March 2022

• On March 17, the Appellate Court ruled against the City of Austin in a suit over the overhaul of the land development code.
• It ruled that the City violated property owners’ procedural rights by not allowing them an avenue to protest the changes.
• As a result, the City Council faces a tough decision on how to combat the affordable housing crisis.

March 17 is supposed to be a fun day. It’s a day to drink green beer, eat corned beef and hash, and sing Irish drinking songs. At least it is in my household.

Unfortunately, this year it was not a very fun day for the City of Austin. On that day, the Court of Appeals handed down a long-awaited decision that upheld a district court ruling against the City. This decision, unfortunately, has a huge negative effect on the future of the City and how we are going to try to combat our affordable housing issues.

So what was the decision and what does it mean for the future of Austin? That’s what we talk about below.

Background – The Massive Overhaul of the Land Development Code

 

I have written about this previously, but the Austin Land Development Code (“LDC”) needs a massive overhaul. As we continue our rapid growth, there is a need for more housing. The best way to meet this demand is to allow for increased density throughout the City.

The City Council tried to do this by adopting a complete overhaul of the LDC. It would have allowed for increased density in many areas around the City, especially along transportation corridors.

But some property owners objected to the zoning changes in their neighborhoods and filed suit against the City to stop it. The district court agreed with them and put a temporary stop to enacting the new LDC. The City appealed that decision and has been waiting for this ruling for a while. For a more detailed analysis of the reasons behind the lawsuit, you can go here to read my previous posts about it.

What was the Ruling from the Texas Appellate Court for the Austin Land Development Code Lawsuit?

 

That brings us to St. Patrick’s Day this year. On March 17, the Appellate Court finally handed down its ruling. And it basically agreed with the District Court.

The Appellate Court ruled that the City violated property owners’ procedural rights by failing to a) notify the property owners of their right to protest and b) hold hearings at the Planning Commission before holding a vote to approve the new LDC. The trial court’s ruling is, therefore, upheld. And the new LDC cannot go into effect.

What does this Mean for the Future of Affordable Housing in Austin?

 

The City now basically has three options with this lawsuit. It can either a) ask for an en banc rehearing of the entire appellate court, b) appeal to the Texas Supreme Court; or c) let it drop and accept defeat.

Council members Tovo, Pool, and Kitchen originally voted against the LDC overhaul. And since this ruling, they have each come out with a statement that suggests they do not want the City to continue with the overhaul and to just let this drop.

The bigger picture, of course, is what does Austin now do about its affordable housing problems? The property owners in this suit have found what I characterize as a loophole in the State law. The procedures required in the statute work for changes in zoning for individual properties. But they handcuff a city if it wants to overhaul its LDC because it is not realistic to think that it could hold hearings for every property in the City. That would be far too time consuming and costly.

So a city like Austin – which has an affordability crisis and needs increased density to solve it – cannot make a large overhaul to the local code to try to solve its affordability issues. The State statute is working against the local interest for the future of the City.

But despite these issues, the City Council is going to need to figure out some answer to the affordability crisis. I guess we will see what they do next.

• After a three year hiatus where it was only virtual, SXSW thankfully returned to Austin last week.
• In addition to the intangible benefits, SXSW allegedly brings a big economic boost to Austin.
• And it was great to have SXSW back on our streets.

It had been three years since South by Southwest (SXSW) had graced the streets of Austin in person. For the last two years, SXSW has been virtual only. And while I am sure they put on a great virtual conference, its not quite the same as having it in person.

For Austinites, we sometimes view SXSW with some hesitation because of all the people it brings to the area. Traffic is bad enough during normal times. But after not having it for two years, everyone I talked to (I know – quite a scientific poll) was really excited for SXSW’s return – including me. Its so ingrained in the City and it was sorely missed the last two virtual years.

It is just more exciting around here during SXSW. I mean, Austin is a pretty exciting place on most days, but SXSW gives it a huge extra boost. The city is more alive during SXSW. But aside from just raising the excitement level, SXSW also provides other benefits to us. And that’s what we are going to talk about this week.

 

South by Southwest is an Austin Treasure

I talked a little above about what an intangible benefit SXSW brings to Austin. In addition to raising the energy of the city, it provides fantastic opportunities to hear great panels or see new movies or listen to music. But in addition to that, there are also economic benefits that SXSW brings.

According to a 2019 report, SXSW was directly responsible for 12,800 hotel reservations in the city. These reservations let to approximately $1.9 million in hotel occupancy taxes. The report claimed that the total consumer impact to the area was $16.7 million.*

In addition to the measurable economic impact, SXSW provides great exposure for Austin. According to Hugh Forrest, the Chief Programming Officer of SXSW, the 2022 crowd was expected to be just slightly smaller than the 2019 crowd. That’s a lot of people coming to see and enjoy our great city. In addition, there is a lot of increased national media coverage of Austin at its best. This coverage can lead to people being interested in living/working/investing in Austin. According to that same study above, the value of the increased media coverage to the City is almost $340 million.

So in addition to the benefit the actual festival brings – entertainment, thought provoking panels, etc – SXSW also potentially provides a big economic boost to Austin.

 

What Could Derail SXSW?

But that, of course, does not mean that everything is wine and roses during SXSW. I already mentioned above that the additional people make a bad traffic situation far worse. But that, of course is a temporary problem.

In addition, there is some cost to the City. I do not know and could not find the details about police presence, who pays for it, etc. But there must be some cost to Austin to host a festival of this size. But there is little doubt (to me, at least) that the benefits far outweigh the costs.

Unfortunately, however, there is something else that could derail SXSW. Late Sunday night, there was another shooting on Sixth Street downtown. Four people were shot and hospitalized with minor injuries. This is a worrying trend for Austin. If there is a significant increase in crime, it could potentially discourage people from coming to SXSW. And that would be a disaster for both the Festival and the City.

But overall, SXSW is just a huge benefit for Austin. And its hard to explain how much it was missed the last two years. So thank you, SXSW, for bringing this terrific festival to our city.

 

 

 

 

 

 

*I’ve written before that I am sometimes dubious of economic benefit reports like this, but it’s the best information I could find.

• Affordable housing is back in the news because it’s a major issue throughout the United States.
• The City of Austin and Travis County have enlisted incentives to encourage developers to build more affordable units.
• While this is a good start, we need more incentives to meet the needs of our growing community.

I’ve talked a lot in this blog about affordable housing. And there is a reason for that. It’s a big issue. It’s a big issue here in Central Texas. It’s a big issue in Texas in general. And it’s a big issue in just about every growing city across the United States.

Here in Central Texas we are having tremendous growth and, as more people move to the area, our housing supply has not kept pace. As a result, its getting more and more expensive to live in the area. And working class folks are being forced out of the area.

Austin and Travis County, therefore, have both been looking for ways to solve the issue. But what have they done? Is it successful? That’s what we talk about this week.

What has Austin done to Help Solve Affordable Housing Crisis?

The Austin City Council has talked a lot in the last few years about trying to solve its affordable housing crisis. And it has enacted a few plans to get that crisis solved.

Specifically, as developers have come to the city to build new projects, the City Council has routinely negotiated with them to include affordable units in those projects. Often the developers will want zoning variances to build higher, more dense buildings. When requesting these variances, the City Council almost always requires them to build some affordable units.

A big key to solving the affordability crisis is density. So these zoning waivers are crucial for increasing the supply of housing in Austin. Unfortunately, too often these plans have been stymied by neighborhood groups. But that is a blog post for another day.

In a recent email, Jack Craver discussed some additional measures that the City has taken. As you may recall, in 2018 we passed a $250 million affordable housing bond. That money has all been earmarked at this point. It is going to the following areas:

• Land purchases – $100 million – Austin has bought/is buying land and is soliciting bids from developers to build affordable housing on that land.
• RHDA and OHDA – $122 million – Austin uses these programs to incentivize developers to build affordable housing.
• Home repair – $28 million – Presumably this money is being used by homeowners to improve homes and make them better suited for affordable housing.

According to Craver, this has and will likely lead to several thousand new affordable units. Obviously that’s not enough to meet the need, but it is a good start.

What is Travis County Doing to Help Solve the Affordable Housing Crisis?

Similar to the City of Austin, Travis County has been working on ways to help solve the affordability crisis. The Travis County Commissioners met this week to discuss this very topic.

During the meeting, they discussed a five year goal to improve housing and build more affordable units. This includes providing incentives to developers to build 70,000 new units by 2027. Of these units, 21,500 are to be built outside of the City of Austin.

Specifically, the units should have the following characteristics:

• 12,000 units should be affordable to those making 30 percent of the median family income and below;
• 15,000 units should be affordable at 31 to 60 percent MFI;
• 9,000 units should be affordable at 61 to 80 percent MFI; and
• The remaining 34,000 units should be affordable to those who make 80 to 120 percent MFI.

As always, the devil will be in the details. And these plans can still be derailed. But overall, this is a good start from both the City and Travis County. We need more affordable housing and both the City and County have some limited plans to incentivize developers to build more units and increase density. That’s the way we are going to get ourselves out of this crisis.

But, of course, this is just a start. We need more incentives and more ideas on how to increase density to provide better housing opportunities. Because the flow of new people to the area – thankfully – does not appear to have an end in sight.