Here's an example of a neighborhood group misappropriating the cause of affordable housing in order to obstruct a dense multi-family development.
Jeff Jack, the president of the Zilker Neighborhood Association, has urged Austin's coalition of affordable housing advocates to oppose a redevelopment project on South Lamar. (Download ZNA_letter.pdf
The owner/developer wants to tear down the apartment complexes at 1500 and 1418 S. Lamar and replace them with a new mixed-use development. The existing complexes have 141 units. They would be replaced by approximately 300 units, doubling the density. (City council approval is necessary because the property is not zoned for multi-family; the existing apartments are a grandfathered nonconforming use.)
Not surprisingly, ZNA opposes this project. City staff and the Planning Commission have bucked ZNA (and bully for them). Having failed to persuade Staff and the PC, ZNA is trying to rope the affordable housing advocates into doing its dirty work.
According to Jack, the 141 existing units rent for $405-$600 per month. The new apartments will start at $890 per month, except for 30 units reserved for affordable housing. Since it seems unlikely that Council will kill the project, Jack wants the developer to reserve 141 units as affordable housing: "[W]e should be getting a 1 for 1 replacement for the existing affordable units in the new project."
Here's my back-of-the-envelope calculation, taking Jack's proposal at face value. We'll assume that the existing units rent for an average of $600 per month (the top end of the current rent), and that the new units would rent for an average of $890 per month (the starting rent for the new units). Jack is proposing that an additional 111 of the new units (141 less the 30 planned affordable units) be rented at the current rate, a discount of $290 per month. That's $32,190 less rent per month (gross) for the project as a whole.
Let's discount that $32,190 by 10% for the expected vacancy rate and another 10% for management fees and property taxes. (We don't have to discount for maintenance, repairs, utilities, etc. because these costs don't depend on the amount of rent.)
This gives an expected decrease in monthly operating income of $25,752, or $309,024 per year. Using a 6% capitalization rate (very reasonable for this market), that works out to a $5,150,400 decrease in market value. Using a more conservative 8% capitalization rate, the loss of market value is $3,862,800. (These properties are on TCAD's books at $3,204,000 -- certainly low, but this gives you a sense of the magnitudes involved.)
Thoughts:
1. Council should approve this project outright and unconditionally. The developer's proposal will double the density of housing on a property abutting a key transit corridor. It is exactly the kind of mixed-use development the City has been pushing. ZNA's plea to save affordable housing should fall flat for this reason alone.
2. The affordable housing bonds should make it easier for Council to brush aside Jack's appeal to affordability. The City will soon be offering a lot more help to low-income families; it does not need to preserve affordability one development at a time.
3. It is unfair to tax a single owner/developer between $3.8 and $5.1 million for 141 affordable units. Affordability should be a shared burden. That's the premise of the affordable bond package.
4. Jack may genuinely care about affordable housing. But volunteering to spend someone else's money doesn't prove anything.
