Candidate Q&A: Council candidates address housing in Austin
Editor’s note: This is a continuation of the Herald’s candidate Q&A features. For this feature, we submitted questions about housing in Austin to Austin City Council candidates Oballa Oballa (First Ward), Helen Jahr (First Ward), Mike Postma (Second Ward) and Councilman Paul Fischer (Third Ward). Here are their responses.
1. How would you describe the overall housing situation in Austin?
Oballa: I will say housing issues in Austin are not bad as of right now because we have seen some apartment built recently and we are expecting more to be built, but we still need to do more to make sure all of our residents are satisfied by making sure they rent and buy homes in Austin. We can do this by partnering with private developers. Private developers can make a better return on the investment of constructing new housing in the Twin Cities or Rochester, which means local government in Greater Minnesota needs to play a role in supporting new housing development.
We should focus our support on helping to prove out the housing market locally so that we can attract more investment from the private sector. A perfect example of this is the collaboration that led to building the new apartments that just opened behind Runnings. The City worked with the developer to get the project off the ground, and we now have increased housing that is not only beautiful, but is filling up at a much faster rate than the developer expected. We should use this as a case study to attract more private development to help solve our housing challenge.
Jahr: The housing situation in Austin has significantly improved since the last housing study conducted in 2017. For example, the Fox Point Townhomes completed in 2019 have made a positive impact. This multifamily-housing development has added 38 two,
three, and four-bedroom townhomes in Northwest Austin that are available to singles and families based on income. In addition, the Flats on 21 market-rate apartments have added 83 one and two-bedroom units. However, there is still a need of approximately 1,000 units of all types, particularly market-rate rentals and senior housing. This falls in line with the City of Austin’s 2017 Comprehensive Housing Need Analysis, which predicted that there would be a change in the demographic with the most considerable population growth in the 65 to 74 age group. While Austin’s population and number of households continue to grow slowly, there is a noticeable gap in the for-sale-single-family homes in the dollar range of $200,000 to $250,000.
Postma: I would describe it as significantly improved, but not yet where we need to be as a city. Over the last five years, Austin has gained dozens of new single-family homes. Over 100 market rate apartments have been built between Flats on 21st and Science Park complexes. We’ve seen Fox Pointe Townhomes completed as well, providing 38 income-based housing options for our community. All of this new construction is measurable leaps and bounds beyond what the city had seen built in that 2000-2015 time frame.
My concern lies at the heart of Austin, where we find a significant amount of our housing stock is aging. That aging housing stock is well built, but those homes need upkeep and repair to remain in good condition. The vast majority of properties are seeing that upkeep, but there is about 5-10 percent of that housing needing attention. Many times the repairs are beyond the financial means of the homeowner. I will focus on more programs that can help citizens who need a hand in maintaining their homes so they can feel assured about living there well into the future.
Fischer: Housing is the biggest issue or definitely competes with the leading issues for the City of Austin. It is often difficult for those who have a suitable home to appreciate the broader implications of housing on a community’s economy, quality of life and, from a City Council perspective, the implications for the City budget both near and long-term.
We see homes around our median household price selling well at about that $110,000 level when a comparable new home would be more likely at $225,000+. This makes a significant financial gap and we unfortunately see fewer wage earners at this level. While we have seen some wage growth, which helps greatly in this area, cost of new construction seems to outpace this factor at present, continuing an anemic new home starts in 2020 of just five.
While there are limits to what we can and should do, I’m willing to be creative with addressing what our housing study identifies as a need for 532 general occupancy units and 425 age restricted units to meet demand. It is clear our economic growth is hampered when employees can’t find homes when employers want to add positions. Particularly bad is the lack of market rate housing that creates new units that free up more affordable homes as people move through the housing continuum. I’m committed to keeping this as a priority for the City Council.
2. Do you believe the Housing Tax Abatement has been beneficial to the city?
Oballa: The city council drafted the tax abatement in 2015, the same year I moved to the city. According to residents and the council, it brought so much change to the city and big benefits to Austin’s local economy.
There are many reasons why the tax abatement is beneficial to cities. First, the tax abatement is designed to make these areas more appealing to prospective buyers and developers. The city council had approved 43 projects since 2015, including the Flats on 21, an
82-unit apartment complex, which is most newly and the best apartments in town.
Tax abatements are also designed to stimulate the local economy with the construction of new homes and businesses in the area. I have seen many people filling (Flats on 21) and some of those new residents moved here from our neighboring cities.
Additionally, this program is a benefit to prospective homebuyers when the folks building are freeing up their existing homes to continue to add to available houses on the market.
Jahr: Yes, I do believe the Tax Abatement has been beneficial to the City. After three years of operating the program, over 41 new single-family homes have been built in Austin and 39 homes built in Greater Mower County. The Tax Abatement Program, in a nutshell, encourages a person to build a home on a piece of land and only pay the property taxes on the land and not on the value of the home for a period of 5 years. Although this is a short-term investment, it will lead to long-term gains for the City. The 41 homes built during the tax abatement period will continue to pay taxes long after the 5-year abatement ends. That is a win-win for the City and the people who live in Austin. Due to the success of the program, it has been extended until Dec. 31, 2022.
Postma: I referenced the dozens of new single-family homes and two new apartment complexes built in my first answer; most of these have taken place since the Tax Abatement program came into place. This is not a coincidence as many builders are utilizing this program as a major factor for choosing Austin as the site of their projects. The amount of new property tax revenue that the city will see once these abatements are completed is in the hundreds of thousands of dollars, which will help all of us shoulder city service costs going forward.
While I’m a proponent of the Tax Abatement, I recognize that it needs to be one of the tools we use to address housing, but not the only tool. The abatement does a good job creating new, generally higher end home construction on what are otherwise vacant lots. As a city we need to make sure we find other tools that focus on our core housing stock as well.
Fischer: Absolutely. We’ve approved 45 homes since the program’s inception, one of which was an 83 multifamily largely market rate unit. I would like this number to be higher as the demand is certainly there.
The implications to the City’s budget on new taxable value is a critical key to keeping taxes in check, along with the other items I mentioned previously, and housing abatement is one tool we can and should utilize. As squad cars and snowplows get more expensive, adding more property value in both commercial and residential is something that has to be a focus.
I understand those who feel like giving them a tax break for five years is not fair, but if the market is not producing units, we need something to add to the scale to address this problem.
Several of the units by developers have been started without a buyer at groundbreaking and show good confidence in the market. The 83-unit was largely constructed without the incentive and is a strong indication of the demand as it has filled up nicely. Helping bridge the cost of new construction by a modest amount makes for a wise investment to make sure those homes are built in Austin and they don’t choose another community to call home and commute into Austin.
3. What steps should the council take to meet the demand for housing (as indicated in the city’s most recent housing study)?
Oballa: We need to improve Austin’s housing supply. The City of Austin is growing everyday and more people are moving in the city, but there is a housing shortage. Austin’s biggest growth barrier is that there isn’t enough available housing, according to the study done by Maxfield Research that shows we need at least 1,000 new housing units by 2025.
To keep up with this demand, we must work collaboratively with local and regional partners to increase and improve our housing supply. According to the study, Austin needs almost of 207 market rate rental units, 67 for-sale market family homes, around 86 subsidized apartment units, 53 affordable units, and 119 for-sale single family homes.
As a councilmember, I will work to find creative ways to solve this problem, including looking at the best practices that other Greater Minnesota communities have found successful and bringing them to Austin.
Jahr: Housing continues to be a challenge in Austin and is generally a good indicator of growth and prosperity. Stable and affordable housing will anchor families in Austin to pursue education and employment opportunities. Many owners and renters are paying, on average, 30 percent of their income for housing costs. The Council should continue to try to deliver services with the least amount of cost to not further burden households. They should also continue to build strong partnerships for land acquisition and development, keep the lines of communication open to lessen community opposition to development projects, and encourage builders by streamlining the permit process. The first step in the streamlining process would be to identify the factors that most significantly bog down the construction and redevelopment process. Methods of input could be round table meetings, public forums and surveys.
Postma: I believe that continuing the tax abatement is a good idea. This incentive, paired with record low mortgage rates, should continue to make building new homes appealing for contractors for the foreseeable future. I also believe that this will make investors consider constructing another market rate apartment complex once they hear that Flats on 21 is 80 percent filled in less than six months.
I would like to see the city focus more on programs focusing on our existing home stock. Over 60 percent of homes in our city were built before 1960 and 25 percent of the homes were built before 1940. These homes are well built with good bones, but over the decades need new roofs, HVAC, electrical systems and more. To assist with these large expenses I’d like to see the city form a deeper partnership with the Austin HRA and their CHIP program, which currently has a $10,000k income-based loan program that helps homeowners with needed repairs like this. I would love to see this program expand to a higher project total with much higher income eligibility levels so that the average citizen can participate as well. Programs like this will help make sure our homes are in good shape for years to come.
Fischer: I am confident that the City is positioned well to look at using all the tools afforded to us in Minnesota Statutes. We have dedicated funding for housing as we look to work with a private developer and utilize State funding where appropriate. Several discussions have been had but at this point, the asks have been too large and our most recent tax credit project, River Bend, was not approved by Minnesota Housing Finance Agency.
The Flats on 21” market rate multi-family project was encouraging as we added 83 units and our participation was essentially limited to utilizing our abatement program. The previous Fox Pointe tax credit project filled up very quickly and demonstrated the demand for workforce housing. These two projects confirm the demand our Housing Study calls out and serves as a strong indication that further investment is warranted, proving the market is critical as this is the first thing developers look at as they analyze risk. We can work on the funding gaps from there for other projects and what they offer for improving out housing options.
There are a lot of factors when analyzing the housing market and I think developers will find a willing partner to address this critical demand from the City of Austin. Doing what we can to attract private development is exactly what we’ve done and I think the right recipe for continued improvement. I plan on being a part of keeping this on the front burner of the Council consideration.