Austin Business Journal reports, "A new state law set to take effect in the fall could throw a wrench in Austin’s plans to incentivize more affordable housing.
That’s according to the director of Austin's planning department, Lauren Middleton-Pratt, who wrote in a July 28 memo to city leaders — as the city is updating its density bonus programs — that a new state law will require the city to re-evaluate how it incentivizes new income-restricted housing units.
The new state law is Senate Bill 840, which was passed during the 89th Texas Legislature and allows for mixed-use residential housing on any land that’s zoned for office, commercial, retail, warehouse or existing mixed-uses without needing a zoning change approved by a city. The legislation, set to be effective in September, could make it easier for developers to place mixed-use residential projects throughout large cities in Texas.
The law only applies to cities with more than 150,000 residents in a county with more than 300,000 residents.
SB 840 could impact Austin’s efforts to incentivize affordable housing units in new developments because Austin's density bonus program being scrutinized allows developers to build bigger than normal if affordable housing is added or the developer pays into the city’s affordable housing efforts.
Middleton-Pratt said SB 840 will increase base zoning entitlements across Austin, meaning that some projects won’t need to provide community benefits because they won't need City Council approval for increased entitlements.
“Several significant additional entitlements typically offered through voluntary density bonus programs will become available by right to residential and mixed-use projects under SB 840,” Middleton-Pratt wrote. "Therefore, SB 840 will significantly impact the viability of many of the city’s density bonus programs."
She also said the full scope of how SB 840 will impact entitlements for projects in Austin is still being analyzed by city staff but it’s “clear that an updated approach to incentivizing income-restricted units that goes beyond density bonuses will likely be necessary.”
Austin is in the middle of updating its density-bonus programs as they have been criticized as being too narrow for some projects and encourage displacement of existing residents.
Middleton-Pratt has said city staff have begun to incorporate SB 840 into the updates on the city's density bonus programs and more information on recommendations on density bonus programs should be provided by spring 2026."
Source: Austin Business Journal
Written by: Sean Hemmersmeier
Published: July 31, 2025
Posted by Grossman & Jones Group on
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