Thursday, March 1, 2018 by Jack Craver

Austin could use rising property values to create affordable housing

City Council Member Greg Casar wants to get the most out of the hundreds of millions of dollars that the city is poised to spend to upgrade its transportation corridors in the coming years.

The improvements coming to Austin’s corridors will naturally contribute to increasing property values in the surrounding area. If the city does nothing, the result will simply be a continuation of the displacement of low-income tenants from the urban core, he said during a Tuesday work session. But if Council seizes the opportunity to dedicate the increased value to affordable housing, the enhanced infrastructure could be a win-win.

As he explained to the Austin Monitor after the meeting, the two most common complaints he gets from constituents are traffic safety and rising rents. The transportation bond will hopefully help deal with the former, while he hopes that putting in place tax increment financing districts around some corridors could help mitigate the latter.

Tax increment financing is an economic development tool used to direct public investment to a specific area of a city. The city creates a TIF district and issues debt to invest in any range of improvements in that district, such as infrastructure or parks.

The idea is that the increased property value resulting from the investment leads to increased property tax revenue, which is used to pay off the debt. Until the debt is paid off, any tax revenue that results from increased property value in the TIF district does not flow into the city’s General Fund; it can only be used to pay off the TIF debt.

Casar thinks the city isn’t using the tool nearly as much as it could to promote affordable housing. On Thursday, Council will take up a resolution he drafted instructing city staff to develop a new TIF policy that will permit more liberal use of the tool.

Expanding the use of TIF is particularly important, said Casar, in the wake of Gov. Greg Abbott’s move last year to block the creation of three homestead preservation districts. In such districts, a certain portion of the tax revenue is collected with the exclusive purpose of repairing or building affordable housing.

TIF offers much more potential, he said, than simply allocating a certain percentage of tax revenue every year to the affordable housing trust fund. By creating a TIF district, the city can borrow a large sum of money from a bank and invest it immediately in building housing, and then it can pay back the debt, with interest, over a long period of time.

In contrast, not only do the funds in the affordable housing trust fund represent but a drop in the bucket of Austin’s identified housing needs, they trickle in gradually, preventing the city from making major, game-changing investments.

Council Member Pio Renteria, who last year described Abbott’s decision to kill the preservation districts as a “Trumpian tantrum,” signaled his enthusiasm for increasing TIF.

“We need to take advantage of (the corridor spending),” he said. “We’re talking about recapturing some of the value that we’re adding to those corridors.”

The current city TIF policy, which Casar referred to as “pretty conservative,” allows a maximum of 5 percent of the city to be included in TIF districts. Casar would like staff to consider raising that cap. But more than that, he wants to consider ways to change how TIF is used. Traditionally, TIF districts are created to facilitate the investment that is expected to boost property values; in the case that Casar envisions, the creation of the district would follow the investment (corridor spending) that is going to occur regardless.

On Tuesday, he said that he expected his resolution to pass without much controversy. The real debate, he added, would likely come when it’s time to put a new policy into action.

While creating more subsidized, income-restricted housing is a stated priority of nearly every member of Council, there will likely be differences of opinion about how much of the future revenue growth should be devoted exclusively to it.

Photo by John Flynn.

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Key Players & Topics In This Article

affordable housing: This general term refers to housing that is affordable to Austinites, with or without subsidy.

Austin City Council: The Austin City Council is the body with legislative purview over the City of Austin. It offers policy direction, while the office of the City Manager implements administrative actions based on those policies. Until 2012, the body contained seven members, including the city's Mayor, all elected at-large. In 2012, City of Austin residents voted to change that system and now 10 members of the Council are elected based on geographic districts. The Mayor continues to be elected at-large.

Tax Increment Financing District: A geographic area in which property tax revenues are set aside for reinvestments in other areas.

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