Don't let the Greeks out of the University Neighborhood Overlay

Several University of Texas fraternities and sororities will ask the Planning Commission tonight to carve their properties out of the University Neighborhood Overlay.   Staff has endorsed the requests.  I'm surprised, because this is a bad idea.

The UNO, approved in 2004, dramatically increased allowable heights and densities in a chunk of West Campus.  It has resulted in the wholesale reconstruction underway there now.  Over the next few years, we will see thousands of new units of student housing in West Campus.  That is a good thing.

The relaxation of height and density restrictions predictably has hiked up the value of properties within the UNO.  This has resulted in a steeper tax bill for the fraternities and sororities within the zone.  The property tax bill for Sigma Chi's house, for example, tripled to $60.000 between 2004 and 2007.  The appraised value increased from $857,000 in 2002 to $2,284,000.

The greeks don't think this is fair since they do not benefit from the increased development entitlements:

Tim Aynesworth, coordinator for a student housing preservation group, said nonprofit student housing organizations do not benefit from the overlay's zoning guidelines. In response to the zoning changes, Aynesworth said they want their properties to be excluded from the overlay and returned to the classification as a multi-family base zoning district.

"We need to find a way to return to our original zoning district," he said. "By doing so, we will actually reduce the development potential of the property and hope it will lower its valuation."

The fact is, though, that fraternities and sororities are competing against other students for very scarce land.  Right now, they are consuming a lot of land for a relatively small number of students.  For example, the Sigma Chi property has just 13,591 square feet of living space on a 39,000-square foot lot (0.9 acre), a floor-to-area ratio of just .34.  The lot has a 75-foot height-limit under the UNO, and could hold well over 100 student apartments (maybe a lot more).

Who deserves it more?  I don't know.  I don't even know how to make this kind of moral judgment.  That's why I prefer to let prices sort it out.  The cost of holding a piece of property consists of the opportunity cost and the tax burden.  Fraternities and sororities are functionally shielded from the opportunity cost by our non-profit tax laws.  The only cost they face is the tax burden.  If we cut their property tax burden, there will be no way to tell how much they really value the properties.  Inevitably, we will see fraternities and sororities hold onto properties long after they would have been converted to mid- or high-rise student housing.  I don't see any justification for such a policy -- unless someone wants to argue that fraternities and sororities produce significant benefits to society at large, not just to their memberships.

Comments

[Daniel]

Another thing to consider is that the Greeks DO, in fact, have every opportunity to benefit from the UNO, should they decide to redevelop their houses in a more modern and less palatial way. This could allow for the Greeks to take advantage of the increased property values by borrowing against the value (admittedly at some cost) to increase the density of their housing.

Contrast this with another long-standing non-profit student housing group, the cooperatives, who are very much looking forward to the redevelopment and increased density the UNO will allow them. Since their goal is to provide the benefits of their services and the affordable rent rates they offer to as many students as possible, this allows them to expand the scope of their mission... which will increase their scale and economy over time, allowing for more growth in the future. The property they are developing in west Campus has been covered in the Statesman.

So the only way in which the Greeks are not able to get the benefit of the upzoning is if they are stating that low density housing with party-friendly lawns are an inherent part of their mission, and that expanding their membership would detract from that mission. In which case, I think the question of whether they produce significant benefits to society at large answers itself.

[Rob]

I'm not a fan of the Greek system but it does play a major role in many students' lives, both during school and after graduation. I could see the argument that these houses deserve treatment similar to historical buildings or even churches. They do perform charity work and serve as social meeting places for students.

One of the reasons so many students want to live in West Campus is because of the proximity to fraternities and sororities. I think if they are forced to move the students will migrate to wherever the houses go.

[M1EK]

The charity work performed by frats is far outweighed by their negative effects on their neighbors.

The positive impact they have on their own members' lives ought to be funded by those members (or maybe the frat's rich alumni).

[DSK]

I say no breaks for the Greek houses. IMHO, if a fraternity or sorority chapter isn't obtaining enough funding through a combination of dues and alumni donations, then it's not much of a chapter. If a chapter feels its taxes are unfairly high, the places to pursue that are at the county and the state, rather than the municipal zoning code.

[heyzeus]

I don't feel sorry for landowners whose property has increased in value by $1.5 million in 5 years. That's a benefit. If their fraternity house qualifies for historic protection, that is one way to lower your tax rates. If not, and the organization truly can't afford the property taxes, then consider making better use of your land either by improving it or selling it for an enormous profit. It's the same choice everyone else in rising real estate markets has to make.

[GMV]

The Greek community has always had an enlarged sense of entitlement so I guess they think they can get whatever they want. The problem with them "getting priced out" of West Campus is that the punks could/will end up in another neighborhood and I wouldn't wish that on too many many neighborhoods. I don't think they are really creative enough to figure out how to maximize their property in West Campus (ie, build up-not out)and still stay where they best belong.

[Chop Chop]

The fact is, if the frats opt-out, it won't actually reduce the value of their land. The land is valued for its development potential. Even if the city rezones the land, the neighborhood still supports dense development for this land. A new owner would simply ask for the zoning to be restored.

[AC]

Chop Chop, I completely agree that the zoning change won't affect the real market value, for the reasons you gave. However, some seem to think that TCAD will only consider authorized uses in its appraisals. The fraternities apparently think that's true. I haven't heard anything definitive, which is weird, since TCAD ought to have a clear-cut policy on that.