Through The Roof Executive Summary
What happened to Austin's affordable housing?
Why doesn't the market provide?
Why should we care?
Don't reinvent the wheel: Best practices in affordable
housing
What can we do? Recommendations for Reform
Executive Summary
On the eve of a new century, Austin finds itself living in high times.
In November 1998, Fortune magazine named it the best city in which
to do business. The Austin metropolitan area has added more than 208,000
new jobs since 1990, roughly 35 percent of "total" jobs. Unemployment
rates are at their lowest in years despite the mass influx of new residents.
The explosive growth of the 1990s has also led to tremendous traffic problems,
sprawling growth in the suburbs and surrounding cities, rising housing
prices and rents, and increasing concern for the region's fragile environment.
Housing plays a vital role in every community. Homes are where people
live; where children and pets play; and where friends and family gather.
Shelter is a need as basic as food and clothing. Housing is also an important
economic engine for a community; it generates jobs and tax revenue.
Homes are Foundations for Families and Communities
In Austin, housing has become precious. Between 1990 and 1998, average
single-family home prices and average rents rose approximately 70 percent.
This translates to an average 1998 home sale price of $149,700 and an average
rent of $801 for a two-bedroom apartment. This is a swift change from the
previous two decades; from 1970 to 1990, Austin was one of the most affordable
places to live in the country, according to a 1998 study sponsored by the
U.S. Department of Housing and Urban Development
(HUD).
The lack of moderately priced homes in Austin makes recruiting and keeping
entry-level workers difficult and eventually dampens the economic growth
as the central city's tax base moves further and further into outlying
areas. The quality of life for all residents erodes as they face longer
commutes, more pollution, poorly funded essential public services, such
as schools, and unequal tax burdens.
The Lack of Affordable Homes Contributes to
Other Problems
Recognizing these alarming trends, members of the Community Action Network
called upon 23 community and business leaders in the spring of 1998 to
research, define, and make recommendations to assist in the development
of a comprehensive housing policy for Austin and Travis County. The Community
Action Network, a private/public partnership of 13 major community organizations,
is committed to Austin-Travis County becoming a healthy, safe, educated,
and compassionate community where people work together to achieve their
full potential. Newly reorganized in 1992, the Community Action
Network has the unique mission of engaging the community in a planning
process that coordinates and optimizes public, private, and individual
assets and actions to achieve sustainable solutions to health, human, and
social issues. The Community Action Network Working Group on Affordable
Housing represents a range of stakeholders, most of which work in housing-related
fields, including homebuilders/developers, realtors, and housing advocates.
The Working Group prepared "Through the Roof: A Report on Affordable
Homes in Austin" in response to the Community Action Network directive.
The report found cause both for optimism and for much concern.
With Austin's record-setting employment and population growth, the region is
the envy of most urban areas. This rapid growth, combined with other factors,
however, has put average housing prices and rents out of the reach of many of
Austin's middle-class residents and places relentless burdens on the poor and
those on fixed incomes.
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Disabled residents face almost impossible challenges in finding
homes and apartments thatare adapted for their use. According to City of
Austin projections for the year 2000, this means approximately 34,000 households
(82,000 people) pay more for housing in proportion to monthly income than
is affordable (more than 30 percent of income by federal standards). About
40,000 households (97,000 people) live in substandard homes, which lack
adequate kitchen and bath facilities, and approximately 11,000 households
(27,000 people) live in overcrowded conditions.
These are conservative estimates; they do not include households with
incomes greater than 80 percent of median family income.
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These are not only people on public assistance. These are largely our schoolteachers,
our entry-level firefighters, our musicians and artists, our sales clerks, and
our entry-level workers as illustrated in the graph below.
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The market provides choices for those who are seeking homes and apartments
above the median price, but there is a desperate need for more affordable
housing in Austin -- homes priced at or below $85,000 and apartments
that rent for less than $600 per month.
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To address the need for housing assistance, the federal government provides an array of resources to states and cities. These may combine with private and nonprofit efforts to increase housing opportunities through building new homes or apartments or providing financial assistance to low and moderate-income residents. Existing public and private housing programs in Austin, however, are often too narrowly designed and/or underfunded to make a significant impact. Many residents most in need of assistance often cannot access programs due to low wages or credit problems.
The enormous demand for lower priced homes and apartments and the barriers posed by the existing network of housing programs are not insurmountable. "Through the Roof" challenges every business, community, and religious leader, each public official, and every resident to learn how to help increase housing options for all residents of the region.
The report addresses the acute need for permanent housing for Travis County
residents earning below median income. It describes the causes of the housing
shortage, barriers to addressing it, and its impact on the region.
The Working Group also included "best practices" in affordable housing
from across the country and recommendations for action in Austin. This Executive
Summary provides an overview of the report.
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WHAT HAPPENED TO AUSTIN'S AFFORDABLE HOUSING?
Several factors converged to create a gap between the housing needs
of Travis County residents and the housing available to them. The most
important are:
KEY CAUSES OF HOUSING GAP
(1) Rapid Population & Employment Growth.
The City of Austin has been growing rapidly for more than two decades, but the
recent rate is staggering. Since 1990, Austin has added almost 150,000 people
— 50 new residents every day for eight years.
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This wave is at a lesser overall rate than those booms of the 1970s
and 1980s, but it is projected to continue steadily for the next decade
with the metropolitan area reaching 1.5 million residents shortly
after 2010. People came most often for jobs -- 208,400 new ones since
1990 in the metropolitan area. The nature of Austin's economy during
the 1990s, however, is fundamentally different from that of the 1980s.
In the previous decade, state and local government, which includes
the University of Texas (state) and the Austin Independent School
District (local), employed a substantial portion of the Austin labor
force. The economy of the 1990s is built on broader base within basic
industry functions such as high-tech manufacturing and software design
companies. Migrants to Austin are not homogeneous; indeed, they reflect
the increasing diversity of the regional economy. Such diverse employment
growth has fueled housing demand at all price levels.
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2) Uneven Growth in Wages. The benefits
of the region's robust economic growth have not been shared evenly. According
to The Benchmark Company's 1997 Austin Newcomer Study, 63 percent of
new residents earned below $50,000, and 29 percent were below $25,000. The latter
salary qualifies an Austin resident for federal housing assistance.
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A four-person household at that income would be considered low income.
The metropolitan poverty rate of 16.6 percent in 1996 was well above
the national rate of 13.7 percent. Texas' poor are most likely to
work, predominantly in service or retail trades according to a study
by the Center for Public Policy Priorities,
and the Texas Workforce Commission
projects that eight out of ten of Austin's fastest growing occupations
have average wages below $13,520. (See graph above.)
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3) Lack of Available Affordable Homes.
The increase in available housing has not kept pace with the number of
new people and jobs arriving in Austin. Swift absorption of new developments
illustrates the sharp demand for housing. New homes offered for less than
$100,000 are sold before they can be built. Currently, existing single-family
homes remain on the market for less than two months on average, continuing
a downward trend. Occupancy rates for apartments citywide continued to
move upward, approaching 97 percent — a 3 percent vacancy rate
— by the end of 1998. Occupancy rates between 90 and 95 percent
are considered a healthy economic balance. Much of the growth in employment
in the early 1990s took advantage of the vacant inventory created during
the mid-1980s. Such slack in the market has been absorbed to a great extent,
and Austin is losing the competitive advantage of offering low-priced housing.
The increased demand on existing housing and slow addition of new stock
drove up housing prices. Between 1990 and 1998, average single-family home
prices rose from $87,600 to $149,669, a 71 percent increase. 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, a 68 percent increase. This translates to
an average rent of $801 for a two-bedroom apartment. In Central Austin,
rents averaged closer to $1.15 per square foot or $1,071 for a two-bedroom
apartment, and occupancy rates were above 97 percent at the end
of 1998.
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 more expensive properties. Multifamily buildings (those with two or
more units) built in the 1990s account for almost 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
financed with federal tax credits have been constructed. This financing,
however, is highly competitive and cannot be considered as a stable long-term
source of moderately priced multifamily housing.
In the single-family market, new construction has also shifted toward
more expensive homes: 28 percent of sales reported were of four-bedroom
homes with an average sales price of $201,030. Homes selling between $150,000
and $175,000 (above the area average) had the largest decrease in the time
they spend on the market. Increasingly, single-family homes are built outside
of Austin. In 1997, only 25 percent of the new homes built in the metropolitan
area were inside the Austin city limits. While in 1990, Austin captured
about 50 percent of the new single-family home construction. Data from
1998 suggests this trend will continue without aggressive strategies that
allow people to stay or move back to Austin.
4) Critical Mismatch between Incomes and Prices.
This convergence of a rapid growth in population, employment and
housing costs has increased the amount of money housing consumes from Austin
residents' budgets. Those particularly hard hit are making less than the
regional median income, especially the poorest groups and people on fixed
incomes.
Even in an era of low interest rates, Texas and Austin homeownership
rates lag the 1998 national rate of 66.3 percent, according to the Real Estate Center at Texas A&M University.
Across the state, 62.5 percent of households owned their homes, less than
in 1980 (64.3 percent). Only 54.8 percent of Austin metropolitan residents
owned their homes in 1998. Historically, city rates fall behind the region.
In Austin, this is due in part to a large student population, but the mismatch
between incomes and housing prices also influences these figures. In 1998,
63 percent of Austin households had sufficient income to purchase the median
priced home ($117,800), and this figure overestimates the actual number
since it assumes all have good credit histories and can afford to make
a downpayment of 20 percent.
For renters, the situation is also disheartening. The National
Low Income Housing Coalition calculated in 1998 that 41 percent of
Austin metropolitan area renters are unable to afford a market-rate, two-bedroom
apartment for about 30 percent of their income (the federal payment standard
for affordable housing). Earning the federal minimum wage of $5.15 per
hour, an Austin area resident would have to work 103 hours per week to
afford that market-rate, two-bedroom apartment. An hourly wage of $13.21
-- 257 percent more than the federal minimum wage -- is required to rent
the same apartment and work 40 hours per week.
(5) Decline in Federal Resources. The federal
government provides the majority of funding for low and moderate-income housing
assistance. These monies have declined markedly over two decades. HUD funding
dropped from $71 billion in 1978 to $20.7 billion in 1999, a decline of over70
percent. In 1998, HUD provided the City of Austin almost $12 million for a wide
array of services from housing assistance (homeless to homeownership) to youth
programs to neighborhood and small business assistance; the slight increase,
$900,000 from 1996, is due to Austin's rapid rise in population. The Housing
Authority of the City of Austin (HACA) received about $17 million from HUD
in 1998, down from $21 million in 1996, to assist very poor residents. The Travis
County Housing Authority receives roughly $3 million annually from HUD.
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Federal resources can not begin to meet the scale of need in the
Austin area. The Community Action Network estimates that more than
3,800 people in Austin are homeless on any given night. The Austin
and Travis County Housing Authorities serve more than 7,000 residents
with average annual incomes of less than $8,500. On April 27, 1999,
more than 2,300 Austin workers waited in line for hours -- many camped
overnight -- to be placed on the waiting list for HACA rental assistance
vouchers. The current wait in Austin for a voucher is six months to
three years. The City of Austin receives more flexible federal housing
resources to serve residents with low and moderate incomes, but it
also cannot meet the demand for housing assistance.
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WHY DOESN'T THE MARKET PROVIDE?
These factors help to explain the emergence of a housing crisis for
many Austin residents. Given the great demand for homes below $85,000 and
rents below $600 per month and availability of government subsidies, albeit
limited, why hasn't the private market filled the gap? By its very nature,
providing a product at below-market prices is a formidable task, and government
housing programs are notoriously complicated. Austin, however, has some
unique factors that magnify the difficulties of developing lower cost housing.
Ineconomic terms, when demand outpaces supply, prices will rise; in Austin,
however, supply is constrained by other factors, which further increase
housing prices.
KEY BARRIERS TO AFFORDABLE HOUSING
1) Difficulty Accessing Housing Programs.
While a number of worthwhile programs are operating, they are proving inadequate
because those most in need cannot access them due to low wages, poor credit
histories, or existing debt burdens. These residents then pay more than
30 percent of their income for housing or move in with friends or family
-- "cost burdened" and "overcrowded" are the technical
terms. Often, the most affordable housing option is an inferior one, such
as one with little or no infrastructure (sewer, roads) in an outlying area.
2) Difficulties in Building/Renovating Homes.
Building new homes or rehabilitating existing housing presents its own challenges.
Austin is a popular market, so costs are high for construction labor, building
materials, and land.
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Austin's natural environment also impedes building lower cost housing;
the natural clay soils found primarily east of MoPac-Loop 1, for instance,
require more foundation work to stabilize movement over time, which
adds costs. The hills to the west have a strong rock floor but overlay
the aquifer. City policies to protect Austin's water source restrict
the ability of homebuilders to create more dense, andthus, less expensive,
housing. High fees, extensive regulations, and delays in approval
by the City of Austin complicate building residential developments,
even more so for lower cost housing. Finally, nonprofit developers
are often key partners in the production of affordable homes; however,
the current capacity of nonprofits in Austin is limited.
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3) Lack of Awareness. The widespread
lack of awareness of housing's vital role in the community is a significant
obstacle to improving housing opportunities in the region. Public officials,
business leaders, and residents need to understand the importance of housing;
how their daily decisions impact the local housing market; and how the
lack of affordable housing affects their ability to do business. For instance,
approximately 48,000 students study at the University of Texas each year;
the University, however, provides housing for roughly 6,100 students. Thus,
the Austin housing market absorbs the balance. Community leaders can, by
their actions, inadvertently increase the costs and difficulties of creating
more affordable housing. Educating residents and neighborhood groups is
a critical step in increasing Austin's housing opportunities. Objections
to perceived declines in property values and increases in traffic, school
populations, and crime have led residents to block affordable developments
in their neighborhoods despite a developer's ability to address concerns.
4) Lack of Resources. The community's
existing housing programs and resources -- the majority of which come from
the federal government -- do not adequately address Austin's rapidly changing
needs. To leverage declining federal funds, many states and cities have
chosen to dedicate their own monies and to partner with private and community
institutions to increase housing opportunities. The State of Texas provides
some additional monies for housing through the Texas Housing Trust Fund.
Housing programs administered by the City of Austin, approximately $12
million annually, are funded by HUD. Austin does not use its local tax
revenues for housing programs as many cities do. Moreover, the Austin business
and charitable communities provide only limited resources for housing.
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WHY SHOULD WE CARE?
The City of Austin is losing its middle class to outlying areas, notably to
the northern cities of Round Rock, Pflugerville, and Cedar Park. As more residents
become commuters, the City of Austin will provide more and more services to
people who do not pay property taxes. Even though it is home to Dell Computer
Corporation, 58 percent of Williamson County income was earned elsewhere, presumably
Travis County, according to a 1998 study by Texas Perspectives, and 75 percent
of new single-family homes were built outside Austin's city limits in 1997.
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The future can be seen in most older urban areas -- the middle-class
attracted by lower housing prices and better schools settle in the
suburban areas. The central city becomes home to only the rich who
can afford the higher cost of living and the very poor who cannot
afford to escape it. This scenario ultimately degrades everyone's
lifestyle. It also creates great inequities in the tax base. A vibrant
city is critical to the survival of any metropolitan area. Such cities
attract residents and visitors with sports, entertainment, arts and
other attractions. Nationwide, since 1992, metropolitan areas, which
include cities and their suburbs, are overwhelmingly responsible for
the country's economic growth -- they support 84 percent of the jobs
and house 85 percent of the people, according to the 1998 State
of the Cities report by HUD. Cities, however, face more significant
challenges than their suburbs -- concentrated poverty, fewer middle-class
residents, and a lack of employment, education, and housing opportunities
for residents.
An obvious sign of Austin's regional decline is traffic congestion.
A 1998 Sierra Club study of urban sprawl named Austin the "second
most threatened" of medium-sized cities in the nation. More than
200,000 cars cross Town Lake each work day, and for every 1 percent
increase in population, traffic on Interstate 35 increases by 4 percent.
According to a nationwide study of traffic by Texas A&M University,
Austin ranked as the worst medium-sized cities in the nation for the
amount of time (61 hours) and gasoline (90 gallons) wasted idling
in traffic in 1996. Austin often ranked closer to cities much larger
in size, such as Dallas and Houston, than its medium-sized counterparts,
such as El Paso or Nashville. This could ultimately result in Austin
being classified as a non-attainment city under the Clean Air Act
by the Environmental Protection Agency, radically impacting Austin's
ability to access federal highway funds and further degrade traffic
conditions.
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DON'T REINVENT THE WHEEL: BEST PRACTICES IN AFFORDABLE
HOUSING
Austin's challenges in providing lower priced homes for its residents
are not unique. Cities and states across the country have created diverse
and dynamic partnerships to address their housing needs. Austin can learn
from their experiences. Innovative collaborations between the public, private,
and nonprofit sectors stretch scarce federal resources. "Through the
Roof" highlights more than 20 affordable housing "best practices"
from across the United States, including Texas. These model programs were
tailored to meet the distinct needs of their areas; to adopt them in Austin,
some features may need to be adapted to local characteristics. Typically
programs address common barriers to affordable housing -- acquisition of
land or properties, construction expenses, and funding for rehabilitation/renovation
of existing structures.
WHAT CAN WE DO? RECOMMENDATIONS FOR REFORM
Austin is at a strategic point in its growth. Without providing more housing
at lower prices, Austin's middle class -- and soon, its businesses -- will move
to more affordable areas in nearby cities or beyond. In order to help to overcome
the key barriers to affordable housing -- the lack of public awareness, supply,
access, and resources -- four goals were developed by the Community Action Network
Working Group on Affordable Housing. Important first steps to achieve these
goals are also outlined. These actions are neither exhaustive nor mutually exclusive
nor do they need to be undertaken chronologically; these actions complement
one another.
RECOMMENDED GOALS AND ACTIONS
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GOAL 1. EDUCATE THE COMMUNITY ON THE REGIONAL
HOUSING CRISIS. In order to educate residents and business
and community leaders on the impacts of a lack of affordable housing
and the difficulties facing area residents in finding affordable housing,
the Community Action Network partners should:
Action 1-A. Make housing a priority in decision-making processes
throughout the region. Policy decisions made by community leaders
should weigh the impact on the housing market.
Action 1-B. Convene major employers and the universities and
colleges to discuss the housing crisis, its impact on their business
or institution, their impact on the housing market, and their responsibility
to help improve conditions.
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Action 1-C. Institute a public education campaign to educate residents,
neighborhood associations, and employers on the impact of the affordable housing
crisis on them. Raise awareness of substandard conditions in unregulated or
poorly managed developments and the difficulties facing low-wage workers. Rising
housing prices mean businesses will face more difficulties in recruiting and
retaining workers, and Austin residents will face rising tax burdens as their
middle-income neighbors move to the suburbs.
GOAL 2: IMPROVE EXISTING FINANCING METHODS.
Existing housing programs of government, lending institutions, and nonprofit
organizations are largely ineffective, narrowly designed, and/or underfunded.
The community must develop new ways of creating more housing opportunities
for low and moderate-income residents of Travis County. To do so, the Community
Action Network partners should:
Action 2-A. Encourage public officials to develop incentives
for building more affordable housing through a variety of tools, such as
rehabilitation of existing buildings, tax abatements, tax increment financing,
fee waivers, density bonuses or transferable development rights.
Action 2-B. Facilitate a review of the current allocation of
housing resources, e.g., federal and state funds, lending pools, and foundation/nonprofit
support, to ensure they are operating efficiently to meet the needs of
eligible residents.
Action 2-C. Challenge lenders to develop new and appropriate
loan products to accommodate lower income borrowers and borrowers with
less than perfect credit ratings.
GOAL 3. DEVELOP PROACTIVE POLICIES TO MEET
COMMUNITY NEEDS. In order to ensure that the tax burden is equitably
distributed, Austin-Travis County must attract and retain residents across
the income spectrum. A citywide housing policy to clarify priorities, goals,
and responsibilities is essential to do so. Elements of the policy may
vary, but critical issues should be addressed. The Community Action Network
partners should:
Action 3-A. Encourage city and county officials to adopt a joint affordable
housing policy that includes a comprehensive list of neighborhood impacts
that all housing developments must address including traffic, school capacity,
long-term maintenance, crime and safety issues, and other issues to be
identified. Developments that comply with this policy will be approved.
Among other issues, the policy should:
Action 3A-1. Promote efforts to make more land available at below
market prices for affordable housing developers, such as convening taxing
authorities to develop a vacant-lot foreclosure program, creating a land
bank, or allowing appropriate entities the first right of refusal for surplus
public lands.
Action 3A-2. Encourage public officials to review zoning ordinances
to facilitate affordable multifamily developments and other group quarters,
especially single-room occupancy units, similar to college dormitories.
Action 3A-3. Promote community and employer efforts to help consumers
achieve their housing goals, such as credit counseling for both renters
and homebuyers, homeownership counseling, and savings programs.
Action 3A-4. Highlight that any housing built with public subsidies
must be accessible to disabled residents and encourage privately developed
housing to be as well.
GOAL 4. INCREASE RESOURCES FOR HOUSING.
The Working Group estimates that tens of thousands of households live in
substandard housing; pay an excessive amount for their housing; and/or
live in overcrowded conditions. The public sector cannot address these
problems only with federal resources. Additional monies are necessary to
address the current shortfall in affordable housing units. To raise supplemental
funds for the community's housing needs, the Community Action Network partners
should:
Action 4-A. Work with public and community leaders to create
a housing trust fund with adequate, dedicated resources for affordable
housing efforts by the year 2000.
Action 4-B. Engage the assistance of private and community institutions
in collaborating with the public sector in providing more housing programs.
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