Sean Bukowski

House for sale

Time to Take a Serious Look at a Series LLC

  • A Series LLC may be a useful structure for certain real estate investors.
  • It can provide numerous individual and separate liability entities for a relatively low price.
  • But you have to follow specific rules when setting up the Series LLC to get adequate protection.

We represent a lot of real estate investors who are in the process of purchasing property. It’s a big part of what we do. And that often includes helping our clients figure out the best ownership structure for their purchase. Usually that advice ends with us telling them to set up a limited partnership or (less often) a limited liability company.

But sometimes that’s not the best advice. There is at least one new(ish) structure – a Series LLC – that can really be a benefit to certain investors – especially those that are purchasing a number of rental homes. But to set up that structure, you have to make sure you follow the specific rules that allow for its formation.

So that’s what we are going to talk about this week. What is an LLC? How do you form it? And is it right for you?

What are the Basics of a Series LLC?

A Series LLC is exactly what it sounds like: a series of limited liability companies that are connected back to the parent limited liability company. This allows for assets and operations to be broken up across various series that work as individual LLCs, but still connect to the parent LLC.

With just one filing, therefore, an owner can set up an entity that can potentially house multiple single purpose entities. That obviously has the benefit of ease, saving time, and money.

But there are specific requirements that are required when setting up a Series LLC.

What are the Requirements of Setting Up a Series LLC?

To set up a Series LLC, you must first file a standard certificate of formation with the Secretary of State. There is, however, required extra language needed on the form in order to explain how the Series LLC is formed and how its liability works. This language is extremely important to include. If it is not done, each series may not be treated as a separate LLC with separate liability.

Then, once you have the initial LLC filed with the SOS, you do not need to file a certificate of formation with each subsequent series. You simply file an assumed name certificate with the Secretary of State for each series.

It is imperative that once you have a series underneath a parent LLC, you must keep all management, recordkeeping, and funds between the two completely separate. You must not commingle any funds between the series, or you may lose their separate liability status.

What are the Benefits of a Series LLC?

As you can see, there are a number of rules and policies you have to follow when setting up a Series LLC. So why do it? What’s the benefit?

The two main benefits to creating a Series LLC are cost and protection. The cost for filing a Series LLC rather than a set of normal LLCs is drastically different because the series only requires a Assumed Name Certificate for each series rather than filing a separate Certificate of Formation with the SOS with each series. And as long as you do this correctly, each series will be treated as a separate entity with its own liability. Thus providing separate protection at a relatively low cost.

As mentioned above, the ideal use of a Series LLC in real estate is for a company that wants to purchase numerous single family home rentals. For a relatively low price, the owner can set up multiple single purpose entities all rising up through the initial LLC.

Filing for a Series LLC can be inexpensive and prove to be much more viable in protecting assets. However, it is vital to follow the guidelines put in place by the State of Texas when filing to avoid any legal trouble that could result in seizure.

voting hands

Are We Headed for a Crazy November?

  • In 2012, Austin switched from a open seating city council format to a 10-1 district plan with representatives from each of the ten districts.
  • In 2020, the City started a redistricting plan that attempted to equally distribute population throughout the ten districts.
  • If a lawsuit challenging that redistricting plan is successful, all ten district seats could be up for election this November.

There has been a lot of talk recently about who is going to be running for office in Austin in November. Indeed, with Mayor Adler finishing his term, Kirk Watson and Celia Israel seem to be the front runners for the open Mayor seat. And a number of candidates have thrown their names in the ring for the open City Council seats.

But that is where things kind of get interesting. There is an ongoing lawsuit that could throw the November Austin election into disarray. It has the potential to be a huge issue. If successful, it could challenge the whole election and city council system this year. And yet, until recently we had not heard much about this lawsuit.

So that’s what we are going to talk about this week. Not only the upcoming election but how they could be thrown off kilter by an outstanding lawsuit.

How the Austin City Council is Set Up

To understand the ramifications and reasoning of the lawsuit, you must first understand the history of the Austin City Council. Prior to 2012, the Austin City Council was open seating. That means that the City Council members could come from anywhere within the City.

That changed in November 2012 when Austin residents elected to move to a 10-1 system. This created 10 regional districts which would each send a member to sit on City Council from that district.*

Part of that change was that the City was to redraw the districts every ten years. As a result, the City undertook a proposal and hearing process to redraw the districts based on the shifting population. That process started in 2020 and has now been completed. The new districts are scheduled to go into effect for the 2022 elections.

Lawsuit Challenges Austin Redistricting

Well that is where things got kind of messy. Austin city council members are elected to four year terms. The city, therefore, staggers the elections. So some of the seats are up for election every two years.

But because of redistricting, there are some residents that voted for a council member in 2018 but are no longer in that district. As a result, they will not vote for a council member for six years – from 2018 to 2024.

Some of those residents, therefore, filed a lawsuit claiming that they were effectively disenfranchised from voting for city council. As a result, they wanted the court to force the City to call elections in all ten districts and have every council member seat up for election this year. As I am sure you can see, this would cause quite a stir on the Austin election scene as the council members who did not intend to run again this year would have to run for his or her seat this November.

As I was writing this article, the local district court granted the City’s request for summary judgment against the plaintiffs. As a result, the lawsuit could be dismissed. But that does not mean the fight is over.

The Plaintiffs had already asked the Court of Appeals and the Texas Supreme Court to hear the matter. And the Supreme Court has said it will hear the appeal. As a result, it will have the final say on whether Austin will have to have ten district court elections this November. And, if that happens, it could be a wild few months leading up to that election.

 

 

*The extra “1” is for the mayor.

tax

Its That Time of Year

  • The deadline for protesting your property taxes is coming up very quickly.
  • Its important to follow the deadlines and guidelines for protesting your taxes or you may lose your best chance to lower your assessed value.
  • When presenting your argument to the appraisal district, you have to support it with facts and analysis.

You don’t need me to tell you what time of year it is. It seems to be pretty popular news these days. They even have faces for radio talking about it on television. But in case you have missed it – its property tax season again in Texas.

At our office, we have been bombarded by phone calls and emails since the Notices of Appraised Value came out. Its not hard to see why. The appraisal districts seem to have beaten all records in the amount of the increases this year. So if that is what you are seeing on your properties, we highly recommend you file a protest.

Indeed, we think all property owners should protest their appraised values every year. Obviously this is a little self-serving but its also in the owner’s best interest. This is especially true for commercial property owners. But if you are going to protest, you have to make sure that you follow the deadlines. Because if you miss a deadline, you can miss your chance to have your taxes lowered.

So that’s what we are going to talk about this week – the process of protesting your property taxes.

What are the Basics of Protesting Property Taxes in Texas?

 

Many of you may know this already, but I want to start by making it clear that when I write “protest your property taxes” what I mean is protesting the assessed value of your property. The local county appraisal districts will assess your property every year. And you can protest that they have assessed it too high. Once the assessed value is assigned, in the fall the tax rates will be determined. And then the amount you owe is the assessed value multiplied by the tax rate.

It is probably obvious but I timed this article for this week because the protest deadline is coming up. Usually it is on May 15 of each year. This year, May 15 falls on a Sunday. The deadline, therefore, is moved to May 16. Just to be safe, though, I recommend you make sure your protest is filed by Friday, May 13. The deadline is too important – if you miss it you will likely not be able to protest your taxes.

When you protest, it is VERY important that you check two boxes. The first is that the market value of the property is incorrect. The second is that the property is not equal with other similar properties. These should be the first two boxes on the protest form.* And they are both valuable to give you your best shot to have your taxes lowered.

Once you protest, you will have an informal hearing first. In some districts – especially Travis – this has gone largely online. The process is you submit your evidence through the county’s portal and then a week or two later, the appraisal district will email you back an offer. If you do not accept its offer, you will go to a formal hearing. There are some districts that still have in person informal hearings. In those districts, you will meet one on one with a county appraiser and try to reach a settlement.

If you go to the formal hearing, you will be in front of a panel of three people. You will present your case for why the value should be lowered, the appraisal district will present its case, and then the panel will decide what it thinks should be the appraised value. If you are unsatisfied with the Panel’s determination, you can then file a lawsuit against the local appraisal district.

The Information You Need to Have the Best Chance to Lower Your Assessed Value

 

As you have probably noticed, in the last five to ten years the appraisal districts have gotten much more aggressive. They have access to information they did not have before from companies like CoStar. And they are searching county records for deeds of trust.

As a result, if you are going to have any success protesting, you need to be prepared. And you need to be prepared WITH DATA. A narrative of why your appraised value should be lowered is probably not going to be successful. You need to have analysis that supports exactly how much lower the appraised value should be. That is by far the most influential way to get your taxes lowered.

This is a stressful time for property owners. Runaway taxes can sink a commercial real estate investment. If we can help at Bukowski Law Firm, please give me a call.

 

 

 

 

 

*Some counties may combine these two categories into one box to check.

student homeless

Where am I Supposed to Live?

  • Some ACC students have requested that the Board of Trustees help them find affordable housing.
  • The Board of Trustees has agreed to help them with a few different initiatives.
  • But real change and help will not occur until Austin’s City Council has better housing policies.

There was an article this week in the Austin-American Statesman that caught my eye. In it, the local reporter interviewed some college students about their struggles with finding affordable housing.

We have all been talking a lot about affordable housing. I mean, its one of the biggest issues in the country. The article was especially interesting to me because it was a real world example of all the bad local housing policies in action.

It kind of fired me up again to talk about all the mistakes the Austin City Council is making and how there’s still time to fix it – but its fading fast. So that’s what we will talk about this week – Austin’s bad housing policies and how they directly affect Austinites.

Its Difficult for Students to Find Affordable Housing in Austin

The author of the article in the Statesman interviewed a few Austin Community College students who were having difficulty finding housing. According to the article, there are thousands of ACC students struggling with the rising cost of housing. And some of them have to resort to couch surfing, regularly visiting food pantries, or moving far away from Central Austin to make ends meet.

Obviously this is not what anyone wants. It does not serve anyone’s best interests for students to have to commute from far outside the city because they cannot afford to live in Austin. In response to these issues, the ACC student government asked the Board of Trustees to respond to the affordability crisis with a variety of measures, including working with community partners to find affordable housing options, identifying housing sites close to campus with reliable free transportation, and creating a committee to prioritize student housing.

ACC seems sympathetic to the cause and it plans to work with the students to identify housing solutions, increase awareness of housing resources, and alleviate the personal and financial challenges that students face.

Need to Face the Core Problem for the Affordability Crisis

The one thing that was noticeably absent from the article was a discussion of why the students are in this situation in the first place and how they can get out of it. The reality is, they are right. Austin has an affordable housing issue. And I know we have talked a lot about this but the main culprit for it are Austin City Council’s terrible housing policies.

To the Council’s credit, some of the members have tried to enact an overhaul of the zoning code that would be friendlier to building density. But as you know, this has been struck down by the courts. As a result, Austin is basically back at square one for an overhaul.

But that does not mean there is nothing the City Council can do. A few months ago, we hosted a roundtable with the Austin Business Journal where we talked to a number of leaders in the real estate industry. They had a lot of ideas about how the City Council can help improve housing affordability. Without making a complete overhaul to the code, the City Council can –

  • Allow all homeowners to be able to build accessory dwelling units (ADUs);
  • Reduce the minimum parking requirements;
  • Reduce the minimum lot size for single family homes;
  • Participate in private/public partnerships to encourage more affordable building; and
  • Adapt zoning changes in smaller areas to encourage denser building.

All of these changes will help to increase the supply of housing in Austin and, therefore, control the cost. Of course, there are still a number of folks on the Council and throughout the City that oppose even these changes. As a result, I fear that things are going to get much worse for these ACC students before they get better.

architecture

Protecting Your Real Estate Investment

  • It is possible for thieves to file fraudulent deeds and attempt to sel property they do not own through a fake property sale.
  • That’s why it is so important for buyers to purchase title insurance when buying commercial or residential property.
  • In our title attorney business, we work with a local title company to provide title services to buyers and sellers of commercial property and hopefully protect their investment from frauds like this.

I had a conference this past weekend to attend in Dallas. There were good speakers but – like with any conference – I found myself drifting to my phone every once in a while to read some internet articles. And while doing, I read a few about folks scamming property owners with fraudulent deeds. Obviously as a real estate attorney this interests me but we also had a client recently who thought something similar happened to them.

I don’t want to be the local evening news and scare monger in this article (“SCAMMERS ARE COMING FOR YOUR PROPERTY! TUNE IN TO SEE HOW YOU CAN PROTECT YOURSELF!). But these scams do sometimes happen. And when they do, they can be a significant nuisance. As property owners, therefore, we have to take precautions to protect our investment.

And that’s where title insurance comes in. I know some folks hate it and hate the cost. But it really is important. So what are these scams? And how can title insurance protect your property? That’s what we talk about this week.

Beware the Fraudulent Deed Scam

 

The people who commit the fraudulent deed scam are trying to steal your money. The basic premise is that they forge a deed (often a quitclaim) allegedly transferring the property from the current owner to them. They then file that fraudulent deed with the county clerk. At that point, the thief may try to sell the property to a third party while showing they have a deed to the party in the county property records.

This is, obviously, a big problem for the potential buyer. If not caught, the buyer could pay a lot of money for what he thinks is a property investment. Then, after closing, he does not have any rights in the property because the thief had nothing to sell except lies.

Title Insurance can Protect Your Investment from Scams

 

This is where title insurance comes in to help protect you. A basic title insurance policy:

  • Should alert you if you are buying a property from a fraudulent seller; but
  • If the title company misses the fraudulent deed, reimburse you for your lost investment.

It is, of course, important to read your title commitment thoroughly prior to closing because there could be exclusions to the coverage. But assuming you have normal, full coverage, a title insurance policy can protect you against buying from a fraudulent seller.

Key to Finding a Good Title Company

 

There is little doubt, therefore, that title insurance is a must purchase when buying a new property. Its equally important to work with a title company and escrow agent that will provide the coverage that you need.

First, you want to make sure you and/or your lawyer have read and understand the title commitment (pre-cursor to the actual policy) prior to close. As I wrote above, there can be exclusions to the policy and its very important to understand what those may be.

Second, you want a title company that understands how important it is to get the deal closed. To be a good closer, its vital to fully understand the Texas Department of Insurance Rules. But if the buyer or seller needs something the TDI rules do not allow, a good closer will also help find a solution that satisfies all of the parties. Because at the end of the day, making sure the deal closes is very important to both the buyer and the seller.

As title fee attorneys at Bukowski Law Firm, we understand how important it is both for the parties to be protected and to get the deal closed. We pride ourselves on providing the best title and escrow services around. We would love, therefore, to help you close your next deal.

 

 

homeless

All Ideas are Welcome

  • Late last summer, Austin started tearing down homeless encampments and dispersing the people who were staying there.
  • But Austin does not have enough beds to house all of the folks experiencing homelessness in Austin.
  • Hopefully some corporate citizens can come up with creative solutions to help those who are most in need.

This week I want to revisit a topic that we have not talked about in a while – Austin’s homelessness issues. I’ll explain later in the article why this topic is in my mind this week. But, if you recall, the last time we checked in, Austin had a serious problem with homeless encampments all around the city. And then the voters elected to once again outlaw camping on public grounds. It was something I advocated for because having homeless encampments all around the city is not a good and feasible long-term solution to homelessness.

But the correction always came with one big issue – once the homeless folks are forcibly removed from their encampments, where are they going to go? It’s a question that I do not think we, as Austin citizens, have been prepared enough to answer. But its too important a question to just ignore. So this week I am writing about what potential solutions Austin has put forward and then maybe some outside solutions that got me thinking about this issue again.

Where Have all the Homeless Folks Gone?

 

It was late last summer or early fall when the City started breaking down the homeless encampments and moving people out of them. At that point, the homeless folks were no longer allowed to camp on public grounds and had to go somewhere else.

The Austin homeless population is estimated to be about 3000 people. Unfortunately, we just currently do not have enough beds to house that many people on a regular basis. As a result, there are many fellow citizens who are sleeping on the streets at night.

There are, of course, multiple potential solutions that exist. While these groups are all undoubtedly doing their best, combined these efforts still do not fulfill all the demand there is for housing. These options include –

  • ARCH – The ARCH building downtown at 7th and Neches is run by Front Steps. They can serve about 200-300 people per day and have about 190 beds for overnight stays.
  • Other housing options – Other places around the city like the Austin Shelter for Women and Children, Casa Marianell, and Lifeworks all house folks experiencing homelessness.
  • Hotel Purchases – The City has purchased a few hotels to convert into lodging for homeless folks. Each one will house about 20 people when completed.
  • Encampments – There are still some encampments that pop up throughout the city. And eventually they are torn down.
  • Developers – Some developers have worked with the city to help house some folks experiencing homelessness.

Despite the effort of these great groups, we still do not have enough housing to meet the needs of everyone who is currently on the streets.

Potential Corporate Solutions to Homelessness

 

So now I will tell you why this topic came to mind when I was debating what to write about this week. Elon Musk has been in the news a lot lately. It seems like that is always the case, doesn’t it? As you probably know, he acquired about 9% of the outstanding stock of twitter. And then briefly flirted with joining the Twitter board and buying out the rest of Twitter’s stock.

During this time, he was tweeting a lot, as you can expect. And in one of the tweets he suggested closing Twitter’s headquarters – since, as he wrote, nobody goes there anyway – and turning it into a homeless shelter.

Shortly thereafter, Jeff Bezos responded that Amazon had done something similar in Seattle. And in addition to housing a number of folks previously experiencing homelessness, having the housing on Amazon’s campus made it easy for employees to volunteer at the shelter.*

I am embarrassed to admit that Amazon opened this almost two years ago and I had no idea. But I am fascinated by the idea. I am sure there are some unintended consequences of this – and Bezos hasn’t escaped all criticism. But I find the criticism – at least in that article – to be unconvincing.

Amazon and Bezos are doing something in Seattle to try to help house people who are experiencing homelessness. They should be commended for doing it. And I hope they – and all the other CEOs and companies moving to Austin, including Elon Musk – will follow his lead and come up with creative solutions to help our citizens who most need it.

 

 

 

 

 

*I’ve written previously about the return of the corporate town. And every time I see a Google or Meta or Amazon office, it appears that we get closer and closer to that reality. But that’s an article I will revisit later.

waiting airport

Leavin’ on a Jet Plane

  • There have been a lot of reports lately of chaos at the Austin airport.
  • This includes long lines, labor shortages, and canceled flights.
  • Unfortunately, these issues are likely to continue for a while at certain times of the week.

A couple of weeks ago, I wrote about the much needed expansion of the Austin airport (“ABIA”). If you recall, under Project 2040, the plan is to build a new, additional terminal and expand and renovate the existing one. This expansion will increase ABIA’s capacity from 34 gates to at least 66.

As I wrote at the time, there is no doubt we need this. My friend Greg Anderson recently showed me a projection from the US Census Bureau that predicts the Austin metropolitan statistical area (“MSA”) will have approximately 5.3 million residents by 2050. So the current 34 gates are just not going to be sufficient.

Well since I wrote that article, there has been a lot of new excitement at ABIA. And it has not been the good kind of excitement. This week, therefore, I am writing about what’s going on at ABIA.

The Austin Airport has Significant Congestion

 

You may already know what I am going to write about as this has been in the news a lot lately. But ABIA has seen some incredible backups and shortages lately. Indeed, in the last week, there have been reports of:

  • Security lines that stretch outside the airport’s doors and down the block. Some reports have these lines taking three hours to get through.
  • People leaving rental cars on the side of the road and walking to the terminal because the car lanes are so backed up.
  • An excessive number of cancelled flights.
  • A shortage of fuel for incoming and outgoing flights.

I am sure you can imagine, therefore, there seems to have been a lot of chaos and unhappy travelers and workers recently at ABIA.

What is the Cause of the ABIA Chaos?

 

Obviously nobody wants to see these kinds of issues derail an important airport. And there is no doubt that ABIA is trying to solve these issues. But what needs to be fixed? What’s causing this? There are a few contributing factors:

  • Overcrowding – I talked about this in the previous article, but Austin is booming. And the current size of the airport is just not sufficient. And its not just the current residents – Austin has tons of tourists come through for festivals and concerts, etc. That’s one reason why the trouble has been centered around early morning flights on Monday and Tuesday. Its an incredibly busy time and ABIA is just not equipped for that kind of capacity.
  • Labor shortages – ABIA Executive Director Jacqueline Yaft asked for additional TSA agents weeks ago. But TSA apparently does not have the agents to spare. It has a labor shortage and, as a result, does not have enough TSA agents to fulfill ABIA’s needs. That will, obviously, lead to longer security lines.*
  • Tank Farm – ABIA is trying to solve its fuel needs by building extra fuel storage tanks on land near the airport. But according to Jack Craver’s email blog, the neighborhood groups are fighting this. As a result, approval for that storage area is currently held up at city council.

Combining all of these issues has lead to the big problems ABIA is currently facing – and will continue to face.

What is Next for ABIA?

 

So what do we do now? How do we continue to get flights to and from Austin?

First, I want to make clear that the airport is not always a disaster. As far as I can tell from the reports, the crazy times really are focused around early morning – especially at the beginning of the week. At other times, the airport is running normally.

But ABIA officials have warned that they do not expect the busy days and peak hour long lines to end any time soon.  That’s why the 2040 Project is so essential. The quicker we can get the additional gates to meet the growing capacity, the better. And lets hope that TSA can find a way to reduce its labor shortage and get ABIA the number of agents it needs.

Until then … well I certainly do not want to tell you to join CLEAR and TSA Precheck. Because that’s only going to make my lines longer.

 

 

 

*After writing this, TSA announced it was sending 15 new agents to Austin. So that’s obviously good news.

land

I Can’t Get Home

  • If you own land that does not have access to a public road, there are ways to get an easement over neighboring land to provide you access.
  • An easement by necessity will only be granted if you can fulfill a three-prong test prescribed by the courts.
  • To get an easement by necessity, you will likely have to resort to litigation.

Sometimes when I am thinking of things to write about in this blog, I hit a wall and cannot come up with any good thoughts. Its then I must go searching for some interesting ideas. That’s a short way to ask you not to judge me when I tell you I was reading a summary of a real estate decision from the Idaho Supreme Court this week when I had an idea of what to write about.*

The case was about some locked in land to which the property owner did not have access. And that got me thinking of how that is treated here in Texas. We have dealt with some similar issues for some of our clients previously. So that’s what I am writing about this week – how do you get to property for which there is no easy access?

 

What is an Easement?

I do not want to bore you with a law school lecture but to explain what happens to your landlocked parcel, we first need to understand what an easement is. An easement is a property right in land that is separate from the title ownership. It gives the dominant estate (easement holder) the right to access over the servient estate (the land owner) for a specific purpose.

The most common form of this is the utility easement. So if I own three acres of land (for example), I likely want to give Austin Energy an easement to install electricity lines so that I can have electricity on my property.

This is important when you have land that does not have access to a public road. I know that is weird to think of for us city folk. But it is not uncommon in rural areas.

 

How do You get to Land if there is No Access?

In Texas, therefore, what do you do if you do not have access to your land through any public roads? That is where an easement comes in. You are going to need to get an easement across someone else’s property to access your land. There are basically four types of easements that could potentially help:

  • Agreed easement;
  • Prescriptive easement;
  • Easement by estoppel; and
  • Easement by necessity.

Eventually I will try to talk about all of these individually. But this is a relatively short blog and I don’t want to completely bore you. So this week we are only going to talk about the last one – an easement by necessity.

 

An Easement by Necessity Can Help You Access Your Land

If you do not have access to a public roadway from your land and you do not have an express easement over a neighboring property, you may be able to get an easement by necessity. A court can grant you an easement over someone else’s property because it’s the only possible way to access your property.

To get an easement by necessity, you must demonstrate –

  • Original unity of property of your landlocked property and the property over which you are seeking the easement;
  • The claimed easement is a necessity to access your land; and
  • The necessity existed at the time the property was severed from the purported servient estate.

You must prove all three of these to be able to convince a court to grant you an easement by necessity. See Hamrick v. Ward, 446 S.W.3d 377 (Tex. 2014).

 

Easement by Necessity Can Lead to Dispute           

We have dealt with this situation multiple times on behalf of our clients in the past. And every time we have to deal with it, it inevitably leads to a dispute between the neighboring property owners.

The best course, therefore, is to try to come to an agreement with your neighbor granting you an express easement to access your land. But if you cannot come to an agreement, you do have the possibility of getting an easement by necessity. Though we will likely have to go to litigation to get a court to grant you that easement.

 

 

 

 

*This is not a normal thing for me. I was just depressed from Michigan’s loss in the NCAA tournament and was trying to avoid sports.

Construction

Huge Loss for Austin

  • 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.

atx

SXSW – Its Good to be Home

  • 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.