Austin Real Estate still Affordable? – Affordability in Austin Real Estate
August 9, 2018 | Front Porch Realty
Austin Real Estate still Affordable? – Affordability in Austin Real Estate
The definition of “affordable housing” depends entirely on who’s looking.
As an urban planner, affordable housing is a key ingredient of a growing, healthy and vibrant city. Considering most City planners want to arrange a housing stock that serves a diversity of people. That’s comes mathematically to housing payments costing less than 30% of the city’s median family income (in Austin, that’s $81,400 for a family of two or more). Doing something like this creates diversity in housing, and fosters Austin’s ideal as an inclusive, progressive city.
Developers have been working with this type of affordable housing, but to them the term also implies a market-determined price point by which older, cheaper housing can be flipped for their own profit. A single-family home in an underserved part of East Austin can be bought, demolished, and turned into condominiums. The developer is after all incentivized by the easy profit more so than they’re after the city’s ideal of affordable housing health long term.
Yet affordable housing is more than monetary value of cost. It’s a home that one can depend on, that is stable and secure, and affordable both today and into the cities bight future. That type of affordability has been slowing disappearing in Austin, especially in the central metro area.
Most residents hold a general belief that the new people moving into Austin is what’s makes the city expensive. That’s because the city remains more comparably more affordable than other American cities. 2016 census data shows that Austin’s median gross rent (as a percentage of a household’s annual income) is still 29.8%, below the national median of 30.6%, and even below the governmental definition of affordable housing.
The only reason Austin doesn’t feel affordable, says City Demographer Ryan Robinson, is due to the steep rise in housing costs since 1990, when the city was half as large. The median family income for the Austin-Round Rock Metropolitan Area has only doubled since then, from $39,400 to $81,400, while the median price of a single-family home has quadrupled, from $73,000 to $305,300.
“Almost every income level feels that,” said Robinson. “And yet without question we continue to be relatively affordable compared to our competitor cities, to the coastal markets where we continue to get a ton of our employment.”
Certainly the rush of new residents has changed the city’s makeup. In 2000, 46% of Austin households made less than $50,000 annually, and only 8% made more than $150,000. By 2016, the number of households making under $50,000 dropped by 20%, while the size of the wealthier group tripled. Austin’s housing stock amplifies the sticker shock of this shift. Single-family homes under $150,000 made up 32.6% of those sold in 2011. By 2017, that number had dropped to 3.2%. Homes selling for over $400,000 jumped from 12.5% to 27.1%. The same type of rush to luxury housing was seen in the rental market.
Partially due to this increase in supply, homeownership rates have slightly dropped, and occupancy rates of luxury-level rentals has fallen by 8%. But the trend in rising housing costs is not as much a case of inadequate supply as it is an imbalance in the kind of housing being created. The market that produces new housing does not treat all demand equally. It prioritizes the renters and homebuyers who carry spending power.
About Affordability
The city has long grappled with the countervailing tendencies of the economy, and right now, through CodeNEXT and other means, is pursuing the goal set by the Strategic Housing Blueprint: 60,000 new housing units affordable for those earning less than 80% MFI within the next 10 years. CodeNEXT and the Blueprint have each innovated several new techniques to address affordability, but have not veered from the same affordable housing strategy the city has followed for years. This approach does not challenge the trend of expensive housing; it embraces it.
The rapid rise in housing costs is a drag to the average consumer, but to the city planner, it’s what keeps the engine running. “If the housing in the central city wasn’t becoming more and more expensive year after year, then I would actually be worried,” said Robinson. “It is a direct testimony to how successful and vibrant we have been over the past 10 to 15 years.”
He’s right. It would be a legitimate crisis for the city’s economy if the real estate boom of the past few decades ground to a halt. But maintaining that pace of development – and working with the developers who will make it happen – necessarily requires that city planners also risk displacing longtime residents.
The local government wants a degree of affordable housing, but not enough to stagnate growth. So you end up with neighborhoods like West Campus and East Riverside, where city plans spurred development and increased density, but also excluded poorer residents from the area. Representatives from these neighborhoods participated in the design of neighborhood plans geared toward providing for the underserved, something that did not end up actually happening. In both cases, the market’s need to provide for the most profitable demand drove local development. In an effort to sustain growth, the city’s interests aligned more with those of the market than those of the neighborhood’s residents. If the city was siding with the wants of developers over the needs of the community during the University Neighborhood Overlay (UNO) planning process, it was hard to detect in the scramble to address affordability.
Developer Ed Wendler Jr., who built the WatersMark community in Barton Creek, said this climate of urgency has clouded affordability discussions in Austin, undermines cooperation, and opens the doors for exploitation. “In a crisis, you gotta act. You gotta act,” he said. “It’s like negotiating a real estate contract: A lot of times, people will stick on a condition that if you don’t sign the contract by Friday, then they will withdraw their offer. What they’re trying to force you to do is to enter into something you haven’t really thought out. So, the affordability crisis: It’s a sales tool.”
