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Council responds to report finding ‘affordable’ condos aren’t always affordable

Thursday, December 15, 2022 by Jonathan Lee

City Council approved a resolution on Dec. 8 addressing barriers to affordable condo ownership, acting on findings from a report by the University of Texas School of Law that expensive condo fees and improper property tax assessments can push below-market units beyond the reach of those who qualify. 

“There are some things we really need to attend to to make sure that in our ownership units, people can afford to stay,” said Council Member Kathie Tovo, who sponsored the resolution

The UT report identifies monthly condo fees as a key reason affordable condos might not be affordable for some buyers who meet income qualifications. In developments with below-market and market-rate units, condo associations sometimes charge the same fees for all owners, saddling low-income buyers with fees they can’t afford. 

While the city can’t regulate condo fees, it can take into account their cost by lowering a below-market home’s listing price, as the report recommends, or incentivizing discounted fees. 

Heather Way, a professor at UT and the report’s lead author, said it’s actually in a developer’s financial interest to make initial condo fees on brand-new, below-market units affordable to buyers. “If they don’t, those units are going to sit there empty,” she said. 

But Way is less worried about the fee a developer charges on new units than what happens afterward. “The thing that jeopardizes these low-income homeowners the most is rising condo fees,” she said.

Condo associations can change fees from year to year to account for things like inflation and increased building maintenance. They can also raise discounted fees for below-market owners. 

Another problem is erroneous property tax assessments within the first year of ownership. The report found that the Travis Central Appraisal District has incorrectly assessed affordable units as market rate in the past, surprising owners with a property tax bill that is potentially thousands more than they were expecting.

This happened at the Grove, where the affordable units “had such a high assessment value their first year that the folks who qualified for them really struggled to pay it,” Tovo said.

Incorrect assessments are mainly a product of bad timing. If a developer doesn’t tell the county’s appraisal office which units are affordable and which are market rate by a certain date, the county will classify all units as market rate.

Way said the problem can be addressed with greater awareness and coordination among the city, county and developers. The report recommends creating a road map to help developers navigate the process of creating affordable condo units as well as working with city and county staff to make sure developers report affordable condo units on time.

Without the city intervening to reduce these unanticipated costs, families could be at risk of losing their home. “It’s going to stretch their budgets even thinner and ultimately can lead to foreclosure and the family losing their home as a consequence that they can’t afford their taxes and can’t afford their condominium fees,” she said. 

The resolution directs city staffers to return to Council in March with an update on how to implement the report’s recommendations. 

Photo made available through a Creative Commons license.

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