Developers aiming to build bigger projects near Austin’s future light-rail stations will have to include affordable housing on-site rather than pay the city to build it elsewhere, under new rules unanimously approved Thursday by the Austin City Council.
The change tightens the recently approved citywide density bonus program, a zoning tool that allows developers to build larger, taller projects than would normally be permitted in exchange for community benefits, such as affordable housing. Elsewhere in the city, developers using the program can pay into Austin’s Housing Trust Fund — a city bank account for affordable housing — instead of providing the required affordable units within their projects. For future projects near Project Connect light rail stations, that option is now off the table.
Developers’ ability to pay a fee instead of incorporating affordable housing into their projects has divided Austin housing advocates. Some say eliminating the option is likely to stymie development, while others worry that without strict on-site requirements, affordable housing will continue to be concentrated in certain areas of the city.
The stakes are particularly high along the future rail corridor, where Austin is trying to encourage denser development while trying to ensure lower-income residents can afford to live near transit.
Awais Azhar, executive director of HousingWorks, said he’s glad the city moved forward with the item.
“We want to have people housed in affordable housing close to the transit system, because mobility costs are really important for low-income households,” said Azhar. “We should have affordable housing in more areas.”
A house divided
Under the city’s density bonus program, “fees-in-lieu” are paid into Austin’s Housing Trust Fund rather than building affordable units on-site. How much a developer pays depends on factors such as how many affordable units they otherwise would have had to build and how much the developer would lose by selling or renting the unit at an affordable price.
Using a studio or one-bedroom as an example, a developer would pay the city $136,900 per condo or $101,500 per rental unit.
Housing advocates acknowledge the fee can be considerably less than the total cost of building an affordable unit. Whether that ultimately results in more affordable housing depends on who you ask.
Critics of fee-in-lieu argue that the options is much more attractive to developers than producing on-site affordable units, leading to a concentration of affordable housing in areas where it’s cheaper for the city to build, using money from the Housing Trust Fund. Supporters of the fee option contend that making things easier and cheaper for developers should be the goal.
“If you want to see more development, better development, more redevelopment, better redevelopment, then you have to allow for fees in lieu,” said Greg Anderson, part of the Austin Housing Coalition.
Anderson did not support City Council’s action Thursday to eliminate the fee-in-lieu option in areas adjacent to the new light-rail stations.
“If fee-in-lieu makes sense, then just allow it everywhere. You don’t say, ‘Oh, it makes sense everywhere except for here,’” he said. “To muddy it up at this point, I don’t personally see the value in that.”
After more than a decade of explosive growth, Anderson worries that Austin’s development boom is starting to cool.
“The new-construction market is already withering on the vine, with very few projects starting,” Anderson said. “I understand and support the goal of getting affordable units on-site near transit. But if the requirement causes projects not to (make financial sense), we don’t get affordable units — we get no units.”
While the item passed, Council Member Ryan Alter also expressed concern that eliminating the fee option for these areas may lead to less-dense development precisely where the city is trying to encourage it, near light rail. He asked city staff to monitor the impact of the policy shift in the coming years.
