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Study shows Austin housing market still growing at record levels

Thursday, July 10, 2014 by Elizabeth Pagano

A housing study that the City of Austin is required to perform every five years is providing City Council members more confirmation that the city’s housing market is continuing to change at a breakneck pace.

The five-year planning mandate is requirement for city officials to receive federal entitlement grants. One component of that plan is the housing market analysis presented at Council’s long, last meeting before its annual July break. Thanks to a loaded agenda, questions were limited.

Heidi Aggeler with BBC Research and Consulting presented the plan, which is similar to a study the group performed on the city in 2008. The new study looks at how the market has changed over the last five years.

One of the more significant findings, said Aggeler, was a discovery that renters who earn more than $75,000 a year were up 74 percent from 2007. In comparison, renters earning less than $25,000 a year had only increased 1 percent over that same period.

Though the overall rental occupancy rate continues at record-high levels, there is evidence of some relief for the highest-price units, which have lower occupancy rates than the more affordable dwellings. Luxury rentals stand at about 12 percent vacant, where non-luxury properties continue to have vacancies of four to five percent.

Most of Austin – 55 percent of all households – continues to rent. In comparison, shifts in homeowner distribution have been minor, despite the fact that home prices have increased 68 percent since 2000.

“Many sought additional employment to pay for their housing costs. We heard a lot of concern, in the focus groups (conducted as part of the study) as well as the survey, about property taxes. There were concerns that rising property taxes would force low-income residents to need to leave,” said Aggeler.

Currently, 25 percent of homeowners and 45 percent of renters in Austin pay more than one-third of their income for housing. Aggeler said that most residents make a trade-off in order to live in the city. Sixty-nine percent said they paid more to live in Austin than they would elsewhere, a fact with which 66 percent of renters agreed.

Aggeler said that people with disabilities were having a tough time finding housing that met their needs. With the current market, she explained, it is very difficult for anyone with credit problems or a criminal history to be able to access housing. This has been a recurring concern for the region.

In the past five years, the gap in available housing to serve Austin’s renters with the lowest incomes has widened. Five years ago, the city was 37,000 units short on housing for those earning less than $20,000 a year. That has since increased to a 41,000-unit gap. The number of people impacted has also increased, and now encompasses those earning less than $25,000 per year, explained Aggeler.

In addition to the report, Aggeler urged the city to capture land for affordable housing now, before its value increased further. She also advocated for a better use of land banking, and land trusts, and proposed the city set aside publicly owned land for mixed-income development.

Aggeler further suggested that the city partner with private entities, and emphasized the need for agility in investing in a rapidly moving housing market. Some types of Community Development Financial Institutions, she argued, can offer this speed.

“These are terrific tools, to be able not only to preserve current neighborhoods and housing opportunities in current neighborhoods, but also to create housing opportunity products in neighborhoods that don’t have a lot of affordability,” said Aggeler.

The last recommendation from the report was for the city to establish an affordability goal – 10 percent, it suggested – which could dictate development policies and be monitored by city management staff.

Public input for the study was gathered from 5,315 Austin residents. About 1,000 people who commute to Austin also responded to the voluntary survey. A supplemental survey targeted specific populations in the city.

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