AURA suggests improvements to Housing Market Analysis

AURA welcomes the recent release of Austin’s 2014 Comprehensive Housing Market Analysis. The report provides valuable context into the state of the Austin housing market and a stark reminder of the depth of problems Austinites face in finding housing available. We particularly agree with the report’s recommendations for rapid reduction in regulatory barriers toward homeowners building accessory dwelling units (ADUs), a change we have led the push for.

However, we are disappointed in both the depth of analysis offered and the scope of the recommendations. The recommendations would barely begin to address the housing crisis in Austin. We offer suggestions for the improvement of this report:

Analysis Of Supply and Demand

To be comprehensive, a housing market analysis needs a discussion of the link between housing supply, demand, and prices. As the report notes, the greatest loss of affordable housing did not come from a reduction in subsidized affordable housing programs, nor the physical destruction of existing affordable, private market housing stock. The greatest loss of affordable housing came from increasing prices for existing private market affordable housing. The report therefore, must address the reasons why prices have increased so much for previously-affordable housing units.

The use of an economic model of supply, demand, prices, and price elasticity could begin to address questions such as what effect the creation of greater supply would have on prices in the city.

Estimates of costs and benefits of each recommendation

Using such a model, the report should analyze the effect size of the costs and benefits of each recommendation. For example, while AURA supports the report’s recommendations on loosening regulations regarding ADUs, the total number of new ADUs that would be created as a result of the change is modest, and their creation will have a modest effect on prices. The report should be able to estimate the effect of the ideas that it advocates.

Additionally, there should be honest accounting for the potential negative effects on affordability that come with some of the recommendations. For example, raising cash-in-lieu fees charged to new development may, perversely, encourage developers to forego additional density. This would result in reduced affordability in two ways: reduced payment into the fee-in-lieu program, and reduced supply of housing in the private market. Estimates of both effects on household affordability should accompany any recommendation. In previous studies, many programs that attempted to achieve affordability through development fees have found that the latter effect dominated the former and affordability was actually worsened.

We must be willing to adopt policies commensurate with the size of the problem we face. To do so, we must predict how big the positive and negative effects of our recommendations will be.

Consider better funding models

In addition to considering how to obtain more funds for subsidized affordable housing programs, we believe that we should think about more programs that, through their nature, incentivize greater household affordability in the private market. For example, funds for affordable housing programs could come from allowing new, dense development by right and allocating tax increments over certain density levels to fund affordable housing programs. Thus, instead of effectively taxing (and thus discouraging) density, affordable housing programs would become allies of private market housing in seeking abundant, transit-oriented development.

Household Affordability, not Affordable Housing

Imagine Austin takes special care to use the more holistic concept of household affordability, not merely housing affordability. Housing which has low rent or mortgage costs, but necessitates high spending on utilities, transportation, or other non-avoidable expenses, does not result in household affordability. Individuals make choices between housing with high rents and low transportation costs. City policy has emphasized the household affordability metric to match our goals to the lived experience of our residents, and our report should do the same.

Conclusions

Austin’s trend toward expensive sprawl is neither desirable nor inevitable. It is the direct result of policy choices made by the city to limit the types and locations of affordable housing. For any subsidized housing solutions to be effective, we must cure the dysfunction in our private housing market–excessive regulations preventing the creation of abundant housing to meet the housing needs of our growing city. Otherwise, we will always have a population that cannot find housing that meets our needs for a reasonable price.

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