Those high-priced condos will be great for families with children

There's a common perception that the condo boom is making central Austin less family-friendly.  Some people argue that because the new condos won't attract many families with children, they are turning central Austin into a playground for rich singles and couples.  Council member Kim has even taken up the cause, suggesting we need more four-bedroom condos downtown.

It is true the new condos are aimed at affluent singles and couples.  But this does not mean they are bad for families with children.  Just the opposite.  Building lots of expensive condos is one of the best strategies for getting more families with children into central Austin.

Here's why:  The supply of single-family houses in central Austin is essentially fixed.  Families with children must compete with singles and couples for these houses.  There are lots of affluent singles and couples to compete with.  This competition has pushed up prices, and will continue to do so for the foreseeable future.  If we want more families with children, we have to give them an edge in the bidding.

One way to do this is to stack the market with homes that appeal more to families with children.  This means replacing small homes with large homes.  Large households generally want large homes more badly than small households do.  The typical family with three kids is willing to spend more for, say, the 2,400th square foot of living space than the typical single.  All else being equal, a family with children is likely to outbid a single or couple for a large home.  Whenever a small home is replaced by a large home, the odds go up that a large household will win the bidding on another home.  (On the other hand, artificially restricting the supply of large homes is a good strategy for driving families with children away.)

There is another way to give families with children a better shot:  Add lots of homes that singles and couples will view as close substitutes for single-family homes.  Giving singles and couples a good alternative makes them less likely to bid up the price of the existing stock.  Why pay a steep price when there's an equally attractive option just around the corner?

The expensive condos sprouting up around downtown will attract affluent singles and couples who are willing to pay a premium to live in central Austin.  In other words, they will attract exactly the class of buyers most likely to compete with families with children for scarce single-family housing.  And unlike single-family homes, there is a huge potential supply of new condos.  This steady supply of new homes will give small households other choices, cutting what they are willing to pay for detached single-family homes. Over the long run, families with children will see less competition and pay less for housing than they otherwise would.

So there are really two ways to get more families with children into central Austin.  One is to build large houses.  The other is to build a lot of small, expensive condos.

Comments

[Old Timer]

We're an affluent couple with no plans to have children. We live in in a 1500 sqft house in area 1B which we own and have done so for the last 15 years. There is no chance ever that we'd sell our house to move into a downtown condo. We consider a glorified apartment to be a poor substitute for a house with a yard.

Just a data point for you.

[AC]

Thanks. Obviously, not all singles and couples will find condos an equally attractive option. But many of those moving to central Austin will.

[Pat Offender]

We are (not) affluent empty-nesters who sold our W 10th St bungalow last year and will be moving into a spankin' new three-floor walkup townhome on So Lamar early next year. Those 1500 SF cottages are falling down all around you, and only a king's ransom will rehabilitate many of them. The huge amount of time, treasure, and spinal tissue that 95 year-old house consumed after living there for 12 years was all I could stand. If I never have to push another lawn mower or smash my thumb under a 20-oz. hammer, I will be happy as a clam.

[ccosart]

As you might expect, I agree totally about the condos helping take some pressure off the single family market. The fact that 10N is now appreciating fast and being marketed as "near downtown" just shows the degree to which supply is not meeting demand. Having just bought a house in 10N it's not bad for me personally, but I'd rather have had more infill downtown and in 78704 north of Oltorf, and then maybe we could have afforded something south of Oltorf in 78704.

Which I guess brings me to what I think is equally important - allowing more infill outside of downtown. I think allowing all SF-3 lots in central Austin to be upzoned to at least one of: cottage lot, urban home, or rowhouse zoning would meet the needs of singles and DINKS who don't want a downtown condo, but who also don't need a Walmart-sized suburban lot in Crestview, while increasing supply.

I actually don't think big houses are the main problem. Affluent families who can afford the 2400 sf house can probably afford a place in reasonably central Austin, they just aren't that interested in a more urban lifestyle if a huge house trumps everything else. It's middle class families who would be happy in 1200-1700 sf who are SOL. But that's just my perspective - we have two kids in a 1300 sf and have unused/underused space. I'd give two or three hundred up for a more efficient floorplan.

I'd rather meet the needs of families who want a more green-friendly urban lifstyle but who are priced out than affluent families who just want a Circle C house in 78704. Not saying they shouldn't have the option, I'm just not shedding too many tears for them since at least they can choose the 1500sf in central Austin while the majority of Austin families can't...

[el longhorn]

More housing will always help reduce prices, even if it is not a perfect match. Look at those 1950's era 2-1 900 sf suburban homes in Crestview. Family's of 5 used to grow up in those. Families can adjust to 1000 sf 2-2 condos in downtown...will adjust when the price compared to a sf home become attractive.

[Steve]

One factor you're leaving out is that most families with kids (I'm in the 14th year of that stage in my life) want to live in an area with good schools and the type of amenities associated with family living.

I thought about how cool it would be to own a downtown condo, and I'll be there in another 10 years after the youngest is gone to college, but for now, my kids need space to roam and a place to ride bikes. I think sticking kids in a downtown condo would be bad for the kids.

As far as what I think is your notion that the availability of condos will reduce demand for Central homes, theoretically I'm with you, but inmigration is going to wipe out that effect and Central housing will continue to rise and appreciate in value regardless of how many downtown condos are purchased by young couples and singles.

[pel]

My wife and I rent a 1300sf house in Crestview. We have three kids.

It is my belief that the condos will help the price point for our neighborhood when we go to buy, because any increase in central city lodging supply should help depress demand. Not that I think prices will drop, barring some kind of major economic recession/depression. But maybe, at least, the annual increase will slow down enough for my salary to catch up.

While I certainly enjoy my Crestview home and would like to buy it, I am not opposed to parking me, my wife, and our brood in a similar sized condo closer to downtown.

However, I'll be damned if I'm going to pay the same price plus a $300+/mo homeowner association fee that a condo would command.

Frankly, even Crestview is becoming too expensive. I doubt I could coax the owner to sell for less than $230k, and I have seen realtors ask for $290k+ for some pads in my neighborhood.

Who knew that a 1300sf, 1959 house with asbestos siding and <100amp electric service could be so expensive?

[M1EK]

Steve,

Consider that in the true 'burbs, your kids can't bike outside your own small development - while in central Austin, great bike routes exist going quite long distances, and then there's the bus too (which my 13 year old has used to his advantage at times).