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Commission vice chair calls density bonus programs a failure

Monday, February 12, 2018 by Joseph Caterine

At the Zoning and Platting Commission’s Feb. 6 meeting, Vice Chair Jim Duncan continued his series of CodeNEXT presentations with an indictment of the city’s density bonus programs, one of the city’s main approaches to facilitating housing for households making less than 80 percent of the median family income. He charged city staff with being “blind” to the disappointing output of the programs since the first one was launched in 2004 as part of the University Neighborhood Overlay in West Campus.

“We’ve given away a lot of entitlements in this community through our density bonus system, and we’ve gotten very little in return,” Duncan said at the meeting.

Texas state law’s prohibition of mainstream affordability tools used in other parts of the country, like inclusionary zoning and linkage fees, has limited the city’s options in incentivizing affordable housing for the middle-to-low-income population. While varying in specific requirements, all of Austin’s bonus programs operate on the basis that if developers include a certain percentage of affordable units in their project, they will receive extra height, floor space or density as a bonus. Some programs offer a fee-in-lieu that can be paid as an alternative to constructing on-site units that goes into an affordable housing trust fund.

In the past, the city has embellished the success of the density bonus programs. In a 2016 Neighborhood Housing and Community Development report on the programs prompted by a 2015 City Council resolution, the number of total units secured by the program was presented as 1,662. However, in a graph later in the report, it is clarified that the total included 499 “anticipated” units, bringing the actual total down to 1,163.

The oldest program in West Campus has produced the most affordable units at a total of 593, but others like the East Riverside Corridor and Downtown programs have, to date, produced zero. Funds collected from fee-in-lieu payments have to date constructed one affordable project, the Super Co-op in West Campus.

Erica Leak with the Neighborhood Housing and Community Development Department said that some of the data in Duncan’s report was not accurate. In an email to the Austin Monitor, she debunked Duncan’s claims that the Rainey program did not have an affordability period (it does) and that city staff did not monitor the programs (they do). However, at the meeting Leak admitted that staff did face a capacity issue. Currently, the department is requesting additional staff to operate the programs and hiring contractors to assist in monitoring participating projects.

The second draft of CodeNEXT proposes a standardized version of the programs, the Affordable Housing Density Bonus Program, although the current programs will stay in place. Although Duncan agreed that the inconsistency in the current numerous programs discouraged buy-in from developers, he does not think that the proposed citywide Affordable Housing Density Bonus Program is the solution. “You don’t expand a bad program,” he said.

Although flaws in the current programs have become evident over the years, attempting to correct these errors does not show much promise either. Most of the parcels that were eligible for the University Neighborhood Overlay program, for example, have already been redeveloped. “If you’re trying to think about where we are today and trying to project that back 10 years, that’s not particularly fair,” Leak said. “Could we have asked for more? Maybe.”

Firm ECONorthwest has been assisting staff as part of the CodeNEXT drafting process to more precisely calibrate the fee-in-lieu rate for the proposed program, so that the city can gain more affordable housing in relation to the entitlements offered. However, consultant Ian Carlton emphasized to the commission that the density bonus programs were voluntary for developers.

“They can always build to the base entitlements granted within the code,” Carlton said. “We need to make sure (the program) is still attractive for the developer to build those base entitlements as well as the bonus entitlements.”

Despite ECONorthwest’s help, Duncan said that fine-tuning the economics of the program did not get to the heart of the problem. “We’ve been calibrating for so long,” he said. “Anybody who doesn’t acknowledge that this is a failed program for what we could have gotten out of it in a city like this is not being honest.”

This story has been corrected. The city’s current density bonus programs will remain in place, and that the citywide affordable housing density bonus program proposed in CodeNEXT would be in addition to those programs, not a substitution for them.

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