CHAPTER 1:The Emergence of Austin's Affordable
Housing Crisis and Barriers to Resolving It
Several factors have converged to create a gap between the housing needs
of Travis County residents and the housing available to them. The most
important of these are: 1) rapid regional population and employment growth;
2) uneven wage growth; 3) slower overall growth in the housing stock, concentrated
on more expensive homes and apartments. These factors have produced a mismatch
between the housing residents can afford and housing available locally.
This chapter outlines the dimensions of the problem, key factors that have
contributed to it, and the barriers to addressing the lack of affordable
housing.
RAPID REGIONAL POPULATION
AND EMPLOYMENT GROWTH
Austin has been growing at a rapid pace for the last twenty-plus years.
Between 1980 and 1997, Travis County's population grew from 419,573 to
693,092, an increase of 65 percent.1
Over the last four years, net in-migration has represented as much as 70
percent of the population increase.2 Data on where new migrants settle and where
new housing units are being added show that growth has occurred throughout
the city and county, with the far northern and southern extremes of the
metropolitan area growing fastest. The largest shares of new migrants3 have settled in north (18 percent), northwest (18 percent), and south
(16 percent) Austin as well as the northern suburbs (13 percent). This
is consistent with data on apartment construction, which shows that while
new units have been added in all parts of Austin, the northwest and southeast
portions of the metropolitan area led the way.4 In 1998, the majority of new single-family home sales
were concentrated in northern part of the metropolitan statistical area
(MSA), such as Round Rock, Cedar Park,
Leander, and Pflugerville, as well as the southwest.5 Overall, the City
of Austin captured only 25 percent of new single-family home construction
in 1997, down from 50 per cent in 1990.6
While the central city is not leading the growth in new units, competition
for housing in this area remains fierce, with extremely low vacancy rates
and escalating sales prices. In East Austin, where concentrations of African-American
and Latino residents are highest, there has been a dearth of new construction.
Until 1998, no new multifamily units had been added in East Austin in over
a decade.7
Employment drives much of this population growth. Economic data shows
that, since 1980, the regional economy has become more diverse. Employment
has grown steadily in the MSA, increasing from 243,800 to 599,200 jobs
between 1980 and 1999—a increase of 146 percent.8 Between 1980 and 1995, the fastest growing private,
nonagricultural employment sectors in Travis Country were services, wholesale
trade and manufacturing. By March 1999, the MSA's largest employment sectors
were services, wholesale and retail trade, state and local government and
manufacturing.9
Austin has shifted from an economy driven by government, which includes
the University of Texas (state) and the Austin Independent School District
(local), to one increasingly driven by high-tech manufacturing and associated
services. (See the table below.)
| MAJOR CENTRAL TEXAS EMPLOYERS: 1980 & 1998 |
|
1980 Employer |
Total Workforce |
|
1998 Employer |
Total Workforce |
| 1. |
University of Texas |
15,200 |
1. |
University of Texas |
18,000 |
| 2. |
Austin Independent School District |
7,375 |
2. |
Motorola |
10,000 |
| 3. |
City of Austin |
7,294 |
3. |
City of Austin |
10,000 |
| 4. |
Bergstrom Air Force Base |
6,100 |
4. |
Dell Computer Corporation |
9,000 |
| 5. |
U. S. Dept. of Treasury: IRS |
4,139 |
5. |
Austin Independent School District |
8,920 |
| 6. |
IBM Corporation |
4,000 |
6. |
IBM Corporation |
7,000 |
| 7. |
Texas Instruments |
3,000 |
7. |
U. S. Dept. of Treasury: IRS |
5,700 |
| 8. |
Motorola |
2,600 |
8. |
Tx Dept. of Health |
5,634 |
| 9. |
Southwestern Bell |
2,300 |
9. |
Advanced Micro Devices |
4,000 |
| 10. |
Tx. Dept. of Human Resources |
2,250 |
10. |
Tx. Dept. of Public Safety |
4,000 |
|
Source: City of Austin
|
Migrants to Austin are not homogeneous; indeed, they reflect the increasing
diversity of the regional economy. According to the 1997 Austin Newcomer
Study, 29 percent had household incomes of $25,000 or less, 34 percent
had incomes between $25,000-$50,000 and 38 percent made above $50,000.10
Those earning high salaries are more often well educated and trained, those
earning low salaries come to fill the labor requirements of the service
industries (e. g, construction, hospitality,food service, etc.). Such diverse
growth has fueled housing demand at all price levels.
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UNEVEN WAGE GROWTH
The benefits of economic growth have not been shared evenly by the region's
population. As noted, more than one-quarter of new migrant households to
the region earned less than $25,000 per year. In 1998, a one-person household
earning less than $31,000 (80 percent of the median family income) qualifies
for federal housing assistance. Four-person households earning $28,000
are eligible for programs targeted at low-income households.11
Looking beyond new residents, a significant share of the local population
continues to be poor in spite of a steady increase in average area wages.12 While the area median income rose to $50,800 in 1998, the metropolitan
poverty rate of 16.6 percent (1996) was well above the national rate of
13.7 percent for the same year.13 According to a 1999 report by the Center for Public
Policy Priorities, poor families in Texas get most of their income from
work, not welfare. These working poor parents are most often employed in
the service and retail trade sectors. While these two sectors offer very
low average weekly pay, they are among the fastest growing in the state
and in Austin.14 In fact, of the ten occupations projected to add the most new
jobs in the region by 2006, eight pay less than $9.09 per hour,15 the amount
a full-time, year-round worker must earn in order to afford a one-bedroom
apartment in Austin's current market.16 (See table below.)
| Occupations projected to add the most new jobs,
1996-2006, by hourly and annual wages |
| Rank |
Occupation |
Projected New Jobs |
Hourly Wage |
Annual Wage |
| 1 |
Cashiers |
845 |
$6.66 |
$13,860 |
| 2 |
Salespersons, retail |
665 |
$8.40 |
$17,470 |
| 3 |
Waiters/waitresses |
600 |
$5,89 |
$12,250 |
| 4 |
General managers and top executives |
565 |
$21.62 |
$44,980 |
| 5 |
Food prep workers |
435 |
$7.31 |
$15,190 |
| 6 |
Comb Food Prep/Service workers |
420 |
$5.96 |
$12,390 |
| 7 |
Systems Analysts |
380 |
$19.90 |
$41,380 |
| 8 |
Helpers and Laborers, NEC |
355 |
$8.99 |
$18,700 |
| 9 |
Guards |
310 |
$8.26 |
$17,190 |
| 10 |
Child care workers |
305 |
$6.74 |
$14,030 |
|
Source: Texas Workforce Commission
|
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GROWTH IN HOUSING STOCK
STRONGER AT THE HIGH END
Increases in housing inventory have not kept up with the expansion in
population or employment.17
The rapid rate of absorption of new stock in Austin illustrates the high
level of demand: new apartments are quickly rented upon completion18
and new homes were on the market an average of less than two months in
1998. New homes selling for less than $100,000 were sold before they could
be built. Existing single-family homes are on the market for less than
two months, on average, continuing a downward trend.19 Occupancy rates
for apartments citywide continue to move upward, and approached 97 percent
by the end of 1998.20
Meanwhile, the `equilibrium' rate for apartment availability -- where neither
landlord nor renter have the market advantage -- is roughly 92 percent.21
The increased pressure on the existing housing stock and slow growth
of new stock has driven up housing prices. Between 1990 and 1998, average
single-family home prices rose from $87,600 to $149,669. Across the state,
homeownership rates are low (62.5 percent). Only 54.8 percent of metropolitan
Austin households owning their own home in 1998.22 In contrast,
nationally 66.3 percent of households owned their own home the same year.23
While the current city rate is not known, traditionally the homeownership
rate for cities lag the regional rate.
For the large share of the county's population who rent, housing costs
are also rising: between 1990 and 1998, average rent per square foot rose
from 50 cents to 84 cents. This translates to an average rent of $801 for
a two-bedroom apartment. In central Austin, where student renters are concentrated,
rents averaged closer to $1.15 per square foot or $1,071 for a two-bedroom
apartment.24 Occupancy rates were above 97
percent in central Austin at the end of 1998.25
In response to the high level of demand, and the difficulty of developing
lower cost homes and apartments profitably, builders and lenders have focused
on the high end of the market. In the multifamily market, 64 percent of
units sold were either Class A or B complexes.
Both the average price per unit and per square foot increased for multifamily
buildings between 1997 and 1998. New multifamily developments are most
common at the high end: units built in the 1990s account for 27 percent
of the market and typically rent for more than the average. Only in the
last year has this begun to change as a few more moderately priced multifamily
developments have been constructed through the federal Low Income Housing
Tax Credit program.26 In the single-family market, new construction
has shifted toward the higher end of the market: 28 percent of sales reported
were of four-bedroom homes with an average sales price of $201,030. And
homes selling between $150,000 and $175,000 (above the area average) had
the largest decrease in the time they spent on the market.27
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MAGNITUDE OF THE PROBLEM
AND KEY GROUPS AFFECTED
Much evidence exists that the convergence of rapid growth in population,
employment and housing costs has raised the share that housing consumes
of residents' income. Those particularly hard hit are making less than
the regional median income, especially the poorest groups, and residents
with special housing needs, such as the disabled. In general, renters shoulder
a heavier housing cost burden than homeowners because renters have lower
incomes on average. (See the table below.)
| Magnitude of Housing Needs, By Household Type and Housing
Need, 2000 |
| Household Type |
Cost Burden |
Severe Cost Burden |
Substandard |
Overcrowded |
| Small renters |
8,779 |
6,207 |
16,856 |
4,908 |
| Large renters |
2,242 |
1,633 |
6,614 |
4,709 |
| Elderly renters |
1,992 |
1,813 |
3,846 |
n/a |
| Homeowners |
5,973 |
5,628 |
12.785 |
1.795 |
| TOTALS |
18,986 |
15,281 |
40,101 |
11.412 |
| Notes: Categories are not mutually exclusive, e.g., a household
bearing a cost burden may also be living in substandard housing. Small
renter households have between two to four people, large renter households
more than four residents, elderly households have at least one member older
than 62. 'Cost burdened' households are those paying more than 30 percent
of monthly income for housing, those with 'severe cost burden' pay more
than 50 per cent. 'Substandard housing' lacks complete plumbing and kitchen
facilities. 'Overcrowded' housing has more than one person per room. Source:
City of Austin |
According to City of Austin, Neighborhood Housing and Community Development
projections, over 34,000 low and moderate-income households currently pay
more than 30 percent of their monthly income for
housing. Over 40,000 such households live in substandard housing and
over 11,000 live in overcrowded conditions. Exhibit 10 shows the magnitude
of housing problems faced by particular groups.28
It should be noted that these are conservative figures—they do not
include those with incomes higher than 80 percent of the area median income
facing similar problems.
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RENTERS
Renters currently comprise 45 percent of the metropolitan area's population.29
According to the National Low Income Housing Coalition, the estimated area
median income for renter households in the region was $33,943 in 1998, or 67
percent of the regional median income.
 |
In 1998, 41 percent of renter households
were unable to afford a two-bedroom apartment at federal fair
market rent (FMR) without paying more than 30 percent of their monthly
income for housing costs.30
Among renters, certain groups are particularly hard hit by rising rents.
In 1990, 20 percent of Austin renters paid more than 50 percent of their
monthly income in housing costs.31 Those
on fixed incomes are most vulnerable. For example, in 1997, an elderly
couple, receiving a Supplemental Security Income (SSI) grant of $701
per month would have to pay 71 percent of their monthly grant for a one-bedroom
apartment at FMR. They would then have only $7 per day to spend on the
rest of their needs. Even worse off are public assistance recipients.
With a maximum Temporary Assistance to Needy Families grant of $188 per
month, a family of three would fall far short of being able to rent even
a one-bedroom apartment at the FMR of $503 in 1997. Clearly, it is not
feasible for those on such low incomes to find housing without public
subsidies.
|
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ACCESSIBILITY NEEDS
For the disabled community, affordability and accessibility issues are
intertwined. People with disabilities are disproportionately low income.
32
Thus, they are particularly dependent on affordable housing. As of the
1990 Census, there were 20,816 people in the metropolitan area with disabilities.33
Only recently the City of Austin has mandated that housing financed with
public funds be physically accessible to all, many older units do not comply
with these rules. The Austin Tenants Council's Fair Housing Program reports
that housing discrimination complaints from persons with disabilities had
risen to comprise 43 percent of total complaints by the close of 1998,
up from 26 percent in 1995.34
Priced Out in 1998: The Housing Crisis for People with Disabilities found
that Austin-San Marcos MSA residents who are solely dependent on SSI can barely pay for an efficiency apartment.
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HOMEOWNERS
Homeownership is an important component of stable neighborhoods and
vibrant economies. Even in an era of low interest rates, however, Austin
area homeownership rates lag the nation. In part, this is a mismatch between
incomes and housing prices. In 1998, 63 percent of Austin households had
sufficient income to purchase the median priced home ($117,800).35 Yet the homeownership
rate was only 54.8 percent. Why this discrepancy? There are two important
reasons: (1) most potential buyers carry significant debt and (2) few are
able to make a substantial downpayment.
The table below illustrates how mortgage loans available to a household
near 80 percent of the regional median income (e.g., those at $40,000 in
1998) decline in size when assumptions regarding credit, debt and downpayments
are relaxed and variations in interest rates considered. Those households
carrying other debt or facing monthly fixed costs, such as daycare, quickly
become unable to afford a mortgage for the median priced home. When the
economy slows down and interest rates rise, such households will become
even less likely to be able to become homeowners.
| Mortgage loan size, by monthly household debt, interest rate,
for households earing $40,000/year, 1998 |
| Interest Rate |
No other household debt |
Household debt of $350/month |
Household debt of $600/month |
| 7 percent |
$123,250 |
$120,715 |
$83,150 |
| 8 percent |
$111,750 |
$109,450 |
$75,390 |
| 9 percent |
$103,400 |
$93,000 |
$65,000 |
| Notes: Taxes and insurance estimated, FHA loan
assumed. Source: Milburn Homes, CH Mortgage |
In summary, sustained population and employment growth, along with housing
growth biased toward the upper end, have produced severe gaps in the local
housing market. Several key areas of need identified are: (1) renters making
less than the median income (particularly those earning less than 50 percent
of median family income); (2) disabled residents, those on fixed incomes,
and others with special housing needs; and (3) those ready to move from
renting to homeownership.
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BARRIERS TO DEVELOPMENT
AND PRESERVATION OF AFFORDABILITY
The previous section outlined the dimensions of the mismatch between
housing needs and supply. This section examines some of the possible reasons
for specific housing gaps. Changes in the public role in funding and supporting
affordable housing production is a major factor.
CHANGES IN FEDERAL ROLE
Until the 1980s, the federal government led housing policy in the United
States. Much of the responsibility, however, shifted to states and localities
due to policy changes during the 1980s, and federal resources were reduced.
This forced states and cities to assume a stronger role in addressing their
housing needs—and for finding funding to do so. Of all areas of domestic
spending, housing received the most severe cuts—between 1978 and 1987
new budgetary authority for housing fell $24 billion, or more than 80 percent
(adjusted for inflation).36
Last year, Congress enacted the highest HUD discretionary budget in a decade,
$25.5 billion. These funds are desperately needed. HUD currently estimates
that more than five million households pay more than half their incomes
for housing -- a historic record -- and on any given night, 600,000 Americans
are homeless.37
The impacts of these cuts in Austin are most apparent in three areas:
(1) the decline in funding for the Housing Authority of the City of Austin
(HACA); (2) in restrictions on the use of housing vouchers offered under
the Section 8 program; and (3) in changes to project-based subsidies that
are reducing the incentives for owners to maintain their developments at
affordable rents. These programs have been among critical sources of funding
for the development of housing affordable to those most in need of assistance.
Together they account for more than 55 percent of local subsidized units.
These changes threaten to reduce the number of affordable units supported
by federal funds locally as the need for them becomes most acute.
Like most public housing authorities, HACA receives the vast majority
of its funding from HUD. Yet since the early 1980s, it has received no
funds to build or buy new units, and it has received declining amounts
for rehabilitation and maintenance of its existing stock. In the last two
years alone, HUD funds received have declined close to 20 percent, from
$21.2 million in 1996 to $17.8 million in 1998.38
In the Section 8 housing voucher program, HUD has decreased the maximum
rents it will pay in order to cut costs. It also instituted a freeze on
the issuance of new vouchers in the mid-1990s and forced housing authorities
to hold returned vouchers for three months before reissuing them, again
to cut costs.39
Last year, Congress approved 50,000 new vouchers, the first increase since
1995; these vouchers, however, will be awarded competitively to housing
authorities to assist families leaving welfare. HACA has applied for 700
vouchers, the maximum allowed. The current wait in Austin for a Section
8 voucher is six months to three years. Waits vary because elderly and
disabled residents receive preferential treatment in the program. Sixty
eligible families waiting for vouchers signed up for Section 8 rental assistance
in June 1996.40
In the various Section 8 programs offering subsidies to apartment owners
to maintain low rents, HUD no longer offers long-term contracts to owners.
As contracts for units that were developed in the 1970s and 1980s expire,
owners are offered one-year renewal contracts. In several cities across
the country, owners are choosing to leave the program -- raising rents
to market rates — rather than face an annual renewal process.
In this new funding context, many local governments have developed proactive
housing policies in order to preserve existing affordable housing as well
as to develop more units. Local governments have developed creative ways
to use federal block grant funding (CDBG and HOME), increased local funding
for housing through bonds or even general revenue, and looked beyond public
funding to foundations and private corporate partners. They have also increased
their reliance on nonprofit community development corporations to provide
housing and have increased their use of `off-budget' and regulatory strategies
and shifted from an emphasis on new construction to rehabilitation.41
Austin does not fit this pattern—at least, not yet. It is only
recently that affordability has reached crisis proportions. In this context,
it is not surprising that the city did not develop a strong alternative
funding stream or focus on building the capacity of local groups to address
housing needs. Instead, it has focused on responding to the regulatory
demands that come with federal funds rather than laying out a policy for
itself. Yet increasingly, it is apparent that the scale of current programs
is falling behind the growing need. In addition, some programs that were
designed when prices were lower and financing gaps more easily filled may
no longer reach those needing assistance.
Nor can Austin rely on state government to help fill in the gap in available
resources. The state housing agency (Texas Department of Housing and Community
Affairs or TDHCA) allocates the state's share of Low Income Housing Tax
Credits and administers a small state-funded housing trust fund. During
the 1997 legislative session, $5.2 million was allocated to the fund, to
be spent over the next two years.42
The 1999 Legislature appropriated a slight increase, approximately $12
million, for the biennial.43
Thirty-three states operate housing trust funds with annual allocations
ranging from $122 million to less than $300,000. In addition, 34 cities
manage housing trust funds with annual revenues ranging from more than
$4 million to less than $100,000.44
In this context, Austin must work to develop local funding sources and
to leverage additional resources from private and nonprofit sources.
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BARRIERS TO ACCESS
TO HOUSING
Before beginning the discussion of barriers facing residents and developers,
it is important to understand who it is that cannot afford to buy a home
or that pays a large share of their income for rent. Most federal programs
aimed at assisting residents either to buy or rent homes focus on those
with incomes at 80 percent of the regional median income or below. Currently,
the regional median household income is $55,400—up from $50,800 one
year ago. Thus, four-person households with incomes of $44,300 or less
and individuals earning $31,000 or less are eligible for various federal
programs. Exhibit 11 lists some Austin workers who would qualify for assistance.
Those facing the greatest difficulty are those families or individuals
earning 50 percent or less of the regional median, $27,700 and $19,400,
respectively.45
RENTERS
Too few units at rents affordable given local
wages. For those with incomes below
80 percent of the regional median, affordable units generally mean affordable
rentals. Renters have three options, in theory:
 |
1) find units renting for prices they can
afford on the open market, 2) find units with subsidized rents for which
they can qualify based on their income, or 3) find a voucher or other
means of supplementing the amount they can afford to pay in rent. Exhibit
12 lays out the number of units funded by various sources in the region.
The first option—affordable units on the market—is highly
unlikely in the current Austin apartment market. The previous section
showed 41 percent of renters could not afford a two-bedroom apartment
priced at HUD's FMR in 1998. In addition, for households with children,
there is a shortage of larger apartments. Most new construction is
of one or two-bedroom units and is out of their price range.
The second option—finding units with subsidized rents—is also
unlikely given the scale of current demand relative to available
units. Units with subsidized rents are funded by a variety of public
sources
including HUD and the Low Income Housing Tax Credit (LIHTC) program.
The city also uses some of its federal dollars to support production
or rehabilitation of affordable units through a variety of programs.
The city and county also issue bonds to support affordable housing
projects. According to data collected by the Texas Low Income Housing
Information
Service in 1999 (See table below.), there are more than 14,000 units
locally aimed at cost-burdened households that are assisted by federal,
state and local programs.46 According
to city projections, however, more than 34,000 households pay more than
30 percent of their incomes for housing. Nationwide more than five million
very low-income families pay more than half of their income for rent.47
|
| Affordable Units, by Program and Population Served, 1999 |
| Program |
Number of Units |
Income Group Served |
Description |
| Federal Programs |
| Housing Authority of the City of Austin |
1,928 |
<30% of median |
public housing |
| Travis Co. Housing Authority |
105 |
<50% |
public housing |
| Section 8 vouchers (city & county) |
2,650 |
<50% |
rental assistance |
| Section 8 units (city & county) |
2,861 |
<80% |
rental assistance |
| Section 202 |
203 |
<50% |
elderly |
| Section 811 |
75 |
<80% |
disabled |
| Section 221 (d)3 |
429 |
<30% |
insurance program |
| Section 236 |
980 |
<30% |
insurance program |
| State Programs |
| Low Income Housing Tax Credit |
1,064 |
<60% |
multifamily |
| Resolution Trust Corporation |
1,420 |
<60% |
no longer operates |
| HOME |
351 |
<80% |
grant/loan program |
| City and County Programs |
| *Rehabilitation |
800/yr |
<80% |
emergency repairs |
| 500/yr |
<80% |
barrier modification |
| *SF Loan Program |
15-30/yr |
<80% |
homeowner rehab/construction |
| *Housing Implementation / Developer Assistance |
448 |
<80% |
rehab / new construction |
| HOME |
785 |
<80% |
rental housing development, tenant vouchers, single-family home development,
down payment assistance |
| *Rental Rehabilitation |
213 |
<80% |
loans |
| AHFC Bonds |
660 |
<80% |
multifamily |
| TCHFC Bonds |
684 |
<80% |
rental |
| Total units for cost burderned houeholds (1) |
14,173 |
|
|
| Note: (1) Total does not include those programs marked with
(*) since they focus on rehabilitation rather than lowering the cost of
units. Source: Texas Low Income Housing Information Service |
There is another set of options, that allows households, no matter how
poor, to afford housing. Such alternatives set rents paid by residents
according to their household income, with the public sector funding the
difference, up to HUD allowable rents. For those Austin renters paying
more than half of their income toward rent (those with a severe cost burden),
pegging rents directly to their low incomes is critical. These options
include public housing, where rents are only 30 percent of household income,
no matter how low, or Section 8 housing certificates or vouchers, which
allow renters to live in units at FMR while paying only that portion of
the rent that they can afford (30 percent of their income).
Unfortunately, both programs maintain long waiting lists. The Austin
Housing Authority has 1,100 families on its public housing waiting list
and receives 10 to 20 requests for assistance per day, many from families
facing eviction.48
The situation for vouchers is not much better. There are currently 2,650
Section 8 vouchers and certificates in use in the city and county. Residents
face long waiting lists: in 1997, the Austin waiting list was 600, Travis
County's was 500.49
In April 1999, when the waiting list was reopened for the first time in
two years, over 2,300 families signed up for Section 8 rental assistance.
Many camped overnight to ensure they would receive higher placement on
the list.50
Too few units for renters with special needs. To better serve elderly and disabled who often
have acute housing needs, HUD provides specific assistance for their housing
needs. The Section 811 program provides units specifically for disabled
residents, and the Section 202 targets elderly housing needs. These funds
are few and far between, however. The regional HUD office in San Antonio,
for example, receives Section 202 funding to support one 60-unit senior
project each year to serve Central and South Texas.51 Section 811 currently
funds only 75 units locally and Section 202 provides only 203. HACA makes
426 of its public housing units available for very low-income elderly and
disabled residents.52
Multifamily developments are required to be physically adaptable or accessible,
and many elderly tenants occupy affordable units in non-elderly developments.
The city's barrier modification program serves approximately 500 households
per year.53
Limited numbers of units are also available for residents with mental illness
and for those suffering from HIV/AIDS. Despite these programs and related
services, many eligible residents cannot be served.
Renters also face credit problems. According to the Austin Tenants Council, in the
current tight rental market, tenants often face intense scrutiny of their
credit. Many are denied rental units based on credit problems. Even those
able to make a deposit and monthly rent payments may not have access to
rental housing.54
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HOMEOWNERS
Credit Problems. Prospective homebuyers
must first qualify for a mortgage based on their income and credit history.
For many, this is the end of the line—they may hold too much other
debt to qualify. (See table below.) The City of Austin through the Austin
Housing Finance Corporation offers several programs aimed at homeownership,
often targeting first-time homebuyers. These include the Single Family
Loan Program, the Welcome Home Program, and the Down Payment Assistance
Program. In addition, it funds Community Housing Development Organizations
(CHDOs) to increase the number of homes available to first-time home buyers
through either rehabilitation or new construction.
| Base Salaries of Selected Jobs in Austin in 1997 |
| Job |
Below 80% of median ($40,640, family of four) |
Belox 50% of median ($24,400, family of four) |
Below 30% of median ($15,240, family of four) |
| Paralegal |
$30,900 |
|
|
| Minimum wage worker |
|
|
$10,712 |
| Beginning teacher |
|
$24,955 |
|
| Secretary |
|
$19,100 |
|
| Computer Operator |
|
$24,300 |
|
| Programmer |
$32,700 |
|
|
| Janitor/garbage collector |
|
|
$14,900 |
| Registered nurse |
$35,500 |
|
|
| Data entry |
|
$16,900 |
|
| Entry-level Firefighter |
$28,267 |
|
|
| Electrician |
$35,400 |
|
|
| Senior assembler |
|
$22,700 |
|
| Note: Those below 60% of median income cannot afford a two-bedroom
apartment at HUD's FMR of $687 per month. Those below 80% of median income
cannot likely afford to buy a median priced home ($112,000). Source: 1997
Hay Austin Pay and Benefits Survey; Texas Workforce Commission, City of
Austin, and Texas Education Agency. |
The Single Family Loan Program focuses on rehabilitation or remodeling
of existing homes occupied by families earning between 60 and 80 percent
of median family income by providing affordable sources of finance for
the repairs.
 |
The Welcome Home Program makes homes available
by purchasing and rehabilitating or relocating homes to vacant lots (for
example, homes relocated from the Bergstrom Air Force Base). The CHDO
program funds these organizations to provide homes to first-time homebuyers
(it also supports rental units). The Downpayment Assistance Program provides
between $2,500 and $7,000 to first-time homebuyers purchasing homes for
up to 90 percent of the median home sales price ($105,120) citywide.
All of these programs are constrained by both public resources and the
rising price of land and housing construction in Austin. As a result,
they reach relatively few households.
Discrimination in Lending. In addition
to difficulties qualifying for loans or raising the money for a downpayment,
certain households may face discrimination from lenders. Under the Equal
Opportunity Credit Act and the Community Reinvestment Act (CRA), consumers
are to have equal access to capital and financial services. The CRA is
specifically aimed at preventing `redlining,' the practice of refusing
to lend in or provide services to particular neighborhoods based on race,
ethnic composition or any standard other than creditworthiness. The Home
Mortgage Disclosure Act (HMDA) requires lenders to report demographic
information on every loan applicant and loan.
|
At the state level, a 1998 study by Consumers Union found that the Texas
home loan market is fragmenting into disparate segments: the manufactured
housing loan market; the new home loan market (with builder-affiliated
lenders); and the upper income market. Most attention is focused on the
suburban market; new home lenders specialize in this market and many banks
and mortgage companies also compete there. Low income and minority borrowers
may be increasingly limited to the manufactured housing market. Such loans
are often much more costly than conventional loans.55 An additional problem
is that the home mortgage market is increasingly dominated by mortgage
companies that are not subject to the CRA. In Texas, such companies accounted
for 49 percent of home loans in 1996.56
Evidence from a variety of recent studies of HMDA data shows that minorities
in Austin were much more likely than Anglos to be denied a home mortgage
loan. In a 1994 study, Univesity of Texas Professor Robert Wilson found
that, in Travis County, Blacks and Hispanics were 2.75 and 2.29 times as
likely to be denied loans than Anglos, respectively. By 1998, Consumers
Union found that these `disparity ratios' had declined to 1.83 and 2.13
for Blacks and Hispanics, respectively. However, when they sorted the data
by income group, they found that it was the middle and high-income minority
applicants who were most likely to face discrimination. When they examined
disparities by neighborhood, they found that the two lenders most active
in minority neighborhoods were manufactured housing lenders (Green Tree
Financial, Bank of America-FSB). Such lenders provide credit at considerably
higher interest rates than conventional lenders.
Manufactured Housing Issues. In the face of rising housing costs and inadequate
wages, many households are turning to lower cost alternatives outside the
city limits. Mobile home parks and manufactured housing developments in
unincorporated areas are much more affordable alternatives. But they can
leave households in substandard conditions and/or vulnerable to sudden
increases in costs. Several developments have sprung up to the south and
southeast without adequate infrastructure, causing some to compare these
developments to borderland colonias. Manufactured housing, while owned
by residents, is generally located on rented lots. Lot owners can raise
land rents secure in the knowledge that residents face high costs should
they decide to move. In addition, as noted earlier, lenders specializing
in the manufactured housing market offer financing at less favorable rates
than lenders who specialize in conventional housing.57
At the same time, manufactured housing has become a significant segment
of the new housing market, accounting for as much as one-third of new units
produced in the state by some estimates. If land tenure and zoning issues
are addressed, such housing could provide an important source of housing
for Austin residents.
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BARRIERS TO INCREASING
THE SUPPLY OF AFFORDABLE HOUSING
The other half of the story concerns the barriers facing those who supply
affordable housing—nonprofit and for-profit developers of either single-family
or multifamily housing. This section reviews the major factors that increase
building costs, making it difficult to offer units at affordable prices
-- homes selling for less than $85,000 and apartments renting for less
than $600 per month.
COST AND REGULATORY ISSUES
Costs of delays due to permitting processes.
Developers must often work with several separate Austin departments
in order to gain approval for all aspects of their projects. This can cause
significant delays in projects, forcing developers to hold land or homes
off the market, or to redraw their development plans, while bearing the
costs of financing associated with their purchase or development. Streamlining
these processes or coordinating activities across city offices would significantly
reduce these costs. Up-front meetings to provide certainty regarding the
requirements developers must meet to gain approval would also reduce such
delays. Once City staff review a project, the initial set of comments must
be comprehensive. Too often additional, and substantial, comments are generated
by staff when project updates are resubmitted. This requires the developer
to focus on further updates rather than clearing comments for approval.58
According to a recent informal survey of practitioners conducted by
the Texas Capital Area Builders Association (TxCABA), the best case for
processing plans for a fifty-lot project in Austin is one and one-half
years. This stands in contrast to the time needed for approval of similar
projects in surrounding cities. Processing takes eight months for Cedar
Park, one year for Pflugerville and six months for Round Rock.59 These findings
are consistent with a formal survey of municipalities and developers conducted
by TxCABA in 1994.
City fees.
According to ongoing research for the Real Estate Council of Austin comparing
real estate development fees in Austin and several other Texas cities,
Austin had the highest development fees for both single-family and multifamily
developments when compared to Dallas, Houston, San Antonio, Round Rock,
and San Marcos. Austin's development fees, on average, range from 20 to
120 percent higher than those other cities. Fees that appear to separate
Austin from other cities include:
- parkland dedication fees;
- regional stormwater detention fees;
- capital recovery fees for water and wastewater;
- engineering review and inspection fees for development in an easement
or right-of way;
- fee in lieu of on-site filtration ponds within urban watersheds (does
not apply to single-family construction);
- building permit fees.
For single-family development, the two fees that put Austin ahead are
water and wastewater capital recovery fees and engineering review and inspection.
When totaled, Austin's fees for single-family development exceeded the
second highest city (Round Rock) by $688 per lot. Total fees per lot in
a hypothetical 150-lot project were $4,163 in Austin.
Similarly, fees for multifamily developments were also highest in Austin.
Three fees contributed to this discrepancy: fees in lieu of water filtration,
parkland dedication fees, and building permit fees. Per unit, Austin would
charge $1,776 in fees. In contrast, San Marcos, the second highest in fees,
would charge $701 per unit.60
Natural environmental factors. The protection of the aquifer limits land uses
within certain parts of the city. In other areas, clay soils require reinforced
foundation work. A consequence of these natural factors and associated
protective policies is the increased cost of development in sensitive areas
due to lower allowable densities, larger lot sizes, construction of water
quality and detention ponds, limitations of infill and redevelopment in
these areas and of additional foundation work required to deal with shifting
soils.
Exclusionary zoning.
Zoning practices that encourage homogeneous use of land, uniform lot sizes,
etc., make development of affordable housing difficult. For example, single-use
zoning districts, originally intended to preserve public health by insuring
minimum distances between incompatible uses, make it difficult to provide
housing at a range of prices in the same development. Instead,
such zoning districts have become more and more specialized and exclusive.
 |
Separate zoning districts are required for
large and small lot single-family residential, multifamily, mobile home,
retail, office, and industrial uses. As a result, there is limited diversity
of housing types within a given zoning district.
When housing is developed in this uniform pattern, affordable housing
is not only excluded from many areas, it is subsequently concentrated
in other areas. Affordable projects are then frequently opposed by surrounding
property owners due to the perceived impact of a high concentration of
low or moderate-income residents. On the other hand, a diverse mix of
housing types, integrated both physically and architecturally, can provide
affordable housing at a scale that is acceptable to the community. It
would also promote the deconcentration of poverty. Historically, zoning
regulations have often been used to restrict ethnic and racial minorities
and newly arrived immigrants to housing close to areas intended for commercial
and industrial development. The recently enacted East Austin Overlay
Ordinance and its pending revision are intended to reverse this historical
trend.61
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A large percentage of affordable housing is provided through small lot
residential, multifamily, or mobile home developments. Each of these uses
require specific zoning districts. If the existing zoning is not appropriate
for a particular tract of land, a zoning change is required. Such a change
entails at least two public hearings, one by the City of Austin's Planning
Commission and one by the Austin City Council. Often, the zoning approval
process becomes highly politicized, with factors other than planning issues
influence the decisions. While reasonable concerns regarding traffic, flooding,
impacts on schools and the environment must be addressed, approvals should
be as impartial as possible and based on policy guidance from elected officials,
such as that embodied in a Comprehensive Plan for the city.
Minimum lot size requirements also work against provision of affordable
housing. Over the years, these requirements have become standardized and
are largely based on a suburban, single family residential model. While
this may be appropriate in some cases, it generally works to limit the
diversity of housing types and, in older areas of the city, hinders redevelopment
and infill. Large minimum lot sizes also increase the cost of housing due
to higher land costs and consequent financing requirements. More flexible
lot sizes and zoning categories can permit a wider range and scale of housing,
such as small lot single-family, duplex, garage apartments, cottages, townhomes,
condominiums and small scale multifamily (three to eight). A diversity
of housing increases the possibility of providing affordable housing through
increased density, lower land costs and by integrating affordable housing
at a scale that doesn't overwhelm existing neighborhoods. However, if lot
size standards are reduced, the higher density can be balanced by high
quality public open space.
Land and infrastructure prices. Land within the city limits is at a premium.
A recent study conducted by a team of graduate planning students at the
University of Texas found that land costs for residential lots in Austin
varied from $1.10 and $3.10 per square foot.62
The impact of such cost differentials is much less for higher density projects.
Yet the relative dearth of parcels zoned for multifamily development makes
this a difficult strategy to follow. As a result of high costs and lack
of available land, development is pushed to the urban fringe.
Land assembly for developments including affordable housing could make
a considerable difference toward making such projects financially feasible.
Currently, the city does provide some lots to CHDOs for affordable housing.
Typically, the scale of these developments is small. Given land prices,
it is unlikely that for-profit developers will be able to build affordable
units in infill developments unless they can develop more than one unit
on a site.
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LOSS OF AFFORDABLE UNITS
Given the scale of need, current programs are unable to adequately address
the need for rehabilitation. Without maintaining and preserving existing
homes and apartments, such units are at risk of abandonment or demolition
-- and thus lost from the overall housing stock.
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LACK OF PUBLIC AWARENESS/PRIORITY GIVEN TO HOUSING
Public opposition to affordable housing. Across the country, neighborhood organizations
and other community groups have learned to organize effectively to stop
the siting of land uses ranging from public facilities, social service
providers, affordable housing (especially multifamily housing) and industrial
facilities. This phenomenon is called "not in my backyard"
or "NIMBY" since residents often support the goal of affordable
housing as long as it is not located near their homes.
 |
To a large extent, their effectiveness depends
on the local planning framework through which they exercise their
voice. As many recent studies have noted, localities with consistent
criteria
for making siting decisions for public facilities or for evaluating
the appropriateness of private uses will be more effective at screening
out "NIMBYism" from
valid concerns. The City of Austin, without an effective comprehensive
plan, often makes ad hoc zoning decisions and lacks a coherent
framework for evaluating proposed land use changes.
The House Next Door, a 1998 report by the Innovative Housing Institute,
studied the impact of subsidized housing on property values of private-market
homes in Montgomery County, Maryland and Fairfax County, Virginia, two
affluent suburban communities of Washington, D.C. The report found the
presence or proximity of subsidized housing had no impact on
the values of nonsubsidized homes. The report analyzed all homes
sold (1,000)
in 14 subdivisions from 1992 to 1996. Of 60 residents surveyed, 53
were "satisfied" or "very
satisfied" with their neighborhoods. Most had lived in their
homes for more than three years and were homeowners.63
Lack of an effective comprehensive plan or
planning process. Housing affordability is a significant
and often controversial aspect of Austin's growth and development.
As such, it must be guided by rational, specific, and fair policy
direction. In many jurisdictions, this guidance is provided by
a comprehensive plan or master plan for the city. Austin's current
framework is outdated. Recent policy initiatives are directed at
re-establishing a new planning framework to guide important issues
such as affordable housing.
|
These include updating the Austin Tomorrow Comprehensive Plan and the city's
current Smart Growth and Neighborhood Planning Initiatives. Yet none of these
efforts have explicitly addressed the siting of affordable housing within
the city.
The city is working toward the development of a Smart Growth framework
to guide development in the city toward key zones in order to maximize
the use of existing infrastructure and facilitate the effective development
of public transportation and the preservation of the city's quality of
life. The siting of new, affordable units in these development zones and
the Mueller Airport redevelopment effort could substantially contribute
to the viability of proposed mass transit and would further the efficient
use of public infrastructure. Yet, the Smart Growth matrix recently developed
by the city does not promote the development of affordable units within
these zones. The City of Austin is currently designing a Smart Housing
Initiative to address this concern.
The city has also developed a new, neighborhood planning process that
has produced three plans to date. The stated goal is to produce plans for
all city neighborhoods that will substitute for the lack of a citywide
comprehensive plan. Yet this new neighborhood planning process includes
no parameters for fairly allocating public facilities, affordable housing
or other socially important uses across neighborhoods. Instead, these new
plans run the danger of institutionalizing NIMBY obstacles to the siting
of public facilities and affordable housing. `Fair share' principles have
been hailed as a constructive approach to providing such a framework by
national and local policymakers around the country. These provide templates
or criteria under which public facilities and social services will be located
in a neighborhood.
Lack of regional discussion/collaboration on
housing issues. The link between
regional growth and housing affordability across the region has not been
made. Competition for development, without attention to the larger social
costs of locating jobs and affordable housing at opposite ends of the MSA,
will raise infrastructure and other costs to taxpayers and reduce regional
amenities that underlie the region's attractiveness to employers.
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Footnotes:
The Austin-San Marcos MSA
consists of five counties: Bastrop, Caldwell, Hays, Travis and Williamson.
Two counties, Bastrop and Caldwell, were added in 1993.
Class A units are those that
are less than 8 years old with a full amenity package and washer/dryer
connections; Class B are less than 14 years old with no deferred maintenance;
Class C are 14 years old or greater. Older properties that have had major
renovation are evaluated to determine their proper class. Source: Austin
Investor Interests
The federal government defines
housing as affordable at 30 percent of income for a low and moderate-income
household. Moderate income is capped at 80 per cent of MSA median family
income.
Fair Market Rents (FMRs) are
set by the HUD in order to establish reimbursement rates for housing vouchers
and other programs. Currently, they are set at the 40th percentile rent
for the region -- in other words, 60 percent of units rent for more and
40 percent rent for less than this amount.
Approximately 88 percent of
monthly SSI payment ($494) was needed to rent an efficiency apartment and
103 percent of a monthly SSI payment was needed for a one-bedroom apartment.
Elizabeth Edgar and others, Price Out in 1998, (Washington, D.C: march
1999), Appendix A.
When the national average interest
rate for a conventional 30-year mortgage was 7.08 per cent, manufactured
housing lenders quoted reates between 10 and 13.5 percent to researchers
in Texas. Ibid, 6-7.
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