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Flaw in density bonus plan could bring changes to Plaza Saltillo projects

Friday, December 10, 2010 by Michael Kanin

Developers of the Bonneville Townhomes on East 7th Street earned a density bonus Thursday for their mixed use project, but in the process, Council members learned of a flaw in the density bonus plan for the area around Plaza Saltillo.


Neighborhood leader Lori Renteria came to City Hall to complain that the Council was ready to allow the townhomes’ developer to pay into the affordable housing fund on the very spot where they should be building affordable housing. Agent Alice Glasco, who represents Bonneville Partners, asked for time to conclude negotiations on a deal that might make everyone happy.


In the negotiations leading up to the approval, city officials learned of the flaw in the Plaza Saltillo plan, which was supposed to establish definite rules for developers to follow seeking density greater heights, for example, in return for building some affordable housing units.


It turned out that the plan allows for two different calculations when developers account for just how much affordable housing they should include: For projects that feature actual units that will be set aside for affordable use, developers are instructed to account for 10 percent of the total square feet of the building. If they choose to pay a fee for the right to forgo having those units on site, they’re required to calculate only 10 percent of the area they’ve constructed that extends over the height restrictions.


In this case, that math brought on a disconnect. There, developers discovered that the cost of providing the number of affordable units wouldn’t be justified by the small amount of height they wished to gain from the density bonus. On the other hand, the fee that can be collected off of the project is so small, it provides very little to help construct off-site affordable units.


Glasco explained that, “What you’re getting versus what you’re giving isn’t equal—it doesn’t make sense. You’re getting so little, yet they want you to put eight units (of) affordable housing at $300 a square foot? It doesn’t work.” That works out to about $271,000 per unit on a 904-square-foot apartment, for a total investment of more than $2 million.


However, the fee that they would pay in return for the right to build a taller structure came out to $114,000. “That’s too little,” said Glasco.


There were other problems too. In a letter to Austin officials, Glasco offered nine reasons that the Council should allow the project to proceed with a fee.


There, she argued that her clients could afford to wait until the Guadalupe Neighborhood Development Corporation built its planned affordable housing project on a site next to Bonneville Townhomes. Should that happen, she said, the Saltillo plan’s compatibility standards “would not be triggered,” her clients would no longer be on the hook for either affordable units or the fee that would release Bonneville from that obligation, and the city would lose out on funds.


“Paying a fee-in-lieu of providing on-site affordable housing will allow the Director of Neighborhood Housing to allocate money from the Housing Assistance Fund to finance the fully integrated development of affordable units to appropriate projects located within the Plaza Saltillo (district) or within a half mile of (it),” Glasco wrote. “It is the stated intention of (the Guadalupe Neighborhood team) to re-develop its adjacent land to yield additional and more efficient affordable units within the (district). To better facilitate this outcome…(that project) can potentially be a direct beneficiary of these (funds).”    


The Council voted unanimously to approve the Bonneville project. In so doing, they granted the group, Bonneville Partners, a density bonus in exchange for their inclusion of four affordable housing units. Bonneville will also pay the fee associated with the bonus. That compromise represented what Glasco called a “win-win” restructuring of Saltillo district rules.


Because the Bonneville project is the first in the district, Glasco said that her client agreed to work with affordable housing advocates to come up with a compromise solution. His thinking, she said, was to avoid the bad precedent that would come with such a low fee.


Before he cast his vote in favor of the effort, Mayor Lee Leffingwell observed the issue. “Evidently we have a flaw in the affordability portion of the (Saltillo District) ordinance,” he said. “I would like to ask staff to go back and make a recommendation to change those so we don’t have to go back and have this discussion…every time we do this.”


Molly Scarborough of the city’s planning department told the Council that city planners would go to school on the Bonneville project. “I think it can be used as a case study,” she said.

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