Density Bonus

Key issues

What's The Purpose?

National models recommend that the density-bonus program should support the goals identified in a city's comprehensive plan. Unfortunately, Austin lacks an up-to-date comprehensive plan – we're still patching onto the 1979 Austin Tomorrow Comprehensive Plan ( At this juncture, Austin needs council direction on our core values and goals as a city. Would the city rather leave definition of our goals up to Downtown Austin Plan consultant ROMA Design Group? If not, who will define which core values should be prioritized by density-bonus funds?

Why Not Mandatory?

The primary reason U.S. cities, including Austin, enact density-bonus programs is to fund affordable housing. Known as "inclusionary" housing policy, it supports a community goal to include less affluent folks in all neighborhoods; no local economy can afford to wake up one day to discover that its schoolteachers, firefighters, cashiers, and waitresses have packed up and left for more affordable towns. Some states (e.g., Massachusetts and California) require inclusionary zoning or incentives. Where the "stick" of an inclusionary zoning ordinance is out of favor, or made illegal by state law – as in Texas, where it was banned in 2005, under House Bill 2266 (the Todd "Baxter Bill") – communities must rely instead on the "carrot" of developer incentives. But for an incentive system to work, the city must hold development-rights cards of real value, for the negotiating power to motivate "voluntary" affordable-housing contributions. In Downtown Austin, the city's critical ace is its zoning cap of 8-1 floor-to-area ratio, or FAR – which limits automatic height entitlements to eight stories. In boom times, developers are willing to bargain to build higher – hence density bonuses.

How Much Housing?

For high-rise housing, the city of Austin must establish what percentage of the bonus units (or square footage) it will require to be affordably priced. The proposal from the Affordable Housing Incentives Task Force was for a relatively modest 10% of Downtown units to be price-capped. Other cities require that up to 30% of bonus units be designated as affordable, to earn maximum-level rewards.


Some cities let developers meet their affordable-housing obligation by paying to renovate existing low-income housing nearby that's become rundown. Should Austin's density-bonus policy allow fees-in-lieu rather than always requiring developers to provide affordable units on site? Most who have analyzed the market realities of Downtown high-rise housing say yes, and the Design Commission recommends such fees. Pro: A larger number of affordable homes could be built elsewhere with the fees deposited in a special trust fund. Con: Downtown becomes an exclusive, wealthy neighborhood, increasing economic segregation.

Fee Level?

If fees are allowed or required – at least for commercial office buildings – the next question is, at what rate? Here again, the AHITF recommendation was modest: $10 per square foot. The number was not based on an analysis of developers' costs and profit margins; instead it represented a political compromise in an atmosphere of strong developer opposition to any fee requirement. By comparison, Seattle has a sliding scale of $10 to $25 per square foot, with fees rising for the highest (more valuable) floors. The new high-rise projects now going forward in Seattle reflect that the $20 fee is proving economically viable, at least for high-end projects.

Parks & Open Space

After affordable housing, environmental protection is one of the most common goals nationally of density bonus programs. Funds generated can be used to permanently protect outlying conservation land. Or it can fund parks and green space enhancing the value of nearby property (such as Town Lake Trail or the planned Waller Creek Trail). In Austin, residential developers already pay $650 per unit as a parkland dedication fee.

Which Incentives?

Aside from increased density, other popular municipal incentives to developers include expedited permits, reduced fees, cash subsidies, and reduced parking requirements (garages and surface lots are expensive) simpatico with anti-traffic and public-transit initiatives. The city of Los Angeles in 2002 began allowing 35% density bonuses in designated transit zones.

Whither Downtown Transit?

One Design Commission recommendation: "Establish one or more methods by which transit could be funded through a density bonus program." But major new projects along the rail line could each fork over pieces for the funding pie. For Downtown, a much-discussed transit need is a "last mile" circulator – such as a streetcar system – to take arriving suburban commuters, hotel-based visitors, and others to their final destinations in Central Austin, without having to drive a car. Density-bonus funds are unlikely to be either copious or steady and reliable enough to fund a streetcar system. See "Developing Stories."

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