Finding the Sweet Spot

Quality of Life: Austin families living on median-to-low incomes need affordable housing but also parks for recreation and a clean, healthy environment. By funding amenities that benefit the whole community, high-dollar condo developers can boost social equity. (Photo by John Anderson)

How much must we fork over, and what can we get in return?

That negotiation lies at the heart of a planning tool known as a "density bonus," used by cities nationwide, and on its way toward adoption in Austin. For those concerned about how development and rapid growth are changing Austin – for better and for worse – the density-bonus conversation is worth taking time to understand. At its heart, it offers one means to ensure that the good things we love about Aus­tin remain, even growing in step with increased density and an ever-expanding population.

The term "density" puts a positive spin on intense new development in desirable areas. For more than a decade, city of Austin policy has promoted increased density and vertical mixed use Downtown, as well as in areas along major roads designated core transit corridors, planned commuter rail lines, and other transit hubs. In the face of steady population growth ("Attractive cities attract people," says Mayor Will Wynn), concentrating density in the urban core has been adopted by the city as the most sustainable policy. Rationales include climate protection, energy efficiency, diminishing sprawl, protecting environmentally sensitive land, reducing city service costs, and generally fostering a vibrant, happening, compact, livable city.

But we want good density. To achieve it, Austin needs developers – responsible, civic-minded developers – to infill desired areas with taller, denser projects that follow excellent urban-planning principles as (in theory) embodied in city policy. A density bonus is one tool to promote this "good" density; first, by defining our community needs and translating them into specific city planning goals, then by creating incentives for developers to help achieve those goals for the greater good of Austin.

The incentives are the "bonus." For a developer, adding density is gaining additional project entitlements and additional value – more square feet, building floors (height), condo units, retail or office space to lease or sell. Zoning code limits the size of buildings; for example, in the Central Business District, entitlements are limited to an 8-1 floor-to-area ratio, or FAR. To reward developers whose projects advance urban planning and community goals, the city would grant them bonus entitlements in exchange for voluntary developer-funded community benefits – say, funding for affordable housing, parks, walkable streetscapes, and space for small, local businesses. (See illustrations at right.)

But before that can happen, as a city we must decide how to assemble and prioritize the menu of potential behaviors we reward. That raises a deeper question: What are our values as a community? If there's to be an inclusive public conversation on this topic, now is the moment for it. (No such task force or town hall meeting is yet in the works.) Does the developer get to decide what to fund, and if not, who does? Which should earn more points on a matrix: Protecting the aquifer recharge zone, providing affordable housing, supporting artists and live music, or preserving our history and culture?

Ideally, we want it all.

It's no mystery what developers want – the rights to build taller, denser, cheaper, and faster. For the density-bonus tool to work, both sets of interests, public and private, must gain value equal to what they give. The process of crafting a density-bonus policy, in which Austin now is engaged, is all about finding that sweet spot.

Recommendations to Council

Last year, the City Council directed the Design Commission to recommend density bonus options. In the past several years, Downtown high-rise developers had been negotiating ad hoc exchanges of community benefits for neighborhood, commission, and council support of the variances needed to exceed existing entitlements. One early adopter was Constructive Ventures. On its Spring condominiums, the developer pledged to give $250,000 total for an affordable-housing fund and for park improvements along nearby Shoal Creek. This effectively countered Old West Aus­tin Neighborhood Association opposition; Spring received variances at council to build a slender 400-foot tower on land zoned Downtown mixed use (which sets a 120-foot height limit). That $250,000 was also the magic figure for the variance-seeking CLB Partners condo tower, T. Stacy & Associates condo tower, and Gables Park Plaza; the Novare/Andrew Urban Downtown post office projects got additional height for $200,000. (Austin has probably been leaving money on the table; by contrast, the density models suggested at right would generate millions in value for the community.)

But everyone involved in all that one-off deal-making – including City Council – found the negotiations exhausting, time-consuming, random, and potentially inequitable. So council members began to push for a standard density-bonus policy. The volunteer Design Commissioners were put to work researching the possibilities; among other efforts, task force members made a special visit to Portland, Ore., where city of Portland planning staff generously shared the details of their successful program and toured the Austin contingent around town to show them how policy translated into a cityscape.

"It was fascinating to understand the mechanisms underlying the built environment and the physical results we saw," said Design Commission Chair Eleanor McKinney. Interim recommendations went out to boards and commissions, city staff, and stakeholders for comment; a final report on density-bonus recommendations was issued Sept. 10. (See www.ci.austin.tx.us/downtown/default.htm#density.) Once the report is formally presented to council at its Nov. 8 session, it falls to the elected officials to craft a sound, equitable city density-bonus policy and give it the force of law.

The density-bonus task force members – landscape architect McKinney, developer Perry Lorenz, architects Girard Kinney and Phillip Reed, engineer Jeannie Wiginton, and artist Holly Kincannon – became quite well-versed on the issues and clearly amassed considerable expertise on the mechanics of density-bonus programs. However, the Design Com­mis­sion's written recommendations stop short of detailing specific mechanisms or suggesting fee levels – reflecting, in part, the political necessity of commissioners not stepping into council's policy-making role. Recommendations in the report include:

• Consider funding "a broad spectrum of community benefits";

• Establish a priority tier of baseline benefits required for participation, including affordable housing;

• Establish overarching city-planning goals, by area, to be achieved by density bonuses;

• Customize benefit menus for individual areas of Downtown (and perhaps other neighborhoods);

• Create incentives for developers to conceal parking garages;

• Reward for spaces that "embody community values" – historic preservation, nonprofit space, cultural facilities;

• Consider a tool known as "transfer of development rights," under which the city establishes a "bank" for unused development rights that other developers can buy;

• Use the density-bonus program to generate funds for transit; and use fixed-rail transit (e.g., a Downtown streetcar) as a tool to guide density;

• As one incentive granted to participating developers, allow reductions in parking – which also could encourage transit use;

• Use Developer Agreements to achieve specific district goals; in return, the city would provide money or infrastructure.

Don't Give It Away

The report's most critical recommendation – unpopular with some property owners, devel­opers, and business people, including the Down­town Austin Alliance board – is this one:

• Retain the greatest bargaining tool the city has – existing limits on height and development rights.

The report states, "Recognizing that granting additional FAR above the current baseline levels is the most powerful tool the city possesses to achieve community goals, the city should leave existing floor-to-area ratios as they are, and grant additional FAR only as a development incentive tied to identified community goals." According to Chair McKinney, this came as the strongest possible caution from city staff they met with in Portland: "Keep your FAR where it is! If you do nothing else." A city can't encourage and reward good density, urban design, and responsible development if it doesn't have valuable goodies to put on the table.

In addition, the Design Commission recommended three specific planning tools (all already in progress, to some extent) to help achieve community goals in tandem with the density bonus system:

• Economic feasibility models, to ensure that the density-bonus program does not deter desired development;

• Transit-based planning, coordinated with Capital Metro; and

• Digital 3-D modeling of proposed new projects, to allow for better public review.

From there, the Design Commission punted to the Downtown Austin Plan for the specifics of how a density-bonus program would actually work Downtown. Consultant ROMA Design Group expects to complete its phase one work on that plan in December. That should include preliminary thoughts toward a density-bonus program; working out the details – just one of many thorny issues that the Downtown Austin Plan is supposed to address and resolve – would occur in phase two, which could take at least another six months.

So Austinites have at least several more months to focus and sharpen the conversation about community values and funding priorities. A number of current planning efforts bubbling up from the community could deepen and guide the discussion; pertinent resources include the Central Texas Sustainability Indicat­ors Project, the Opportunity Mapping Initiative by the Community Partnership for the Home­less, and the Austin Sustainable City Initiative led by Cid Galindo at the Planning Commission.

If precise recommendations for Downtown are approved by council, they would be translated into a new city density-bonus ordinance. Work under way by ROMA subconsultants includes researching the hard economic data and feasibility models requested by the Design Commission and by the Downtown Austin Alli­ance as well, as the basis for crafting tit-for-tat formulas. Said Assistant City Manager for Devel­op­ment Laura Huffman, "We need to understand the financial trade-offs to understand whether or not we are striking a decent deal."

Smart Growth to Smart Gifts

For Downtown projects in the late 1990s, the Smart Growth Initiative was an early form of a density-bonus program. Under Smart Growth, developers received waivers of city fees and utility charges, plus infrastructure support, in exchange for good behavior – but no cash. Examples of SmartGrowth incentives include over $1.2 million to the CarrAmerica Building, $730,000 in waivers to AMLI Lofts (Block 20), and more than $646,000 in waivers to the Convention Center Hotel. Developments could earn points by fulfilling many of the same civic goals now being proposed as bonus-worthy: supporting small, locally owned businesses and the live-music scene, green building program participation and Leadership in Energy and Environmental Design certification, good design, protection of historic landmarks, and providing density to support transit.

At that time, providing affordable housing was just one way of earning "points" on a long menu; today it's viewed as a core requirement for a density-bonus program. Other goals incentivized a decade ago – such as simply providing any housing Downtown, or two-star Green Building – now have become market norms. The Smart Growth Initiative halted after public outcry over the incentives package provided to the ill-fated Intel high-rise – not even a Smart Growth project. Now that the waters have calmed, Austin has gained the political will to try again and do it better.

The Smart Growth Initiative had three key goals: 1) determine how and where we grow, 2) improve our quality of life, and 3) enhance our tax base. While those goals are still sound, as a city we're becoming increasingly savvy about what we can and should ask of developers. "The values that keep emerging in discussions of density bonuses are affordable housing, better mobility and transportation connections, and high quality development," Huff­man said. Brewster McCracken said he sees affordable housing and helping small, local businesses as the most appropriate goals to incentivize, because they're not being achieved with ordinary market forces.

Huffman hears recurring themes in the various concurrent urban-planning efforts, including the new urban-design standards coming forward for planned unit developments (the Super PUD), with their own proposed density-bonus system. "The same staff is working on all of these initiatives," noted Huffman by e-mail. "What's exciting is that through TODS [transit-oriented development], VMU [vertical mixed use], and the Downtown Plan, we are finding creative ways to get better development results."

Taking It Citywide

Unaddressed by the Design Commission – or, to date, anyone officially – is how and whether to apply a density-bonus program citywide. On the affordable-housing front, spreading such housing around town could help avoid pockets of poverty. But clearly, the models generated for Downtown wouldn't work elsewhere. "The fundamental development economics vary depending on where you are developing in Austin," notes Huffman; "for example, the value of an additional 30 feet of height will vary and therefore what the City gets in the exchange should vary."

Among those bullish on a citywide program is Mayor Will Wynn. "I try not to get too focused on Downtown; density bonuses aren't just about going from eight to 40 stories," he said recently, while walking from his office at City Hall to a Congress Avenue meeting. "We shouldn't lose sight of the fact that density bonuses could, and should, be occurring all over town, on core transit corridors. Instead of one or two stories, we should have three and four stories, with living units above. ... Thirty years from now, we're going to look around at the buildings built today and wish they'd housed more people." Referencing projections that the city's population could double in 30 years, he noted that "of that next 500,000 people, 100,000 could be living on core transit corridors with a positive net public benefit – for climate protection, energy efficiency, public safety, more eyes and ears on the street, more small local businesses getting more customers."

More than 200 U.S. communities already have density bonuses or similar affordable-housing provisions in place. But since the concept of a city-required density bonus is new in Austin, some wonder: Why should developers be singled out to pay?

"I do think developers have a special obligation to try to achieve community benefits," said developer Larry Warshaw, a partner in Constructive Ventures. A former mayoral policy aide to Kirk Watson, Warshaw worked in the trenches on the Smart Growth Initiative. "Development projects are part of the fabric of the city; it's not strictly private sector. You can positively shape the way a city grows through the built environment – that's why I got into this business."

But, he pointed out, the city of Austin needs to more strongly lead intelligent urban planning by both policy and example: "A density bonus recognizes that good urban design is inherently a public benefit. But city leadership must require and regulate it; developers can't do it all. We cannot optimize every public goal. Yes, developers have an obligation, and we're happy to do it. But there have to be trade-offs."

What's 'FAR' Again?

In simplified terms, an 8-1 floor-to-area ratio means that if a building footprint fills all the buildable area, an owner-developer is allowed to build only eight stories high. To go taller currently, the developer must seek a variance or build on a smaller building footprint. For example, the development company might build on just one-quarter of the site, while agreeing to leave the rest of the tract unbuilt (except perhaps for parking structures). It then could stack its entitlements to get a slender tower four times as tall – 32 stories instead of eight.