The narrative about the code playing out in the local media is that City Council is poised to approve dramatic reforms to land development rules that will have urbanists and developers dancing in the streets as older homeowners mourn the imminent demise of single-family neighborhoods.
Much of that narrative is due to the fact that if you watch Council debates, it appears clear that supporters of reform are getting what they want and reform opponents are getting crushed. But the votes don’t tell the whole story.
Behind-the-scenes many of those who work in development are despairing over a proposed code that they say will hardly make things better than the status quo.
“At this juncture, I’m not convinced it is better for Austin as a whole,” says one longtime land use pro.
“It’s choosing between bad and bad,” said another builder, referring to the current code to the proposed code.
“It’s a piece of shit,” a leading urbanist activist told me last week.
Despite consuming the great majority of the attention in the media and on the dais, zoning may be the least important problem with the new code. But it’s still a disappointment.
For starters, there is the “Equity Overlay,” a policy pushed by Delia Garza and Greg Casar that reduces missing middle zoning in certain gentrifying areas of the city. The equity overlay adopts the flawed reasoning that reform opponents use to defend single-family zoning on the west side and applies it to the east side. If we want to retain and expand housing opportunities for low and middle-income people to the east side, we need to allow a diversity of housing supply. The more properties that are zoned single-family, the more likely it is that the future residents will be elites who can afford single-family homes. The Equity Overlay will not slow displacement, it will accelerate it.
Things are a little better West of I-35, but not much better. In the second draft of the code, staff pared back transition areas behind corridors that were deemed “primarily residential.” That was in response to a request by Alison Alter that was embraced by the mayor in an attempt at compromise.
The affordable housing bonus is a mess
Experts say the affordable housing bonus is not properly calibrated, meaning that developers are unlikely to participate in the bonus and provide income-restricted housing.
This is not just a case of developers trying to pressure the city into providing more generous entitlements. Sources say that the consultants in charge of crafting the bonus, EcoNorthwest, initially calibrated the bonuses in a way that would make it more attractive for developers to participate in it and provide the affordable housing. However, city staff, under pressure from various City Council members has in some cases replaced the carefully calibrated affordability requirements with arbitrary ones that likely don’t make financial sense.
For instance, one of the things everybody on Council agreed to was that residential uses should be allowed just about anywhere (unless there’s a public health concern). So staff was told to rezone existing commercial properties to allow mixed-use. However, many of these properties on corridors can only include residential if 10% of the units are income-restricted. That sounds great, but at least one developer I talked to said it’s unlikely that that bonus will prove more attractive than simply building commercial. The developer explains:
“We did some basic financial modeling on a typical podium and typical wrap deal on a corridor site and found that for both types of projects the yield was higher in the base case scenario than their revised bonus scenario, meaning you would make less return for every dollar invested in the bonus scenario (even while taking more risk) than in the base, so there would be no reason to ever build beyond the base scenario.”
The Equity Overlay also arbitrarily did away with the carefully-calibrated affordability requirements proposed by the experts and imposes a 10% requirement. This goes in precisely the opposite direction of what the consultants proposed. They calculated that higher affordability requirements would be feasible in more expensive parts of town; they proposed requirements as high as 15% for some zones in Central/West Austin. In general, they proposed a 5% requirement on the east side.
If the density bonuses aren’t attractive to developers, the city has little hope of achieving its housing goals, which are largely premised on the bonuses. Not only does this shut the door on the opportunity to get more income-restricted housing on the ground, but it will mean far less market-rate housing being built! Remember, the bulk of the “bonus” is the additional market-rate housing the developer gets to build in exchange for providing the affordable units.
Rules, fees and other headaches
Many insiders voice deep concerns about other rules that will continue to make getting housing built a costly hassle, particularly in the urban core, where we most desperately need more housing.
“All the new non-zoning stuff adds lots of dollars to every site,” says one lobbyist. “Lots of dollars.”
Examples include tree planting requirements and new water detention rules. I’ll get into the details of the latter in the coming days.
Another big disappointment is the lack of reform on site plans and the lack of clarity about what a “site plan light” process for smaller projects will entail. The proposed code exempts projects of three units or less from getting a site plan, which could amount to 8-12 months of extra time and tens of thousands of dollars of extra cost.
One infill builder predicted that few builders would bother going for four units on R4 sites because of the site plan. Instead, they’ll go for two or three. The site plan + the poorly calibrated density bonus means it’s unlikely that many builders will actually build eight units (one income-restricted) that is envisioned under the density bonus.
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