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 1999a 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 figuresthey 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 needsand for finding funding to do so. Of all areas of domestic spending, housing received the most severe cutsbetween 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 patternat 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 $55,400up 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 optionaffordable units on the marketis 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 optionfinding units with subsidized rentsis 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 linethey 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.
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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 housingnonprofit 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.
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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.
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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.
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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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