Austin Contrarian

What's for sale in central Austin? (2/07 edition)

Another in a perhaps-monthly survey.

My search results (run on 2/28/07) are below.  Here are the parameters I used:  1400+ square-foot; single-family; active MLS listing; $300,000 or less.  (See here for an explanation.) 

South Austin (MLS areas 6 & 7):  There are three 1400+ square foot, single-family homes listed for sale for under $300,000.  The largest has 1529 square feet.

North Austin (MLS areas 1B, 2 & 4):  There are 18 such houses, most in the Crestview, Wooten and Highland neighborhoods.  There are none in the rectangle bounded north-south by 45th and Town Lake and east-west by I-35 and MoPac. 

East Austin (MLS areas 3 and 5):  48.  (This total includes a dozen or so east of Springdale, near 183, which some people may not consider "central Austin.")

Two anti-McMansion-ordinance bills

HB 1732 and HB 1736, both introduced by Ed Kuempel (Seguin).  HB 1732 would require cities to give two years' notice before adopting a McMansion ordinance.  If it gets a super-majority, it will apply retroactively to January 1, 2006 (i.e., it will nullify Austin's ordinance). 

I swear I didn't have anything to do with this.

The Affordable Housing Incentives Task Force

The City Council got spooked by spiraling condo prices downtown last summer.  It did what city councils everywhere do when they get spooked:  it created a task force.  The Affordable Housing Incentives Task Force opened for business back in July.  As its name implies, the Task Force is working the incentives angle; it's leaving subsidies to the advocates and the city.

Here is the Task Force's draft report.

The Task Force has both affordable housing advocates and developers -- i.e., people who want more affordable housing and people who know the obstacles.  That's a good combination.  It's produced some good suggestions, at any rate.  For example, the draft report suggests automatically up-zoning low-density multi-family to high-density multi-family if the developer agrees to set aside 10% of the units as affordable housing.  The new project would have to meet neighborhood compatibility standards, but FAR requirements would be waived.  This would permit densification in neighborhood interiors, where it is needed the most.

The Task Force is spiked with ANC representatives.  They don't seem too excited about the relaxed multi-family standards.  I'm shocked. 

Interior vs. exterior space

We live in a small neighborhood of "urban homes" -- 1600 to 2400 sq. ft. homes on small (3500 to 4500 sq. ft.) lots.  We live close to downtown and have a large home by central Austin standards.  But to get this at Austin's prices, we had to give up a real yard.  That was a good trade for us.  We knew we wouldn't use a yard very much, and it would be a headache to keep up.  We care more about the interior space.   

Not everyone shares our preference.  That's fine with me.  But my neighbors obviously do.  And I've always thought there were probably lots of others who would make the same trade if they could.

Here's empirical evidence that our preference for interior over exterior space may not be that weird.  (h/t Matthew Kahn.)  These UCLA anthropologists followed 24 Los Angeles families around for four days to study how they use their house space.    Most of the them ignored their yards:   

Although the back yard is a purported center of family leisure, enjoyment, and privacy, the tracking data from Families 1 to 24 reveal limited uses of back-of-home spaces by family members, despite the fact that every sample included many weekend daylight hours and some afternoon and evening daylight hours, and the weather was generally mild and pleasant enough to be outside on most days. The most salient trend in the data is that 13 of the 24 families did not spend any leisure time (neither kids nor parents) in their back yards during the four days per family available for review. . . . In quite a few of these cases, no family member so much as stepped into the back yard. Sporadic activities in other cases were confined to non-leisure chores such as taking out trash or briefly feeding dogs or washing off chairs.

The yards seemed to function mainly as status symbols.  On the other hand, most of the families had converted their garages into storage rooms or extra living space.

The fact that most households in this sample––and millions visible throughout the U.S.—have converted their garages to spaces not focused on car storage signals a changing need of middle-class families. Families living in average-sized homes (1500–2000 sq ft), as most of these are in our sample, simply do not have enough living and storage space for all of their possessions, and they value garages more for these purposes than for housing cars.

It sounds like many of these families would be willing to trade exterior space for interior space, too.  Like I said, if you want a house with a big yard, that's fine with me.  I think Austin could use more neighborhoods like mine, though; there's probably plenty of demand, even among families with children.

Unintended consequences

A bill has been introduced in the Texas Legislature that would penalize cities for "down-zoning" property:  it would require cities to pay a property owner damages whenever zoning changes cause the property's market value to drop by more than 10%.

I think this is a bad idea. 

There's no question that down-zoning can be unfair to the property owner.  I'm sure we'll see plenty of instances in the upcoming VMU boundary "adjustment" process, as neighborhoods try to pull properties from the VMU district for their own selfish reasons.

There's also no question that this bill will all but eliminate the occasional down-zoning. Any down-zoning could reduce a property's value by 10%.  There will be plenty of appraisers willing to swear to that, at any rate.  This means that cities will have to negotiate -- or sue -- each potentially affected property owner every time they want to tighten up zoning.  As a practical matter, down-zoning will be too costly and cumbersome for cities to pursue, except in rare cases.

Down-zonings are relatively rare overall, though; the VMU process is a special case.   Almost all of our zoning controversies are over up-zoning. And this bill will give city councils perverse incentives in these cases.  They will understand that once they've given a property a particular zoning classification, it will be difficult to switch to a more restrictive classification.  If they zone property commercial, they can't count on being able to rezone it residential.  If they zone property multi-family, they can't count on being able to rezone it single-family.  In other words, you can ride up for free, but the ride down will cost you.

City councils will respond rationally to this incentive.  If given a choice between zoning property single-family or multi-family, they will choose single-family whenever possible.  They will be more skeptical of requests to up-zone property, since these decisions essentially will be irreversible.  And when they do up-zone property, they will increase the "entitlements" by the smallest increment necessary. 

In my opinion, most of our zoning problems today stem from widespread under-zoning.  We should be encouraging cities to up-zone.  This bill will do just the opposite. 

Breaking the VMU bargain

As best I can tell, the City Council intends to gut the Vertical Mixed Use ordinance on Thursday.

O.K., O.K.  That's hyperbole.

But one of its "housekeeping" ordinances (Item 71) seems to take dead aim at the bargain that gave us VMU zoning.  This was the deal the City struck with the neighborhood associations; the City agreed to leave neighborhood interiors alone and the neighborhoods agreed to increased density on the transit corridors. 

One of the best features of the VMU ordinance is that it opens up hundreds of properties to dense residential development without property-by-property haggling.  The VMU Overlay District includes all commercially zoned property on core transit corridors (with minor exceptions).  Hundreds or thousands of properties suddenly are ripe for redevelopment. 

What about these neighborhoods?

Since the beginning, RG4N has slickly marketed itself as the voice of "the" Northcross neighborhoods. Which are "the" neighborhoods?  According to RG4N's website, they are Allandale, N. Shoal Creek, Wooten, Crestview, Brentwood and Rosedale.

Just look at a map.  Why these six?  There are other neighborhoods close by, certainly closer than Brentwood or Rosedale.  Why don't they count?  If they do count, where's their representation?  Where's the evidence that they too want Wal-Mart to go away?

Take a look at the map.

Comparing some city densities

Here are maps of a few cities, color coded by density.  All of the maps can be generated at the Census Bureau website.

I see density figures quoted all the time (and quote them myself).  Think of this as the gestalt method for comparing densities.

All maps are based on 2000 data, the most recent available.  All maps are coded by "block group," with seven standardized data classes.  I used the 20-mile resolution for all of them, but cropped the maps of some of the small cities (small geographically).

Bright green represents 8,000+ per square mile; dark green, 10,000+ per square mile.  Click to enlarge.

Irreversible unaffordability

We are stuck with pricey single-family homes in central Austin.

Rents are volatile; they can go up or they can go down.

Condo prices tend to be volatile, too, for reasons I don't understand.

Single-family home prices are sticky, though.  Even when a housing market collapses, single-family home prices don't tend to fall, at least not in proportion to the collapse.  Sales activity just dries up.  Homeowners hold onto homes they otherwise would have sold.  Buyers wait for the trough.

Aside from an out-and-out collapse, it is rare to see single-family home prices trend downward.  If you do, you know that calls for new city leadership are just around the corner. 

This is worth remembering when you scan the listings for, say, South Austin, and see a 1,800-square-foot home priced at $400,000 or more.  No matter how much the supply of single-family housing grows, that $400,000 home will not get any cheaper, and I don't pretend otherwise.

Still, there is a very good reason for letting the supply half-way keep up with demand:  a growing supply can help hold price increases in check.  We don't have to let things get worse.

Take South Austin.  Homes fetched an average of $210-$215/sq. ft. in South Austin (MLS 6 & 7) in 2006.  Prices per square foot rose by more than 12% over the year before.  That may be what we can expect for the next few years, unless the economy falters or we allow more (= denser) single-family construction.

Look at what this means for a typical 1,500 square foot house.  At the ppsf's listed above, this house was worth $315,000-$330,000 in 2006.  Let's call it $300,000, because the average ppsf tends to skew above the median.  $300,000 is a lot for a 1,500 square foot home, I know.  But just wait.

Suppose home prices increase by 4% per year for the next five years, roughly the historical rate relative to inflation.  Our $300,000 home will be worth $365,000.

Now take the same home and assume the price increases by 10% per year for the next five years.  Price:  $483,000, more than $100,000 more expensive.  Plug in last year's rate and you get  $528,000.   (Historically, that's extremely high, but more moderate than the boom years in California and the Northeast.)  Whatever price we end up with, you can bet it will be sticky, too.

Some people have expressed concern about a potential glut of luxury condos downtown.  I think the worry is unfounded.  If we don't reel in single-family home inflation, people will be moving downtown for the bargains.

Implode Intel now!

Mayor Wynn wants to put off the Intel shell implosion, scheduled for February 25. The federal General Services Administration apparently doesn't think too much of this idea.  According to its spokesman:

To turn back now would cost taxpayers millions of additional dollars, deprive citizens of their badly needed new courthouse for at least two more years, and could potentially jeopardize the construction funding in the future[.]

Wynn's heart is in the right place.  As I pointed out a few months ago, a federal courthouse won't do much to enliven Republic Square, which the City hopes will develop into an Austin-style piazza.  Wynn's thinking that downtown is now hot; we can do better than a stodgy courthouse; let's find a deal that makes everyone better off.

I'm all for finding a replacement for the federal courthouse.  I'm just a spectator, but I think it will be hard.  The GSA will demand that the new buyer pony up:  (1) the GSA's original purchase price; (2) millions for design work and other prepatory work that would have to be redone; and (3) enough extra to make it worth GSA's while to find another, now more expensive, site.

The Mayor might have a specific suitor in mind.  If so, great.  Let's get a deal done.

But unless there's a buyer willing to take and re-use the shell, it needs to go.   

Probably the most important reason is that I'm geared up to watch the implosion -- I'm going to have an awesome view from my building just a block and a half away.  (Personally, I think they should drape the shell in a giant white dropcloth with "Intel" spelled out in giant, black letters- -- let Intel have a little free "publicity" as the implosion is replayed on local news stations everywhere.) 

The other reason is that it has taken the federal government forever and a day to get to the brink of actually imploding this thing.  If it gets put off, it could be years before the gubmint gets around to rescheduling the implosion.  It's got no incentive to hurry because it doesn't have carrying costs.  Unless there's a good (>>50%) chance that saving the shell will get us a new owner, we need to get rid of it while we can.