Housing

CHAPTER 2: Regional Impacts of the Lack of Affordable Homes in Austin

The City of Austin is losing its middle class to outlying areas, notably to the northern cities of Round Rock, Pflugerville, and Cedar Park. In the 22 counties of the Austin-San Antonio corridor, nearly one half (44 percent) of the residents, excluding Bexar and Travis counties, commute to work in a county other than the one in which they live according to 1990 Census data. With advances in transportation and telecommunications, this trend to commute throughout the region -- not just to large cities -- will continue.⁶⁴ As more residents become commuters, the City of Austin will provide more and more services to people who do not pay property taxes. Despite being home to Dell Computer Corporation, 58 percent of Williamson County income was earned elsewhere, according to a 1998 study by Texas Perspectives.⁶⁵ As previously noted, 75 percent of new single-family homes were built outside Austin's city limits in 1997.⁶⁶

The future can be seen in most any older urban area -- families and 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.

Cities need their suburbs, and suburbs need their cities. Nationwide, since 1992, metropolitan areas are overwhelmingly responsible for the country's economic growth -- they support 84 percent of the jobs and house 85 percent of the people.67 A vibrant city is critical to the survival of any metropolitan area. Cities lure residents and visitors with sports, entertainment, arts and other attractions. With crime rates plummeting and revenues increasing, most cities nationwide are benefiting. 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 their residents.

Like much of the United States, Austin is enjoying one of its strongest economies ever. From 1990 to 1998, more than 208,000 new jobs have been created.⁶⁸ Austin boasts one of the lowest unemployment rates in the country. As much as Austin is the business, commercial, and residential center for the five-county area, its monopoly is eroding, and the centers of commerce are spreading -- notably north and south. With the opening of the Austin-Bergstrom International Airport, development will be drawn south and southeast. And, the region's residents will only become more mobile and more dependent on transportation systems.

Technology has changed the face of business. Advancements in information technologies, for instance, allow various aspects of businesses to be separated. As a result management design, production, research, and other areas are free from traditional considerations of location, notably in central business districts. Corporations have more flexibility to relocate jobs to less expensive areas or ones with more market potential. Internationalization, facilitated by new means of production, thus changed the nature of labor, and the basic purpose, of U.S. cities. Information technologies have allowed firms to decentralize operations within metropolitan areas as well as across regions and around the world.⁶⁹ This trend is evident in Central Texas.

Despite the interdependence of the region and its residents' mobility, regional governance is limited. The Lower Colorado River Authority, which oversees water management for a 33-county area and power transmission for 55 counties, is the best example of a regional planning organization. Other broad public issues -- transportation, environmental protection, public health, and housing -- are left to individuals within Central Texas cities and counties and a few organizations, such as the Capital Area Planning Council, to manage ad hoc.

Many impacts of the population and employment boom in Central Texas are already apparent. The loss of open space and the increase in traffic congestion are the most obvious. Austin, long comfortable winning accolades as one of the best places to live in the United States, was named in the Sierra Club's 1998 report as the second most sprawl-threatened, medium-sized city in the country.⁷⁰

Loss of open space and farmland -- a national trend -- is obvious to anyone who has lived in the Austin area for the past decade or more. The American Farmland Trust estimated in 1997 that the United States is losing 50 acres an hour to suburban and exurban development. One of the factors driving this phenomenon was the lack of affordable housing in cities -- or more specifically, the affordability of land in areas surrounding urban centers.⁷¹

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AVAILABILITY OF AFFORDABLE HOUSING

The reasons people choose where they live vary considerably according to life style, but the primary incentives remain the sales price, the location, and the school district. Central Texas is booming. New housing is springing almost literally from the ground. Across the State, counties that surround urban areas -- the suburban metropolitan counties -- are expected to continue to experience some of the heaviest growth. The ring of counties bounding Travis has absorbed much of the middle-income residents moving to Austin, and area residential building trends confirm it.

In the 1990s, the number of homes built in Bastrop, Hays, and Williamson Counties increased dramatically (See table below). To the south, home construction in Bastrop and Hays Counties grew markedly; however, construction in Williamson County, north of Austin, exploded in the 1990s from 174 permits issued in 1990 to 3,063 in 1997. Home values in all three counties increased by 30 percent or more between 1990 and 1997.⁷² The average home values in the cities of Williamson County were rising rapidly, up 28 percent from 1990 to 1997. Round Rock's average sales price in 1997 was $114,100; in Georgetown, it was $120,500. Austin's average 1997 home price was $141,700.⁷³

Single-family home construction and values in selected Central Texas counties, 1990 and 1997
	Permits issued, 1990	Average home value, 1990	Permits issued, 1997	Average home value, 1997	Percent Increase: Permits	Percent Increase: Home Value
Bastrop County	8	$47,000	58	$60,600	625%	30%
Hays County	18	$52,700	157	$71,400	772%	36%
Williamson County	174	$78,800	3,063	$100,700	1,660%	28%
Source: Texas A&M University Real Estate Center

It is no surprise that developers are turning to surrounding areas to build large housing developments. The land is cheaper, among other reasons. Comparing regional residential lot prices, however, is difficult. Sales prices are driven by a variety of factors, including location, lot size, total amount of land, zoning category(s), and utility service extensions. Prices vary accordingly; a recent study conducted by University of Texas planning graduate students found that land costs for residential lots in Austin varied from $1.10 to $3.10 per square foot.⁷⁴ For general purposes, developed residential lot prices vary from $18,000-$60,000 in central locations to about half that in some outlying areas.⁷⁵

Austin no longer attracts the majority of single-family developments. New single-family construction outside Austin city limits was twice that of city housing starts.76 The January 1999 Builders Update, a monthly publication of new home construction, revealed that out of 483 active new home communities in the metropolitan area, only 24 developments offered homes below $100,000. Of those, only five communities -- 1 percent of new single-family construction at the beginning of the year -- were located within the City of Austin. Several surrounding cities have adopted restrictive building codes that through plat notes and deed restrictions require minimum lot sizes, larger square-footages, and other factors for single-family homes that increase the sales prices of the home. These limits together with other building requirements impact the price of homes considerably. These legal instruments are also known as "exclusionary zoning practices" because they prevent people with less income from living in the community. Since minorities typically earn less than area median incomes these practices help to continue the segregation of the region. They are also an example of how an individual city's rules affect the regional housing market. The same trends in single-family homeownership are reflected in the area rental market. In the City of Round Rock, rental rates have climbed steadily in the late 1990s, jumping three cents, from $0.81 per square foot in December 1997 to $0.84 a year later. The occupancy rate dropped from 92.9 percent at the end of 1997 to 90.7 in 1998; this was due to the absorption of an additional 470 apartments.77 To the south, in Hays County, multifamily building permits jumped from three units to 360 between 1994 and 1995, an almost 12,000 percent increase.78

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SUBSTANDARD HOUSING IN UNINCORPORATED AREAS

An alarming housing trend in the region is the growth of substandard residential developments in unincorporated areas, according to an unpublished paper by Professor Robert Paterson and Schleen Johnson at the University of Texas at Austin. These colonia-like communities dotting the landscape south and southeast of Austin are the most affordable homes available to many lower income residents. No accurate count is available given the nature of the housing, but the added population strain and inadequate infrastructure water, sewer and roadways make it difficult to preserve and protect the rural quality of life.

Paterson and Johnson found that State law is part of the problem. Texas does not grant counties the same ability to manage growth as Texas cities have. For example, counties may not assess development and permitting fees and have limited taxing authority. This legal distinction between Texas counties and cities has been exacerbated in the counties surrounding fast growing cities like Austin, the so-called suburban metro counties. In 1996, the Texas Supreme Court chose not to overturn an appellate court ruling that made it more difficult for counties to manage development. The Elgin Bank v. Travis County ruling allows some residential developments to disregard the subdivision platting process, the system that requires standard lot size with adequate utility service. With the "Elgin Bank" decision, developers are not required to provide utility hook-ups, proper road access, or drainage systems.⁷⁹

One major detriment of this ruling is that building permits and subdivision plats also provide a governing body critical information for planning -- population counts drive school decisions and property tax assessments. Unregulated development creates other more severe and immediate governance problems: fire and emergency equipment can often not locate the unregistered developments, nor can they navigate the dirt roads, especially after heavy rains.⁸⁰

The proliferation of these developments threatens public health, school systems, and county governance. They will require increased public spending to retrofit the developments for proper utilities, roads, and drainage ditches. Though more difficult to calculate, they will also cost their communities and the surrounding areas in tainted natural resources, increased pollution, and devalued property . The unmanaged growth lowers the quality of life for all. These developments are not unique to Central Texas. They are occurring statewide in metro suburban counties facing growth. The Texas Legislature throughout the decade, however, has resisted attempts to bolster county authority.⁸¹

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TRAFFIC CONGESTION

With limited public transportation options, the population and employment boom in Austin has strained its roadways. The number one complaint from most Austin area residents is traffic. More than 200,000 cars cross Town Lake each workday, and for every 1 percent increase in population, traffic on Interstate 35 grows by 4 percent.⁸²

According to the 1998 "Mobility Study" by Texas A&M University, Austin residents have much reason to be concerned. The report tracked traffic data from 70 cities nationwide from 1982 until 1996. The researchers calculated key measurements of traffic congestion, such as delay in travel, fuel wasted, and cost of congestion. The report found time spent idling in traffic has more than quadrupled for residents of small and medium-sized cities between 1982 and 1996.83 Austin was one of 20 medium-sized cities included in the study. Though it was the seventh largest of the medium-sized cities, it often scored closely with much larger cities. In 1996, Austin had the highest delay per driver -- 61 hours -- of any medium-sized city and most large and very large cities (See table below). That is the equivalent of almost eight full work days each year. This is up dramatically from 43 hours of delay per Austin driver in 1992, an increase of 42 percent.84

Annual Person-Hours of Delay, 1996
City (Size)	Annual Person Hours of Delay Per Capita	Rank of Cities Studied	Annual Person Hours of Delay Per Eligible Driver	Rank of Cities Studied
Houston (Very Large)	49	8	66	7
Dallas (Large)	48	9	63	10
Austin (Medium)	47	10	61	11
El Paso (Medium)	13	64	18	63
Source: TAMU - Texas Transportation Institute

Austin also ranked high in the amount of fuel wasted each year. It was the worst offender of the medium-sized cities with 90 gallons of gasoline per driver consumed sitting in traffic in 1996. This is a 48 percent increase in total amount of gasoline wasted annually from 1992 when Austin area residents wasted 29 million gallons of fuel in traffic.⁸⁵ The cost of so many residents idling on our roadways each year is staggering. Austin had the highest annual congestion cost per driver for the medium-sized cities with $970.⁸⁶

Austin is on the verge of becoming classified as a non-attainment city by the Environmental Protection Agency for declining air quality. Such a classification would radically impact the city's ability to access federal highway funds. This would further increase the City of Austin's burden related to highway construction and further reduce its resources for housing.

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INVESTMENT IN CENTRAL CITY DECLINES

Other -- possibly more detrimental -- impacts of housing and business centers spreading throughout the region are more difficult to quantify until they occur, so national trends are instructive. Across the country, poverty in central cities rises while suburbs become more racially and economically segregated. As businesses locate in the suburbs next to major roadways convenient to where their employees live, the central city becomes home to the very rich and the very poor. The shift in the middle-class tax base to outer ring areas has many significant effects on the central city. The loss of middle-income residents (1) disproportionately increases the tax burden of existing city residents; (2) often accelerates the decline in public school performance; and (3) reduces the ability of the city government to respond to needs.

Overall beneficiaries of regional growth are residents of new, outer-ring suburbs while central city residents pay more. The costs to government are less in a compact city while construction in new areas adds costs for longer sewer and water lines and new schools, fire and police stations. In a study of Tallahassee, Florida, a Florida State University professor found that it cost almost $4,500 for new sewer hook-ups in the central city (mostly minority and lower income) while in the fast-growing edge town of Lakeshore (a more affluent area) real costs for new sewer hook- ups were $11,443. All Tallahassee households, however, paid $6,000 for sewer hookups. This is an example of how government indirectly encourages growth of edge cities and suburbs.87 Austin's Smart Growth strategies for centralized and decentralized wastewater systems do take these factors into account. Although the national economy is robust, cities still face three crucial "opportunity gaps" according to the HUD's 1998 State of the Cities report. These gaps are in jobs, education, and housing -- each essential to combating poverty and attracting and retaining middle-class residents.

• Jobs. While cities still create most of the country's jobs, there is a significant difference between the number of low-skilled jobs and the number of low-skilled workers. The United States Conference of Mayors estimates that there could be two applicants for each low-skilled job in the 74 urban counties over the next five years. Cities also face a daunting task with inner-city unemployment; minority youth unemployment in central cities was five times the national rate. The wage gap between the highest paid and the least paid workers continues to widen; between 1982 and 1996, the top one-tenth of the workforce's pay increased from $24.80 to $25.74 an hour while wages for the bottom one-tenth dropped from $6.28 to $5.46 per hour. These calculations do not include employee benefits, which, if considered, would only further expand the gap. The lack of affordable day-care and access to transportation for working families in cities also constitute barriers to self sufficiency.⁸⁸
• Education. Urban school districts face enormous challenges in preparing often poor, minority children for the high-technology economy with declining resources. In 1996, 60 percent of students in urban school districts failed to meet basic competency levels in reading and math. Over 50 percent of students in the nation's 20 largest school districts do not graduate.⁸⁹ Austin no longer claims most of the new housing starts in the metropolitan area. As residents, especially those with school-age children, move to surrounding cities, the core city commercial and residential tax base will be lost to the Austin Independent School District. This will sharpen the challenge of providing quality education to all Austin children.
• Housing. Increasing affordable housing remains one of the most formidable tasks for America's urban centers. Even in these robust economic times, a record 5.3 million very-low income renters nationwide paid more than 50 percent of their income for rent or lived in substandard homes. A total of 2.8 million families in central cities have severe housing needs. In the first half of the 1990s, worst case housing needs for families with at least one full-time worker increased by 24 percent. In spite of this, Congress did not appropriate funding for additional rental assistance vouchers from 1994 to 1998. Prior to 1994, Congress -- Republican or Democrat -- had always provided assistance to new families since the programs were created in 1930s.⁹⁰

Homeownership rates in the central cities lag behind their suburban counterparts. For moderate-income Americans, 71.3 percent of suburban dwellers owned their own home while only 51.8 percent of central city residents with the same income owned their homes. Hispanic and African-Americans are less likely to own their homes as are whites at the same income level.⁹¹

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AUSTIN

These opportunity gaps are not yet blatant in Austin, but the trends are obvious. Central cities drive their regional economies. But, as the population increases and people move to surrounding cities for amenities, lower cost housing, and newer schools, the city loses income. In 1998, almost 20 percent of the income earned in Travis County was by people who live in another county.⁹²

Numerous articles in the Austin-American Statesman tell of the shortage of workers across industries. High-technology companies face a chronic shortage of skilled workers; they try to attract employees with a range of added incentives -- pay bonuses, finders' fees, stock options. Moreover, Austin's population growth is not drawing enough people to fill service and retail jobs, including new home construction workers. Grocery stores, fast-food chains, and other retail operations find it difficult to fill minimum-wage positions.⁹³ Austin has attracted many firms from California and other established business venues because of its high quality of life, an abundant, educated work force, and low cost of living. Those factors are changing.

As Patricia Hayes, Executive Vice President/Chief Operating Officer of SETON Healthcare Network, noted in a December 1998 speech, Austin has sophisticated advocacy groups for the environment and the business community, however, public leadership for social equity -- for human capital -- in the community is lacking. Almost 16 percent of Central Texans live below the poverty line, she observed, "think of what we would be saying&if we said that `only 16 percent of the water is seriously polluted.' [Or] `we had 16 percent unemployment'."⁹⁴ Hayes' points are critical when considering the long-term effects of the lack of affordable housing in Central Texas.

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