AUSTIN (KXAN) — A new report found the City of Austin stands out among other large metros in Texas and not in a good way.
A housing analysis found Austin is one of the most expensive cities to build new homes in Texas.
“For more than two years, our market reached an apex of demand and a deep valley of inventory which drove median prices higher. However, this is not a new phenomenon for our region. Austin has for decades been consistently slow to prioritize housing, and the findings of this report calls for specific actions local policy makers should take,” a Tuesday press release read.
The Austin Board of Realtors (ABoR) and the Home Builders Association of Greater Austin (HBAGA) requested the report from the Texas Real Estate Research Center at Texas A&M University.
The report found the City of Austin charged $18,168 in development fees per unit for a suburban-style development; that would be for 200 single-family homes on 40 acres. That’s 80.4% or more than $8,000 higher than the same fees, on average, for the same type of development in the five largest metro areas in Texas.
“This report confirms what those in the real estate community have known for a long time. Although there was little existing data prior to the report being conducted, we now can show that development fees are drastically higher in Austin than most other cities in Central Texas and major metro areas in Texas. This is a huge barrier to building homes and a significant concern considering we are in a housing supply crisis across the region.”
Emily Chenevert, ABoR CEO
The report also found fees were even higher for another type of development in Austin: a one-acre infill with four single-family homes, which the report said is critical to getting more housing up inside city limits.
The analysis found per-unit fees for that type of development are 187% higher, or nearly $27,000 more than average infill development fees across Dallas, Houston, Fort Worth and San Antonio.
“I’m not surprised,” said Paul Smith, owner of Twelve Rivers Realty. “Having done a lot of new construction building in Austin, the fees just continue to go up.”
Smith is a realtor but also buys and builds properties in the city.
“Experience everything from designating the lot to working with the architects to demoing the property building — everything,” he said.
“If it’s costing the developer more money to deliver the property, then ultimately, that’s going to get passed down to the end-user,” Smith said.
It’s a reality Brittney Bossow and Jacqueline Sanchez said they expected.
“Moving to a really desirable city, I think I understood, too, that it’s probably going to be more expensive living here, same with like L.A. or New York,” said Bossow, who moved from Colorado two years ago.
Sanchez is set to move from there in three weeks and is excited to join her friend in calling Austin home.
“It has a ton of opportunity for young adults. The job market is incredible. There’s just so much to do; it’s so much fun,” she said.
But she quickly decided she’d have to rent her new home.
“I considered buying and that was a reason why I didn’t, yeah, buy, was because it was probably too expensive for me right now,” Sanchez said.
According to the new report, development fees could account for up to about 20% of a mortgage for an Austin renter earning a median household income in 2019. That, the authors said, could make or break that first-time homebuyer’s ability to afford a home.
KXAN reached out to several Austin departments for comment. Only the Development Services Department (DSD) responded, which is one of 12 departments part of the development process, it said.
“The DSD fees referenced in the report support the costs associated with administering these services. It is important to note that not all development fees referenced in the report are DSD fees,” wrote DSD representative Robbie Searcy.
Searcy said every city is different, and its fees are structured so private development costs don’t impact the city’s general fund; it falls firmly on those using the services.
“This is an approach that helps ensure private development-related costs do not impact the City’s General Fund (supported by property and sales tax and other non-development-related funding sources),” Searcy said. “In addition, the regulatory framework can differ significantly from municipality to municipality.”
KXAN has asked for further clarification on how those fees and structures are different in Austin compared to other cities.
“DSD and all other departments that contribute to the development process recognize that development fees affect the cost of housing overall and remain committed to meeting the City’s affordable housing goals. We continue to work together to support the Austin community,” Searcy wrote.
“These findings, although disconcerting, are unsurprising,” Taylor Jackson, CEO of the HBAGA, wrote in Tuesday’s press release. “We need to course correct on how the City of Austin handles home building, and time is of the essence. Every day is vital as home prices have increased approximately $100,000 across the MSA since this research project was started in 2021.”
The report indicates although there are several areas to target in order to address housing affordability, policymakers can make a quick and direct impact through development fees.
They recommend local policymakers:
- Increase transparency in development fees by creating online tools that help neighbors, developers and elected officials find information, as well as the justification behind all the fees.
- Simplify the development process, including by reviewing, changing or removing rules that add “unnecessary time and cost” and setting a goal of approving housing permits within 14 days.
- “Right-size” development fees according to the size of the development. “As cities grow, it is critical that they find ways to minimize fees for infill and missing middle developments in their urban core so that the fees are comparable to suburban style developments,” the report stated.
“The National Association of Home Builders 2022 Priced Out Index reports that for every $1,000 increase in the price of a home, whether it be from market forces or development fees, 791 households are priced out of the Austin-Round Rock MSA. We urge Austin’s leadership to act and act now, or we risk becoming a wholly unaffordable city to build or buy a home in,” Jackson said.
Increased taxes: Another possible solution?
Other local housing advocates have filed to create an affordable housing bond political action committee.
“There is no doubt that Austin is in the midst of a housing crisis, with rents and home sales prices increasing dramatically during the COVID-19 pandemic and associated economic conditions. It is critical for us to address this crisis using every tool that we have in our toolbox, including utilizing affordable housing bonds, leveraging changes to the land development code, improving the housing development process, and expanding partnerships with local organizations and businesses,” wrote Awais Azhar, a representative for HousingWorks Austin, one group behind the PAC.
“We must act now to ensure that everyone in our community has access to equitable and affordable housing, from tenants on a fixed income to first-time homebuyers,” he added.
A representative for ABoR said none of their leadership is part of this effort, and they don’t yet have a position on bond packages.