Small backyard homes are commonly called granny flats or accessory dwelling units. SPENCER BROWN

Austin Business Journal writes, "a new policy allowing up to three homes to be raised on some single-family lots is one of the most high-profile changes to Austin's land use code as it tries to combat high home prices and adopt a big-city mentality.

But experts said the program will not have a notable effect on the local housing market for the foreseeable future — plus, there's the specter of a lawsuit scaring some developers off.

The first phase of what's called the HOME Initiative launched Feb. 5. That's when homeowners and developers could start to submit applications. Landowners can either sell the new, smaller homes or they can rent them out. The impact of the change will only become measurable in the months and years to come, but the forecasts aren't heartening to those seeking more affordable housing.

Still, Clare Losey, the Austin Board of Realtors' economist, called the change a “step in the right direction."

She is one of the experts who said the new program will not have a substantial or immediate impact on the market. Some go so far as to say the HOME Initiative will have the opposite effect intended — they worry it will further inflate home costs.

Right now, redevelopments only account for about 3% of new homes built in the region, according to data collected by Austin Habitat for Humanity. Don't expect that to change notably, experts said.

Out-of-town data offers potential outcomes

The Austin Planning Department does not have an estimate on the number of new homes the first phase of the HOME Initiative will create. The city is instead working off data based on similar changes enacted in other cities.

Portland, Oregon, which adopted a similar regulation that went into effect in 2021, had 336 units permitted in the first year of the new regulation, according to a study reviewing the change. Three-quarters of the permitted units approved that year were for fourplexes. While Austin limits homes to three on a lot, Portland allows developments as large as a sixplex.

“While allowing three units per lot alone may not create a substantial amount of capital 'A' affordability, when combined with other land use changes approved by the City Council, these changes will help increase and diversify Austin’s market-rate housing supply, which will over time help make housing more attainable and affordable to the average Austin household," Losey said.

Austin is struggling to meet its 10-year goal of creating 60,000 new affordable housing units. Also, the city's housing inventory is still short of the six-month inventory widely considered healthy for a community.

Austin is largely operating with a land development code set in the 1980s. Recent attempts to revamp it have been fought by activists who tend to win.

A recent study by the University of Texas, published by New York University’s Furman Center and sponsored by The Pew Charitable Trusts, points toward the ability of zoning reform to increase the availability and affordability of housing within a community.

The review analyzed Houston’s decision to decrease minimum lot size requirements, spurring the creation of at least 34,000 townhomes between 2007 and 2020.

It determined that new development had a limited impact on existing residential neighborhoods and did not result in the displacement of the city’s Black and Hispanic residents. It also found that the changes were made possible through the inclusion of a block-vote provision, allowing groups of homeowners to opt out of the new standard if they wished to do so.

Potential lawsuit top of mind

Infill housing developer Scott Turner, owner of Riverside Homes and Turner Residential, said HOME is a fundamental change but not a game changer.

"When you start looking at broad numbers of the city's housing needs, those are so high that (HOME Initiative) is going to do little to meet the total demand," Turner said.

Despite his excitement and ongoing support for the program, Turner said he does not plan to immediately begin submitting applications to participate.

The reason: HOME is expected to be challenged in court by attorney Douglas Becker of Austin-based Gray Becker PC. In December, Becker led a successful case against other land use changes that would have paved the way for bigger buildings in what is now America's 10th-largest city.

"There is more risk for builders to jump right in and wait for the courts to decide," Turner said. "Small projects can't afford that kind of uncertainty. I am cautiously optimistic until we know what the legal outcome is.

"We hope to get to use it sometime soon," he added.

'Gentle densification'

Council Member Leslie Pool, who introduced the program, describes HOME as an organic, gentle and generational introduction to new land use standards that will take time.

She said the policy is a slow process by design intended to empower existing homeowners with an option to create more housing opportunities for their neighbors.

“That was actually the goal,” Pool said. “This exists as intentional, gentle densification.”

Anticipating that developers and builders will prioritize land in Austin’s most desirable neighborhoods, Losey said that those initial projects will likely not fall under Austin’s intended missing-middle housing.

“Builders and developers naturally are going to be more inclined to redevelop areas where homes are generally more expensive than a median-priced home in the city,” Losey said. “They're looking at higher opportunity areas where there is going to be strong demand for homes.”

Losey anticipates that areas just outside of the city’s downtown will be most appropriate for the new policy and will maximize the benefits of the program.

“The underlying land is under more intense pressure to be redeveloped,” Losey said. “The cost of the land is such that it would dictate a higher use than single family.”

Sites eligible under the program are also limited by environmental constraints and deed restrictions. For example, a subdivision that has an overlay or restrictive covenant in place stating that only single dwellings are allowed on existing lots remains protected.

The understanding is that the true strength of the program will only take effect as other planned land use changes take effect, including a second phase of HOME that is set to decrease minimum lot sizes for residential properties.

Set to be considered by Austin City Council later this year, the change would allow homebuilders the opportunity to raise more homes on smaller plots of land.

“Large minimum lot size requirements place an artificial constraint on the housing market that prevents diverse housing options, restricts the ability to subdivide lots effectively and impacts housing affordability by limiting the financial feasibility of building anything other than one home that is relative to the scale of the lot size,” Losey said. “Allowing three homes per lot and reducing the minimum lot size could dramatically change the types of housing built in Austin – by allowing more missing middle housing types – and make homeownership accessible to more Austinites.”

Both phases of the initiative are supported by the Home Builders Association of Greater Austin.

“The homebuilder community is eager to be a part of the solution,” said Taylor Jackson, CEO of HBA. “We want to ensure homeownership is affordable and attainable for Austinites. Some of our builder members are already retooling their operations to adapt to these regulatory changes – however, we will not see the housing diversity and supply that we need without passage of HOME Phase Two.”

As HOME takes effect, there are still barriers that are keeping developers in Austin from producing more affordable homes.

A big contributor to that is the city’s site plan approval process, which delays some projects for more than a year and causes the listing price of new homes to further rise due to the inflated development costs brought on by an inefficient process. City Hall has signed a $2.5 million contract with consulting firm McKinsey & Co. Inc. to streamline that.

In May, Austin launched the first phase of its “site plan lite” process exempting developments with four units or fewer from participating in the traditional site plan review process and offering an expedited program instead.

Greg Anderson, a member of the Austin Planning Commission and the director of community affairs for Austin Habitat for Humanity, said the launch of HOME is a step in the right direction but many more improvements are needed to ensure Austin will be able to provide the affordable housing that its residents need.

“HOME will help, but we need a lot more by right-zoning tools in the toolbox,” Anderson said.

City Council also is working on a resolution that would offer the same opportunity for some projects with five or more units, and there's also an effort to streamline the subdivision approval process."


Source: Austin Business Journal

Written by: Mike Christen

Published: February 6, 2024

Posted by Grossman & Jones Group on


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