Austin has added tens of thousands of new homes in recent years, helping cool rents and expand affordability for many residents. But housing leaders say the city’s lowest-income families are still being left behind.

Years of zoning reforms and development incentives designed to encourage more housing construction have fueled growth, creating housing options attainable for some middle-income Austinites. A single person earning a little more than $55,000 a year, or a family of four making around $85,000, about 60% of the area’s median family income, should generally be able to find housing they can afford in the current market, according to housing experts.

However, housing officials say those gains break down for families earning below 50% of the median family income, or MFI, where the shortage of affordable housing units remains severe. Now, housing officials are exploring changes to Austin’s housing policies and incentives to better target the households they say the market has failed.

“Fifty percent (MFI) and below, we have a need,” said Awais Azhar, executive director of HousingWorks Austin. “Thirty percent and below, we have not been able to provide (options).”

Austin market still fails the poorest residents

The shortage persists even as Austin’s latest housing boom has reshaped the market. From the end of 2020 to 2025, Austin added more than 65,000 units, expanding its inventory by roughly a quarter. The rapid increase in supply was instrumental in helping Austin’s hot market cool. It allowed Austin’s vacancy rate to rise from 6% in 2021 to more than 13% in 2025, which helped lower rents.

For people and families earning 60 to 80% of the median family income, “we’re meeting those goals because our market is beginning to provide units at that rate,” Azhar said. “The zoning reforms have really helped with that.”

Azhar said producing housing for lower and deeply lower-income households becomes more difficult as rents affordable to those families often don’t generate enough revenue to cover associated development and operating costs, making it harder for projects to become profitable.

As a result, many projects require additional subsidies to cover operation and maintenance costs, Azhar said.

“Those could be through federal housing choice vouchers(and) local housing vouchers,” Azhar said. “Those types of support have increasingly shrunk at the federal level.”

Even when funding is available, where affordable housing gets built presents another challenge. Areas near transit, grocery stores, health care and childcare tend to have the city’s highest land costs, making affordable housing projects even more difficult to finance.

“If we truly want to serve our residents and make sure that they have affordable housing,” the city must also prioritize ensuring “all of their household needs are being met,” Azhar said.

How the city could plan to expand affordability

As Austin’s population grew, its economic makeup also changed. A larger share of residents held at least a bachelor’s degree and earned higher salaries, driving up the city’s median household income by 30% between 2014 and 2023. By comparison, the national median household income rose just 14% during the same period.

“Austin’s median family income has increased a lot, whereas the incomes of low-income households have not increased at the same rate,” said Erica Leak, the housing policy lead in the City Manager’s Office.

Leak said one way the city hopes to better target those households, many of them led by caregivers, childcare workers or social workers, is by adjusting density bonus programs, a zoning tool that allows developers to build larger, taller projects in exchange for community benefits, such as affordable housing.

The city recently passed a new citywide density bonus program that aims to create more affordable housing for families earning 50% or less of the median family income. Previously, programs helped produce affordable units more often for households earning about 60% to 80% of the median family income.

Leak said the city is also exploring ways to reach those with the lowest incomes.

Another complication is Texas’ Senate Bill 840 that went into effect in September 2025, which “decreased the effectiveness of some of Austin’s density bonus programs,” Leak said in a memo to the Mayor and City Council members.

The law allows developers to more easily build multifamily housing in commercial zones, removing one of the city’s strongest bargaining chips for securing affordable units or other community benefits through density bonus programs.

In addition to studying ways the city can continue encouraging developers to participate in density bonus programs with SB 840 on the books, Leak said housing officials are exploring ways to speed up development, examining other financial incentives that could help produce more deeply affordable units and updating the city’s Strategic Housing Blueprint, a roadmap that guides Austin’s affordable housing strategy and has not been updated since 2017.

“The market is not serving our essential workers who are making especially under 30% of the median family income,” Leak said. The city wants to “reprioritize our incentives and our funding to really better meet the needs of low-income folks in Austin.”