Council Seeks Consensus as It Eyes Affordability Crisis
A lot is not enough
Houses listed for double the price they commanded five years ago. Prospective buyers paying thousands of dollars over those asking prices anyway, sometimes in cash. Prospective tenants bidding on apartments because the rental inventory is so scarce. Just about everyone in town has heard, or lived, the stories of how untenable Austin's housing market is right now.
That includes the City Council, and now that some progress is being made on the other issues that have dominated its attention for two years – from criminal justice reform to investments in transit to getting through the COVID-19 pandemic – 2022 is shaping up to be a year focused on housing policy. As an opener, Mayor Steve Adler called a special meeting Tuesday, Nov. 30, to look for ideas to improve housing supply and affordability that enjoy broad support on Council.
The difficulty of Austin's housing challenges can be illustrated by one fact shared by economist Jon Hockenyos, who led off the meeting with a sobering presentation on the market: "Since 2011, there have been 32,666 more jobs created for Austin residents than permitted housing units in the city." Despite Austin's status as a national leader in new home construction, demand continues to outstrip supply. The monthly inventory of available homes for sale has dropped to historic lows; the median sale price in October was nearly 25% higher than last year; and rents increased by about 22% between February and August of 2021.
Austin's consistent job growth has made the city resilient to the last few national recessions, but without action to make sure housing growth keeps pace, the city will soon face a workforce crisis, making housing affordability "the most significant economic issue facing our community," said Hockenyos. "Pretty soon it's going to be a whole lot easier if you're an [AISD] teacher beating your way up I-35 coming from Kyle, to just go to work for the Kyle Independent School District," he told Council. "When that happens, we really have a problem."
The urgency to act is obvious, as any initiatives Council approves today will take years to translate into real homes for real people. Take, for example, Affordability Unlocked, the lauded density bonus program introduced by Council Member Greg Casar and approved in May 2019. Since then, city staff have certified dozens of AU projects that could produce more than 3,000 housing units affordable to some of Austin's poorest residents – but only two of them have been completed. The rest remain in the planning and construction pipeline.
The bare facts of Austin's economic situation have helped convince Council that yes, the city needs more housing, and that City Hall should do things to make it easier to produce. But what things? "We can all agree that we need to increase supply," CM Alison Alter noted during the meeting, "but that is not a sophisticated enough approach to policy if we want to actually address the challenge that is before us." Alter and her colleagues Ann Kitchen, Leslie Pool, and Kathie Tovo, who have consistently voted since 2018 against proposed comprehensive revisions of the city's 40-year-old Land Development Code, continue to express skepticism about measures supported by housing builders, even as the local housing market boils over.
Their leverage has increased since a Travis County district court ruled that any LDC rewrite would effectively need a supermajority of nine votes, rather than a simple majority of six, to pass legal muster. While the city's long-delayed appeal of the 2019 ruling was finally argued last week at Houston's 14th Court of Appeals, Adler is proceeding by looking for policies that can get nine votes, and ideally 11, on a Council with two new members who are also more LDC-skeptical than those they replaced.
"I believe in order to increase housing affordability even at the low [income] levels, you have to increase housing supply generally," Adler told us last week. As more affluent buyers cannot find or afford homes, they reach down to bid on homes affordable to people with lower incomes, all the way down the economic ladder. Hockenyos described the same dynamic in his presentation, saying that increasing supply at all levels, "with the possible exception of the highest," would contribute to a solution. (Recent research has shown that, in some markets, new construction has resulted in decreased housing costs for lower income categories, even in the near term.)
Alter counters that simply increasing densities via the LDC and other regulatory measures will not guarantee those units will be built, particularly when the cost of materials and labor is also rising due to demand. Implementing a code that allows for new market-rate housing but does not ensure subsidized housing would worsen the problems we have now, Alter told us: "The argument is not that we don't need to increase supply. It's that we need to be careful in the kind of supply we are building."
So what can Council agree on? The two most substantive items for discussion at Tuesday's work session included one to allow residential development in the city's most common commercial, office, and retail zoning districts, as we reported last week, and one from Tovo that could allow for the proliferation of accessory dwelling units, as the Council Housing and Planning Committee explored last month. The first of these could result in up to 46,000 new housing units over 10 years. There's no estimated impact yet for streamlined ADU planning and permitting; Tovo said she's interested in a preservation incentive that would help homeowners build ADUs on their property, but said the requirements would have to be "substantially better" than those in the last draft LDC revision, which allowed for partial teardowns to be eligible. Together, the two policy changes would still leave Austin lagging well behind the goals established in the 2017 Strategic Housing Blueprint.
Other proposals Council discussed are much further from realization. Encouraging corporations and universities to provide housing for employees, and more housing for students, attracted some interest. Pool said she wanted to explore changes to how the city currently handles multifamily projects, to boost production of such "missing middle" housing types as townhomes or row houses. While there's also general agreement that Austin's development permitting process needs to improve, no one offered concrete ideas for changes; concepts discussed in the past include preapproved site plans for smaller housing types, and ways to speed up the permitting timeline.
Nothing discussed at the meeting approaches some of the swing-for-the-fences ideas adopted recently elsewhere; Portland has allowed four units per lot by right citywide, and California has dialed back subdivision requirements statewide to make it easier to build duplexes. Suggestions that Austin relax its compatibility standards, which limit the height and size of anything built near single-family homes, or eliminate parking minimums were met with tepid responses. Kitchen, who also serves on the Capital Metro board, said she's in favor of a "conversation about parking," especially in areas along Project Connect's emerging transit corridors. Compatibility standards were a different story, though. "It's an area that causes a whole lot of concern for people," Kitchen said. "I'm not sure [compatibility standards] are that much of a problem ... before we take on something like that, I'd like to understand what the issue is and what we're trying to resolve."
Ever the optimist, Adler insisted after the meeting that Council was headed in the right direction. "We were able to ferret out a list of proposals, staff is engaged and will work on what's achievable, and I think there is consensus on adding height along corridors" – referring to his and Alter's earlier proposal regarding vertical mixed use zoning – "and more residential use in exchange for affordability," the mayor told us. But the more challenging issues like parking and compatibility "may take [City Manager Spencer Cronk] having one-on-one conversations with CMs to gauge their tolerance on those policies, and then work[ing] with staff on avenues worth pursuing."