City increases density fees to fund more affordable housing

Austin

AUSTIN (KXAN) — City leaders believe they can get more out of a program that funds affordable housing.

The Downtown Density Bonus Program allows developers to exceed height and density requirements on downtown buildings. In exchange, developers must offer affordable housing on-site or pay a fee that goes into the City of Austin’s Affordable Housing Fund.

“Any and all opportunities are really critical to achieve those affordability goals,” said Awais Azhar, a board member with advocacy group HousingWorks Austin. “These fees are critical for funding our homelessness dollars and making sure folks experiencing homelessness in Austin have the support they need.”

The program was created in 2014. While the market since then has changed, the fees charged by the city have not. That was until a city council vote Tuesday.

“It’s been a long process, but I’m very glad to see those fees getting updated,” said city council member Kathie Tovo of District 9. She expressed concern the city was leaving affordable housing dollars on the table.

Council voted to increase fees for residential projects, but the biggest change is commercial developers will be required to pay into the program should they want to exceed zoning requirements.

Here is a look at the 2014 fees vs. the fees adopted by council Thursday. Previously, commercial developers didn’t have to pay a fee at all.

2014:

  • Residential – Core/Waterfront District: $10/Sq. Ft. Bonus Area
  • Residential – Lower Shoal Creek & Rainey Street Districts: $5/Sq. Ft. Bonus Area
  • Residential – All other districts: $3/Sq. Ft. Bonus Area
  • Commercial – Hotel: no fee
  • Commercial – Office: no fee

As Amended (Thursday):

  • Residential – Rainey Street District: $5/ Sq. Ft. Bonus Area
  • Residential with Central Business District Zoning – All Districts other than Rainey Street District: $12/ Sq. Ft. Bonus Area
  • Residential with zoning other than Central Business Zoning – other than Rainey Street District: $10/ Sq. Ft. Bonus Area
  • Commercial Properties with CBD zoning – All Districts: $18/ Sq. Ft. Bonus Area
  • Commercial Properties with zoning other than CBD – All Districts: $12/ Sq. Ft. Bonus Area

Even the new calibrations may be temporary. They were calculated in 2019 during the Land Development Code rewrite.

“The Design Commission is a strong advocate for downtown density, but we also find that the DDBP is dated and does not create public benefits comparable to the entitlements that these projects receive,” said the Design Commission in a 2019 letter to city council.

When the LDC effort was shelved, so were the fee changes. Council has asked staff to do a current market analysis, so the fee amounts could change again in the summer. The item passed by council moves the fees from an ordinance to the Housing and Planning Department’s fee schedule, so fees can be updated more often.

How much funding does the program provide?

A city of Austin spokesperson told us the city received about $1 million in affordable housing fees through the Downtown Density Bonus Program since its inception in 2014.

City budget documents from last July show there were nine approved applications for the Downtown Density Bonus Program in the previous five years. Seven of the approved applicants were nonresidential projects.

We asked how much the city may have lost due to commercial projects not paying “in-lieu” fees to fund affordable housing. The spokesperson told us the city had not performed that analysis.

But our partners at Austin Business Journal did the math: a company wishing to develop 100,000 square feet of bonus area in a commercial project could pay up to $1.8 million, if the site has Central Business District zoning. If not, it would be a $1.2 million fee.

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