In our latest installment of “Housing Across America”, we dive into housing policy in fast-growing Austin, Texas and its new Affordability Unlocked initiative. The development of Affordability Unlocked, a positive but flawed policy, reflects the tension between supporters and skeptics of  increasing housing density, as more people are beginning to call Austin home and housing costs become an ever more salient issue.

Austin is one of many American Sunbelt cities experiencing significant in-migration, a trend that was accelerated by the COVID-19 pandemic. Since 2010, metro Austin’s population grew nearly 30%, faster than any major metro area in the United States. During that time, the median home price rose 64%. What makes Austin especially appealing is not only its sunny Los Angeles-like climate, but its relatively affordable, family-sized homes and strong job growth. Major tech companies like Oracle, Dropbox, and Elon Musk’s latest Cyber Truck Factory have garnered attention by expanding their presence in the Austin area.

As Austin continues to attract new residents, drawn by high-paying jobs and low living costs, housing costs have risen significantly — paralleling the dynamic in California. And unfortunately, as in California, scarce housing and fast-rising rents have resulted in gentrification of Austin’s downtown neighborhoods and increased displacement pressures on lower-income households and communities of color. 

The Federal Reserve Bank of Dallas recently found that lower-income households, Black Americans, and Hispanic Americans make up a shrinking share of central city Austin’s population, and researchers at the University of Texas at Austin have identified Austin neighborhoods where displacement pressure is particularly strong. All this speaks to the need for housing growth at all levels of income in fast-growing Austin.

Legislators in Austin responded in 2012 with the Imagine Austin Comprehensive Plan, a 30-year plan consisting of eight priority programs, one of which was CodeNEXT, a comprehensive housing policy reform.CodeNEXT intended to update Austin’s outdated land use development code, which determines the standards of what can be built within city limits (for example, decisions pertaining to building size, which environmental features are to be protected on a lot, and the types of easements necessary for transportation modes). CodeNEXT would have introduced modest upzoning in transition zones near major roads and commercial centers which traditionally held single-family homes. 

This would have allowed 4-6 units by-right, and a modest density bonus (8-10 units would have been allowed for buildings that set aside units for lower-income households). The program aimed to meet Austin’s Strategic Housing Blueprint goal of creating and preserving 135,000 housing units over a 10 year period, including 60,000 homes that would be affordable at 80% of the median family income (MFI). 

However, again paralleling the housing debate in California, Austin’s CodeNEXT plan generated fierce opposition from Austin homeowners, affordable housing advocates, and other housing skeptics who argued that increasing density would not result in lower housing costs, but would simply enrich developers. Opponents also argued that the 75 transition zones in the plan would allow developers to produce multifamily buildings adjacent to single-family neighborhoods, ultimately destroying the “character” of communities. The plan also faced some criticism from organizations that felt the plan did little to promote affordability within the city’s transit-oriented districts.

Ultimately, the opponents of CodeNEXT were successful. Mayor Steve Adler rejected the plan in August 2018, calling it “divisive and poisoned”, and directed City Manager Spencer Cronk to begin the process of rewriting it. Although the City Council approved an amended version of the plan in 2019, a judge threw out the revised plan, stating that the city failed to “formally notify” multiple property owners throughout the city of potential zone changes. As a result, the city was forced back to the drawing board a second time.

Austin’s latest revival of housing policy reform, championed by Austin City Councilmember Greg Casar, is the Affordability Unlocked program. Much like CodeNEXT, this version of the plan allows multifamily development on some single-family zoned parcels. It waived on-site parking requirements, height limits, setback requirements, and other design standards that often act as regulatory barriers to housing. 

But Affordability Unlocked differs from CodeNEXT in that these provisions are only for projects that set aside at least half of the total units for lower-income households. Under the program, developers can select from two levels of affordability. Type 1 has a 50% affordable set-aside and allows 6 housing units on feasible lots. Type 2 has a 75% affordable set-aside and allows 8 housing units. These extremely high set-aside requirements and light upzoning essentially limit the program’s incentives to small affordable housing projects only, keeping an unsatisfactory status quo in place in most cases. 

Affordability Unlocked was approved unanimously by City Council in mid-2019, and appears to have sparked an uptick in affordable housing growth. As of September 2020, 26 projects using this program had been approved; these projects will create over 2,700 housing units, of which 2,300 are affordable. However, these numbers are small relative to Austin’s goal of building 60,000 income-restricted housing units by 2027.

Austin’s path to housing reform illustrates the tension between policies that specifically promote lower-income housing growth versus reforms that encourage housing at all levels of income. While Affordability Unlocked improved the feasibility of 100% affordable housing projects, a valuable policy goal in and of itself, this narrower approach did little to encourage middle-income or market-rate housing production (as evidenced by the fact that relatively few market-rate units have been produced in Affordability Unlocked projects thus far). 

Since most Austin residents’ incomes are too high to qualify for deed-restricted affordable housing, and since most housing in the United States is built by the private sector, Affordability Unlocked is unlikely to support broad-based housing growth and reduce red-hot costs. Additionally, Affordability Unlocked did little to encourage the production of affordable housing projects that are larger than 8 units, another major limitation. Granted, this narrower focus likely made Affordability Unlocked less politically controversial than CodeNEXT, helping to explain why it ultimately became law. 

Affordability Unlocked is a partial solution to a wide-ranging problem. As Austin continues its rapid growth, there’s no doubt that the city’s leaders will again have to address the question of housing supply and affordability in the near future.