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Tovo pushes alternatives in lieu of fees-in-lieu

Friday, September 30, 2016 by Joseph Caterine

Mayor Pro Tem Kathie Tovo is pushing ahead in her efforts to steer the city’s density bonus programs in a new direction. Near the end of last year, she initiated a staff review of the current programs, suspecting that there was room for improvement. Neighborhood Housing and Community Development staff members presented their findings to City Council on Aug. 1 with several recommendations. Council voted almost unanimously to pass a resolution that would direct staff to develop a new policy based on this review.

Now, Tovo is working with her staff to propose amendments to this resolution in an effort to give staff a clearer mission. “I would like to see policy that leans more towards on-site affordable housing requirements rather than a fee-in-lieu alternative,” she told the Austin Monitor, “with the exception of the downtown program where the fees are going towards permanent supportive housing, which is a high priority.”

There are currently 10 separate density bonus programs in operation, including the downtown program and the University Neighborhood Overlay. Together, they act as one of the city’s key tools for providing affordable housing in a market where it is lacking. Six of the 10 programs have a fee-in-lieu option in which developers can pay an amount – based on a project’s square footage – to exempt them from the affordability requirement.

One hundred percent of the developers who have participated in the downtown program have gone with the fee-in-lieu option. In fact, according to the staff report, none of these payments have even been collected. “Payments are made when a development applies for the Certificate of Occupancy,” the document reads, “and thus far no projects participating in the program have reached that milestone.”

In contrast, the University Neighborhood Overlay program has collected $1,695,251.75 in fee-in-lieu payments, and two student co-ops have been constructed so far with that money. These are the only two affordable housing projects that have been built with density bonus program funding to date.

Regina Copic, manager of the Real Estate and Development Division of NHCD, told the Monitor that the goal is to have one density bonus program that would cover the entire city but could be modified based on the market conditions of each area. However, she feels that another resolution passed by Council is not moving her department closer to that goal. “It makes double work for us,” she said. “I’m two planners down in my division. We can only do so much.”

Tovo disagrees with these concerns. “None of what I’m proposing will significantly impact the workload of staff,” she said.

Some critics, like Jeff Jack, former chair of the Zilker Neighborhood Association’s CodeNEXT advisory committee, disagree with the resolution on a more fundamental level. “The present resolution is a step along the way,” he said, “but it doesn’t change the fact that we are creating an atmosphere of entitlement.”

According to Jack, the city needs an economic adviser on staff to calculate better estimates of the costs associated with projects participating in density bonus programs. “Otherwise we don’t know if we could be asking for more in the way of community benefits,” he said. “Right now it’s hardly even a negotiation.”

While city staff did not go as far as recommending an on-staff consultant, the main recommendation of the report was to conduct a comprehensive economic analysis through a third party.

Stephen Drenner of Drenner Group P.C., a land-use law firm, said that more regulation would add uncertainty to the program, which would discourage developers from participating. “Right now in Austin, the amount of regulation is directly proportional to the cost of producing residential and commercial projects,” he said.

Drenner also said that the fee-in-lieu option ends up producing more affordable housing in the long run. “With the downtown program, for example, you would either be having a few people living in a high rise or more people benefiting from housing funded by the fee-in-lieu elsewhere.”

Jack, on the other hand, said that this logic has harmful consequences. “Developers say we’ll be getting more housing, but what we’ll really be getting is more segregation,” he said.

In total, Austin’s density bonus programs have facilitated 1,662 affordable units, most of which are at 60 percent of median family income and above. A 2014 Comprehensive Housing Market Analysis conducted for the city by BBC Research & Consulting concluded that there is a need for approximately 48,000 affordable units for families making 30 percent MFI and below.

According to Jack, these disappointing results call into question the efficacy of the density bonus programs as a whole. “The first thing you should do when you find yourself in a hole is stop digging,” he said.

Photo by PWan9108 made available through a Creative Commons license.

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