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Exiled From Main Street

Can Austin's stock of affordable housing keep pace with high-speed growth?

By Elizabeth Pagano, Fri., June 28, 2013

Exiled From Main Street
Illustration by Jason Stout

Last month, The Office ended its nine-year run on NBC with what was ostensibly a happy ending. At least three of its main characters threw caution to the winds and left their respectable office jobs in Scranton, Pennsylvania, to start a glamorous limo-laden life at their new company ... in Austin, Texas.

As a dedicated viewer who wants only the best for her favorite characters, I should have been happy. But I felt my chest tighten a bit when I heard yet another sales pitch for Austin, when I started calculating how many transplants the "Athleap" company would employ in Austin. And then I got to fretting over where all those employees were going to live.

Although the new fictitious company on The Office would base its business model on professional sports teams – still a vacuum in Austin – the narrative made sense. According to the latest data, for the second year in a row, Austin is the fastest-growing large U.S. city, and it's now the 11th largest overall. To a large and understandable extent, this population increase has been marketed as a story of success, of Austin thriving when other cities are faltering, of more jobs and rising home values, and an increasingly livable, walkable city.

But it's also, increasingly, a story of displacement.

When the housing market crashed in 2009, even the sturdy Austin economy felt its effects. Though the population continued to increase, with banks unwilling to lend money, there was very little new construction. This helped us get where we are today: The latest data from Capitol Market Research shows an occupancy rate of 97.4% in the city; rents, according to the latest data available from the Census Bureau, are the ninth highest in the country and expected to rise.

Now in 2013, new development is everywhere you look Downtown. But what, exactly is being built? The answer is not reassuring. "Most of them are one-bedrooms, and they are going to rent for really high prices," explains Foundation Communities Execu­tive Direc­tor Walter Moreau. "Apartment construction is back with a vengeance, but it may not even be enough to keep up with all the people coming here."

Forces of Change

City Demographer Ryan Robinson notes the "intense gravitational pull" of Austin for recent college graduates – per capita, Austin leads the country as a postgraduate destination. On the one hand, he says, Au­stin has become "the manifestation of Richard Florida's The Rise of the Creative Class," the book that argues knowledge and creativity attract their kind. So it makes sense that a company – even a fictional one – catering to professional athletes would relocate to a city that doesn't have a pro sports team. Austin is a cool place to move, and it's a cool place to have a cool business. That reputation is worth a lot when it comes to attracting the creative class.

But Austin is also drawing in plenty of real immigrants, from places where jobs aren't as plentiful, who have lower education levels and lower incomes. "They are really what I call economic migrants. They are coming to us from other parts of the country which ... are still very much struggling in post-recessionary America," says Robinson. "They may not have a job lined up in Texas, but their prospects for a job are still far, far greater in Texas."

Even with rising costs, notes Robinson, Austin is relatively affordable compared to other large cities, though he acknowledges there has been some cost erosion over the past few years. That erosion has a distinct "spacial component," with housing becoming much more expensive in the central city than it was just a few years ago, leading to a "sorting out" of the different households entering the city. "If you are one of the young, talented, and connected," he says, "you not only want to live in the central city, but you can probably afford to live in the central city. If you are not a piece of that incoming stream, if you are coming here without a college degree, without much experience, and without anything lined up, it's going to be close to impossible for you to live inside the central city." The real estate web site Trulia reflects rental prices Down­town at about $1,850 monthly per bedroom. While rates are comparable in near-south and near-east neighborhoods, those numbers drop to the $400-500 range as you move further from the center of town.

At the same time, in a process that is almost the reverse of the white flight of the Fifties and Sixties, minority populations that have lived in central Austin for generations are now finding it unaffordable. They are moving further out, to the suburbs or to areas of Austin that have fewer services. This recent history is reflected in a report from affordable housing nonprofit Green Doors and the Kirwan Institute called "The Geography of Opportunity in Austin and How It Is Changing." The report highlights disparities in opportunity for Austin's poorest residents, and it shows that African-Americans and Latinos are more than twice as likely as white Austinites to live in low-opportunity neighborhoods (see "Expensive Geography.")

Green Doors Executive Director Frank Fer­nandez explains what these low opportunity areas are, and what they mean for residents. "People are getting displaced, they are moving further out – where they don't have bus service, where they don't have jobs, where they don't have health clinics," he says. "Just from a vitality perspective, it really does start to create this bigger and bigger divide, which at some point creates problems, when you have people who are able to benefit from all the wonderful things in Austin, and a growing underclass that is really isolated from it. ... Not only is it harder to afford a place to live in Austin, but it's increasingly pushing us into the extremities of Austin, or the bad parts of Austin that are really isolated from opportunity."

If things continue in this direction, adds Robinson, Austin will become increasingly divided, with concentric rings of affordability circling the city. It's a problematic concept, considering the exponential transportation costs, quality of schools, and lack of services found in the outskirts. "I can't see a future, unless something changes in terms of housing production, that's really not pretty strongly crafted by those 'rings of affordability' or 'rings of affluence,'" says Robinson. "Simply put, if we continue on this trajectory, we will become increasingly expensive, and households that need reasonably priced housing and affordable housing will be increasingly pushed into the periphery.

"Are we going to be Monaco on the Colorado?"

Changing Austin

Elizabeth Mueller
Elizabeth Mueller
Photo by Jana Birchum

The changing demographics have moved much faster than public policy, or even public perception. Moreau notes that in the last five to 10 years, the number of extremely low-income families in central Austin has declined, and it's not due to them getting any richer. "The market is so expensive that poor people can't stay in Austin any more," he says. "In some ways, our perception of ourselves hasn't caught up to the reality, especially if you lived in Austin in the Sixties or Seventies. We were dirt cheap; this is where slackers and creatives and musicians could crash. You could rent a bedroom or apartment in Austin because it was really inexpensive. Now we're number nine in the United States for median rent. ... We're only a few notches below New York City for average rents. I think it gets to the heart of what we think about Austin. Are we still a hip, weird, caring community? Or are we going to let it be too expensive for all but young, wealthy people?"

Between 2005 and 2011, Austin's growth has been disproportionately skewed towards the higher end of the socioeconomic spectrum. During that period, those households making $183,000 per year or more grew by 53.4% – the highest of any demographic. The only group that saw a decline were those making the least money annually, less than $21,950; that population dropped 0.7%. The change – or displacement – is starting to manifest in ways visible to people who aren't demographers.

"There's just far fewer individuals ... who live here who are at that, say, $70,000 or less mark," says Neighborhood Housing and Community Development Assist­ant Direct­or Rebecca Giello. "There's just a disparity in that growth, for middle-class and lower-class. That's where you begin to see the gaps or the income divide." The divide is starting to have a tangible impact on Austin communities, recently leading community advocates Austin Interfaith to jump into the details of development.

Bonus Rounds

Although the old proposition that "development should pay for itself" seems ever more remote – rising population means rising property values mean rising costs – there has been an increasing push to make development pay for at least a few of Austin's resulting expenses. Many housing advocates are pushing harder than ever to focus what Robinson calls the "spigot of national investment money" on Austin's affordability crisis.

Right now, the city is attempting to move from the thoroughly unsuccessful "interim density bonus program" – voluntary, and completely unused by developers – to the actual density bonus program, officially approved as policy by City Council in 2011 but not yet codified into ordinance, a change expected to happen this summer. Both programs ask (and the new version will require) that developers contribute "community benefits" of various sorts to the city in exchange for requested additional development entitlements (e.g., greater permitted height, capacity, or other variances). The community benefits may include additional affordable units within the development, or "fees-in-lieu" – that is, money contributed for affordable housing elsewhere.

The details of the new Downtown Density Bonus Program – part of the larger Down­town Austin Plan – are currently being finalized by city staff, after matters came to a head at Council in March. Council Mem­ber Bill Spelman was frustrated by Coun­cil's inability to impose affordable housing funding requirements on a Downtown boutique hotel: Absent a change in the ordinance, requiring a particular benefit in exchange for the approval of a zoning variance could be interpreted as illegal "contract zoning." Spelman, however, refused to submit to Council's apparent impotence.

"It seems to me we ought to be applying our own policy which we passed with a unanimous vote," he said. "I have the discretion to vote in favor or against any CURE [Central Urban Redevelopment] zoning case. The zoning comes before this Council. ... All of us, as Council members, have the discretion to vote 'yes' or 'no,' based on how well we think it's going to fit our vision for the city, and how well we think it's going to provide benefits to the city, and the community as a result. Our collective decision on that subject, I believe, was made when we passed that policy – whether it's codified or not.

"I, for one, will vote in all cases in favor of that policy. It is in my discretion to do so, and I believe that was a good policy, which we passed on a unanimous vote. I am going to uphold it," said Spelman. Soon there­after, Council took a deep breath, issued an ultimatum, and demanded that the community benefits portion of the Downtown Plan, at least, be codified by staff posthaste, and at its June 20 meeting, Council was briefed on the progress (see "The Latest in Density Bonuses: New Teeth," below).

When Policy Creates Reality

Normally, this process would be the type of sausage-making that would be of interest almost exclusively to developers, their hired guns, and city planning nerds. But, with the crisis in affordable housing having crossed streams with an unanticipated lack of affordable housing bond money – after the narrow defeat of a major bond vote last November – it's a process under wider scrutiny than a comprehensive plan usually receives. The rejection of the bonds suggests that not all Austinites are equally convinced that affordability needs addressing – or more precisely, not everybody agrees on the best strategies to address affordability.

In May, Council moved to eliminate the CURE zoning that, among other things, lets Downtown developers circumvent the community benefits exchange for the city permitting greater height. And an unlikely showdown occurred between a representative of Austin Interfaith and the only member of Council to vote against the proposal, Mayor Lee Leffingwell.

The crux of the dispute was over AI leader Kurt Cadena-Mitchell's assertion that the delay in codifying the density bonus program meant that $20 million that would have gone towards affordable housing had been lost. Leffingwell replied that this number – what developers might have allotted, in theory, for affordable housing – was an illusion. If mandatory community benefits had been in place, and construction costs were consequently greater, argued the mayor, it was impossible to know what would and would not have been built.

That is most certainly true. Though the city has theoretically "lost" not $20 million, but more than $53 million (if every potential affordable unit had indeed been built) in affordable housing funds because of developers declining to employ the interim Density Bonus Program, the fact is that the program was ignored for a reason. Charging $10 for every square foot of space gained through a Downtown zoning change was consistently deemed by developers as unreasonable – or as they put it, using the program would mean their projects wouldn't "pencil out" financially. It's not at all certain that, if the program had been mandatory – especially during the recession – any of the buildings now under construction Downtown would exist.

Nevertheless, Cadena-Mitchell says it's time for a new type of involvement from AI, and that going forward, the group plans to weigh in on zoning cases that could affect affordability. And as he points out, this doesn't apply only to Downtown. "We're not anti-density," he said. "There are a lot of folks that say density, in and of itself, is good. We don't necessarily disagree that density is good, but density is not the absolute good." Density advocates range from the business community that wants to revitalize underutilized Down-town real estate to mass transit, anti-sprawl, and environmental advocates who argue that residential and commercial density is more sustainable. Cadena-Mitchell argues that there are higher priorities. "We believe that everybody has a right to live in a home that's affordable – to have a home," he says. "That's a moral right. And it's a moral imperative to create a society that provides that. The same is not true for density. We don't say things like, 'we have a moral right to density,' or 'we have a moral right to a walkable neighborhood.' Those are good things, but the primary objective is that people have a place to live and call home."

As things stand, the city is limited in its ability to demand affordability from developers. A few parts of town, like Downtown, West Campus, and now (potentially) East Riverside have density bonus provisions in their redevelopment plans that include affordable housing; some planned unit developments (including the Mueller neighborhood) also have affordability requirements. But, in a larger sense, the city is fairly limited in what it can ask developers to do.

Ryan Robinson
Ryan Robinson
Photo by Jana Birchum

Will the new Density Bonus Program work? Only time will tell, but it's worth noting that the developers of a proposed office building at Third and Colorado voluntarily committed $220,000 to Foundation Com­mun­ities in a private agreement, and in the process avoided a public political debate.

Nevertheless, it turns out that a lot can happen when people start paying attention. Under the ever-watchful oversight of Austin Interfaith, developers wanting to redevelop the Section-8 Oak Creek Village Apart­ments recently struck a deal with existing tenants that many are hoping will serve as a model for other developers. With a Housing and Urban Develop­ment contract set to expire, and developers eager to capitalize on prime Bouldin Creek real estate, things didn't look good for the current residents.

But now, though the project is still waiting on federal tax credits (another steadily diminishing resource), developers have agreed, privately, to retain every affordable housing unit that would be lost, relocate tenants if needed during construction, and maintain the new affordable units for the next 35 years. If they fail to provide the promised affordable units, they cannot exercise the entitlements granted by the revised zoning.

Housing advocates hope the Oak Creek project will serve as a model, one that promises to benefit developers, increase density, and retain affordability in the urban core. "This kind of thing is what we need in Austin, if we are going to maintain any level of deeper affordability in Austin," noted Planning Commissioner Danette Chi­menti. "This is precisely the kind of project that we need." Nevertheless, subsidized housing represents only a fraction of what might make Austin housing more affordable.

Disappearing Housing Stock

Elizabeth Mueller, a professor in UT's School of Architecture, has been looking at patterns in Austin's market-rate affordable housing, which she says is quickly vanishing. She is currently at work on a proposal to track the city's non-subsidized affordable housing stock, and a strategy to preserve it.

Mueller explains that, in her opinion, the areas of the city that are most vulnerable are the transit-oriented corridors. Histor­ic­ally, busy streets have been seen as areas best suited for apartment buildings, with single-family homes relegated to more interior, homogeneous neighborhoods. Multi­family construction serves as a buffer between those neighborhoods and the busy streets and shopping centers.

Many of the large complexes born out of the historic form of this philosophy are concentrated in parts of town that are now seeing dramatic change. For East Riverside (running roughly from I-35 to Pleasant Val­ley), major complexes have been host to lower-income residents as well as UT students for decades. Due to federal tax incentives, many of the buildings were built in the same period of time (during the Seventies and early Eighties), are roughly the same age, and have become the "de facto stock" of (nonsubsidized) affordable housing for the city, explains Mueller, and they're reaching the end of their functional usefulness at about the same time. Council recently passed a much-belabored "regulating plan" intended to revitalize these areas; the question is, will what replaces these buildings be available and affordable to the people who live there now?

"A lot of them are kind of at this point where they're really vulnerable to redevelopment, just at the point when the city is creating these different ways of looking at these corridors, and wanting to re-envision them as being mixed-use and higher-density and designed to support transit," says Muel­ler. "I think that's kind of the perfect storm."

Last year, the Wood Ridge Apartments (on Burton Drive south of Riverside) presented a worst-case scenario for rapidly aging affordable housing. For years the apartments functioned in increasing disrepair, until a collapsing walkway highlighted hundreds of city code violations. The apartments have remained under scrutiny, residents were evacuated and remain displaced, and the owners eventually sold the property as a way out of the mess, after paying about $220,000 in fines. Without affordability standards in place, it's hard to imagine the sale, the repairs, and the fines won't translate into higher rents.

"Overall, when you think of where the majority of low-income people live in Aus­tin, the majority live in older properties. They don't live in housing that has any subsidy attached; they live in market-rate housing that's just cheap because it's old," says Mueller. "If we lose it, it would be a big loss. It would cost the city a tremendous amount to try and replace that stock." New buildings are more expensive, and the city just doesn't plan for that, says Mueller. Nor do we often see the unsubsidized stock of housing as valuable affordable housing.

She urges the city to identify existing affordable housing units in changing neighborhoods, and consider buying and renovating them into a stock of housing throughout the city before each area becomes a lot more expensive. Council recently directed city staff to review what is going on with this housing stock, research how it might be preserved, and develop a way to pay for that process.

Don't Forget ...

The November defeat of the affordability bond has led to much official hand-wringing, but also the formation of a formidable group of boosters angling to propose another housing bond (see "Then There's This: Housing Bond Back on Ballot?" May 3). Yet with many more demands looming on the city's existing wish list – as well as the mixed results for the May school bond package – it remains uncertain whether there will be sufficient political momentum for a fall proposition.

Meanwhile, in yet another attempt at a partial solution, the city is looking at a proposal that could reduce its reliance on affordable housing bonds, by reconfiguring the Hous­ing Trust Fund, ideally resulting in nearly $10 million in revenue annually by 2018, enough to fund existing programs if not expansion.

But in any event, it will take more than a few city programs or bond votes to make a dent in the need for additional affordable housing. Moreover, notes Giello, increasing pressure on the lowest-income housing not only displaces populations but has other ripple effects, especially on social services. Housing the homeless and getting that population stabilized lessens the burden on many other social service systems – which in turn, has a direct property tax impact on everyone in the community.

"When people think affordable housing, it's really important that they're not just thinking about things coming out of our office that we fund and make affordable in their community. It's things that are in their community today that will be lost over time, and won't be affordable as it's redeveloped," says Giello. "Without affordable housing ... you lose the opportunity to have your teachers, your pedicurists, your daycare providers, the people who work at your grocery store. ... You just lose the ability to have folks that work in a community live in the community."

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