the market forces at play, and, to its credit, Austin has commendably preserved large central portions of the city. What other city is so infused with creeks, greenbelts, and parks? But the limitations of these land uses increase the cost of doing business.

Progress made by other initiatives that serve the city at large has been more encouraging. In 2006, Austin voters approved a $55 million bond to fund affordable housing. As of 2012, 3,055 units were created or preserved, with the majority of them serving households below 50 percent MFI. In fact, Austin’s programs have delivered a total of 18,406 units of affordable housing below 80 percent MFI since 2000. These efforts earned the city a Robert C. Larson Housing Policy Leadership Award from the Urban Land Institute in 2014. Still, even with these award-winning initiatives, Austin’s housing market is overstressed.

Multiple visioning documents for Austin’s future are also in play. ImagineAustin, a comprehensive plan, was released in 2012, after the DAP, but the two texts are not fully coordinated. In addition, most neighborhoods have filed their own neighborhood plans under the previous city master plan, and these will remain in place. Neighborhoods grow increasingly vigilant to prevent “unwanted” development and, with the City Council now elected by geographic district, spatial planning decisions are set to be politicized even further.

Another major opportunity is CodeNEXT, a city-led initiative to rewrite Austin’s complex Land Development Code (LDC) into a simpler, form-based code. Jim Robertson is also a project manager for this effort. Part of the work is to create strong strategies for density and to encourage a diverse range of housing options. When presented with options of how to renovate the LDC, Austin’s City Council favored a muscular rework: on a scale of 1 (light retouch) to 3 (full overhaul), they settled on an impressive severity rating of 2.5. Initial findings will be presented in late Spring 2016. This revision spells big changes for zoning, an upgrade welcomed by the city’s developers and architects.

Phased and Enthused

A number of solutions are available for affordable housing. Some voices call for the removal of the onsite housing option in the DBP and advocate for larger fee-in-lieu sums. One of the DAP’s original proposals was for a Workforce Housing Corporation that would partially subsidize downtown units for working class residents. No such entity has been created. Pro-development camps propose opening additional tracts to tower development, notably the Statesman campus along the lake. The recent micro-unit housing buzz will be tested in future TOD developments adjacent to downtown, but tiny units require the dependability of serious transit options—and relaxed parking requirements—to really take off. Still others think affordable issues should be solved with citywide taxes, instead of fees that developers pass on to their buyers or tenants, which in turn makes their housing more expensive. A combination of these suggestions is likely a winning mix, and a solution that makes the civic development process faster while generating serious revenue for affordable housing is best.

What remains is the hardest step: a collective acceptance of this new Austin, and serious commitment to smartly improving the city’s capacity. It is no longer about keeping Austin weird, but rather making Austin eclectic. David Heymann, writing in Texas Architect, quipped that “if you’re worried people no longer think you’re weird, then you are no longer weird. You’re just middle-aged.” Austin, long out of its golden youth, now faces its mid-life crisis, complete with our own F1 racetrack. And we have many more laps to go.