Austin Contrarian

More evidence the McMansion ordinance is anti-family

I've argued before that the McMansion ordinance is anti-family.  By making large homes in central Austin more scarce and therefore more expensive, it will drive families with children -- households that put a premium on living space -- to the suburbs in search of affordable housing. 

This very cool map prepared by the City's demographer backs me up, at least indirectly.  It graphically confirms what I've always suspected:  The neighborhoods that generated the most noxious support for the McMansion ordinance are disproportionately populated by singles and DINKs.  The outer neighborhoods, the ones heavily populated by married couples with children, showed little interest in the McMansion ordinance and are not covered by the McMansion ban. 

This map color codes individual neighborhood blocks by the percentage of married couples with children. Here's the key:

Now take a look at the Bouldin/Travis Heights neighborhoods (the area bounded by blue), both bastions of rabid support for the McMansion ordinance:

Those swaths of yellow and pink are city blocks where MWCs make up less than 20% of the households.  Note there are very few areas where MWCs make up even 30% of the households.

Let's go a little farther out, to the South Lamar area (bounded by blue):

More pink, bigger splotches of the darker colors, but MWC's are still relatively sparse.  Significantly, SLNA is also covered by the McMansion ban.

Now a little farther south, where the houses are a little cheaper and a little bigger.  This is roughly the Westgate/St. Elmo area:

Sharp increase in the percentage of MWC's.  Very little pale yellow (0-10%), unlike Bouldin/Travis Heights, which had huge swaths.  Westgate and St. Elmo are not covered by the McMansion ordinance (although they were covered by early proposals).

Last in the line:  The Slaughter/MoPac area, with even bigger houses:

Family city.  Needless to say, no McMansion ordinance here.

You will see a similar progression -- a gradual "thickening" of MWCs -- if you start north of downtown and work your way up to 183.

This distribution of families was not caused by the McMansion ordinance; this map is based on 2000 Census figures.  But the correlation between single/DINK density and support for the McMansion ordinance is obvious and dramatic.  And I think it largely explains the McMansion ordinance.  The most virulent activists came from the central neighborhoods grossly underpopulated by families with children. 

The neighborhoods populated by families were excluded from the discussion early on.  The activists pulled this off by defining the McMansion "danger" zone to be the central Austin neighborhoods dominated by singles and DINKs.  The Task Force was duly constituted with representatives from these neighborhoods. No one bothered to poll the outlying neighborhoods or give them representation on the Task Force.

We got what one would expect from looking at the demographer's map.  The central neighborhoods have been "fixed" so they will become increasingly inhospitable and unaffordable for families.  Many families that want to move closer to downtown will stay put. Austin will increasingly resemble places like San Francisco, where families with children have all but fled the central city.

Three other points:

1.  This map is based on 2000 Census figures.  My guess is that MWCs' share of the inner neighborhoods has decreased since 2000.

2.  MWCs aren't the only families with children.  There are lots of single-parent households and unmarried couples with children.  But I'd expect neighborhoods with sparse populations of MWCs also to have sparse populations of single-parent and unmarried couple households.  This map roughly corroborates this claim.  It shows that the census tracts with the lowest percentage of children under 5 were grouped in central Austin.

3.  The central Austin neighborhoods with the highest concentrations of married couples with children tend to be in East Austin.  East Austin, perhaps coincidentally, was poorly represented on the Task Force.

Why do some small-lot owners support the McMansion ordinance?

As I've argued elsewhere, the McMansion ordinance can only hurt the market value of a small home on a small lot.  I'd expect small-lot owners to know this.  That some support the ordinance anyway has always puzzled me. 

This recent economics paper might clear things up.  It claims the typical person's well-being depends on how he stacks up against his neighbors.  The author matches individual subjective ratings of well-being to earnings information, and finds: 

• Between spouses, "higher neighbors' earnings are significantly associated with more frequent open disagreements about money, but not significantly with the frequency of disagreements about household tasks, the children, sex, in-laws or spending time together."
• "Neighbors' earnings significantly reduce satisfaction with the amount of leisure time . . . and satisfaction with one's friendships."
• "The size of the effect [of neighbors' earnings] is meaningful.  An increase in neighbors' earnings and a similarly sized decrease in own income each have roughly about the same negative effect on well-being."
• "[T]he effect of neighbors' earnings is significantly stronger for those who socialize more frequently with neighbors but not for those who socialize more frequently with relatives, friends outside the neighborhood or people they work with."

This paper is controversial.  No one disputes that people compare themselves to their neighbors; the dispute, I think, is whether these comparisons have such a strong and systematic effect on happiness.  (Some argue the government should not intervene in either case.)

If taken at face value, though, these findings could explain why some small-lot owners support the ordinance.  And why neighborhood association officers -- who probably socialize frequently with other neigbors -- are the fiercest McMansionists.

I realize that other justifications have been offered for the McMansion ordinance, such as preserving privacy, backyard gardens, and sunlight.  Some people simply hate change (including change to "neighborhood character").  And I concede that there are McMansions out there that will make you flinch.

I don't dispute that people support the ordinance for some or all of these reasons.  I've just never believed that these reasons account for all of the support, especially among the small-lot owners who will likely take the biggest hit.   

The Chronicle names the McMansion ordinance the Best New and Potentially Sexy Zoning Ordinance

Here.

You'll learn that "it actually protects the little guy, the humble home dweller, you and me!"

No surprises here.  That exclamation point was uncalled for, though.

A better McMansion ordinance

Although I've spent the last ten days bashing it, I concede that an outright repeal of the McMansion ordinance is unlikely.  But what we've got certainly can be improved.

Below is my proposal for doing that.  My ordinance has three advantages over the current ordinance:  (1) it is neighborhood specific; (2) it is intended to help neighborhoods urbanize gracefully, not to stave off urbanization forever; and (3) it applies only in neighborhoods that we know want it. 

So here it is:

FAR requirements.  The current ordinance fixes the FAR, or ratio of Gross Floor Area to lot size, at .4, regardless of the typical FAR in the neighborhood.  It epitomizes the ordinance's one-size-fits-all approach. 

It would be better for the City to adopt a separate FAR limit for each neighborhood.  I'd suggest the neighborhood's average (mean) FAR plus one standard deviation plus .05.  This would accommodate development at the upper end of "average," while preventing outliers from serving as a benchmark. 

For example, if the mean FAR in a neighborhood is .25 with a standard deviation of .1, the new FAR limit would be .25 + .1 +.05 = .4, the current limit.  (Under this proposal, the maximum FAR for many neighborhoods actually would decrease from the current max of .4.)

Here's the kicker:  The FAR limit would gradually be relaxed and eventually phased out.  I would add .05 to the maximum FAR per year for five years, and then eliminate it. 

Minimum guaranteed home size.  2,300 square feet is too small for many neighborhoods.  I again would use the neighborhood as a guide, and set the minimum equal to the average neighborhood home size plus one standard deviation (but in no event less than 2,300 square feet.)  This would raise the minimum in places like Allendale and Barton Hills to a more neighborhood-appropriate 2,800 square feet.

Building height.  It's now 32 feet.  I'd return it to the former limit of 35 feet at the rate of one foot per year.

Building envelope.  The current building envelope's boundaries are determined by imaginary lines running from the side to the top at 45 degree angles.  I'd increase that angle by 10 degrees per year for four years, and eliminate the building envelope completely after five years. 

Yard setbacks.  Set the front and rear building setbacks at the neighborhood average minus one standard deviation. Reduce them at the rate of 2 feet per year or so until we're back to original setbacks.

Height measurement.  Measure building height from finished grade (the old rule), with a narrow exception aimed at "pedestals."

Garages and second-story porches.  Exclude these from the calculation of Gross Floor Area.

Basements.  Allow them to stick a couple feet above finished grade.  The current ordinance does not permit basements to have any natural light.

A vote.  Require neighborhoods to opt in rather than opt out, and require them to do it through a fair election -- i.e., one that complies with the Texas Election Code.  The ordinance entrusts the opt-out decision to neighborhood planning groups.  The neighborhood groups have erected a number of barriers to the franchise.  If they're going to be delegated real authority, the City had better make sure their elections are up to code. 

By writing a sunset provision into the the McMansion ordinance, we guarantee our neighborhoods an opportunity for appropriate development. By gradually relaxing the McMansion restrictions, we guarantee our neighborhoods an oportunity for a graceful transition. When the restrictions will be the tightest -- at the beginning --developers and lot owners will have an incentive to develop just the large lots; neither this proposal nor the actual ordinance will have much effect here. Think of 12,000-15,000 square foot lots in Tarrytown. But the phase-out will encourage owners to hold the marginal lots (i.e., the small lots) out of development for a year or two or more. This will save us from the most jarring mismatches when the small lots are finally developed.

Anyway, that's how it would work in theory.  At least we'd know that we haven't stuck ourselves with perpetually substandard housing stock.

If you want a vivid demonstration of McMansion's impact . . .

take a look at yesterday's article on the Rosedale redesign.  (I must say it's a pretty cool redesign.) 

The house started out at 1,137 square feet.  The paper neglected to mention the square footage of the redesign, but has helpfully responded to my request for this information.  (The architect has courteously responded as well.)

The redesigned house has 2,188 square feet of air-conditioned space -- you know, what you'd quote if you were going to sell it.  But it's got 3,067 square feet of Gross Floor Area, as measured under the McMansion ordinance.  (So the floor-to-area ratio for this house is about .33.)

No big deal for this lot.  But this same design would have to be cut down by 667 square feet to fit on a 6,000 square foot lot, a typical size in many neighborhoods, and a common size in most.  (The Rosedale lot would be 6,000 square feet if you chopped 55 feet off its depth.)

Take another look at the sketch.  It would be absurd to call this house a "McMansion" if it happened to sit on a 6,000 square foot lot.  And suppose you were the small lot owner.  Which 667 square feet would you cut?

A McMansion miscellany

Miscellaneous reasons for opposing the McMansion ordinance:

It discourages two-car garages and second-story porches.  This was mentioned in reason no. 1.  But it's so inane it deserves separate mention.

It will increase design costs for small lots.  Dont' get me wrong.  I think architects are great.  A house designed by an architect is likely to be creative and compatible with the neighborhood.  But as the series in the Statesman shows, making homeowners happy under McMansion will frequently take a lot of creative architecture.  Creativity is expensive.  It will be most expensive for small lots.

It will make construction projects take longer.  Each new project will have to be vetted by the City for McMansion-compliance.  That's going to slow things up, even with the new inspectors.  Delays cost developers money. Someone's going to end up shouldering that cost, and it's not going to be developers. 

Its requirement to measure building height from "natural grade" will cause chaos.  "Natural grade" isn't necessarily the grade you see.  "Natural grade," according to the ordinance, "is the topography of a site before it is modified by moving earth, adding or removing fill, or installing a berm, retaining wall, or architectural or landscape feature."  All modifications to our landscape after October 1, 2006 count and must be kept track of.  The City, if it wants (prompted, say, by a neighbor) can require you to prove natural grade with a "third party" (read, "prior owner's") survey.  Five years from now, nobody's going to know what they can build on a recently modified property just by looking at it.  They're going to have to get all surveys conducted since time immemorial -- officially, October 1, 2006 -- to figure out how high they can build. 

The McMansion Task Force was not fairly representative.  I suppose if NA's can raise "process" objections to zoning amendments, so can I.  The Task Force supposedly was evenly split between the neighborhood representatives and the developer representatives.  For reasons well documented by M1EK, the neighborhood representatives didn't share the interests of the average Austin homeowner affected by this ordinance, and certainly not the typical small lot owner.  Several on the developers' side had no incentive to fight the regulations, either.  It was a sham to pass the ordinance off as the result of a balanced fight between NA's and developers.

It will encourage smaller yards.  It was supposed to preserve bigger yards, of course.  But the height limitation and building envelope will cause houses to use more of the allowable grade-level "footrpint" than they otherwise would.  Check out the design in today's (November 25, 2006) Statesman.  This clever design (meant sincerely) leaves no usable yard.  If the designer could have designed in a third story -- which would have required just three more feet than the ordinance allows -- there might have been some yard left.

Its one-size-fits-all regulations make no sense for neighborhoods with different looks.  South Lamar, Dawson, and Galindo already had a lot of high-FAR housing.  The ordinance treats these humbler neighborhoods like Tarrytown and Pemberton heights.  (Tarrytown is already thick with starter mansions; it's too late to prevent its McMansionization, if that was the goal.)  Neighborhoods can tailor the limitations to their own taste, but I'll lay even money that none of them loosens the FAR restrictions by one square foot.  (Prediction:  the humblest neighborhoods fight any modifications the hardest.)

That's it.  Good night and good luck.

Reason No. 7 to hate the McMansion ordinance.

The McMansion ordinance will (likely) redistribute wealth from small lot owners to large lot owners.

This is the reason I first turned against the McMansion ordinance.  I haven't put it last for this reason, but because I admit it is still just a conjecture.  I think I've got good reasons for believing it to be true, but markets are dynamic and complicated things.  Maybe it won't pan out this way.  I hope hard sales figures eventually will give us a clear-cut answer.

Enough disclaimers.

Small lots are worth more if you can build big houses on them, assuming there's ample demand for big houses. The McMansion ordinance will keep small lot owners from getting top dollar.  On the other hand, it almost certainly will benefit large lot owners.  There will be fewer lots where it is possible to build the big houses the market demands, making them more scarce and thus more valuable.

This wouldn't necessarily be true in a real estate market where the supply of large lots equals the demand for big houses.  But that balance does not hold in central Austin's market, where small lots increasingly have been used as big home sites.  In other words, a McMansion ordinance matters only in a market where people are building McMansions.

The McMansion phenomenon is a result of the large spread between home prices and construction costs, combined with the relatively low value that buyers put on large yards.   

Let's consider a concrete example.  Suppose large homes in a given central Austin neighborhood are selling for $250 per square foot but cost just $100 per square foot to build.   Let's say we've got a small lot with a 1,000 square foot cottage on it.  What's it worth?

One way to calculate its value is to multiply the square footage by the going market rate for houses that size.  Small houses usually fetch a higher price per square foot than large houses, so let's say $275 per square foot.  Valued this way, the house is worth $275,000.

But suppose that with no McMansion ordinance, the lot could accommodate a 3,000 square foot house that still fetches the market rate.  That house would have a market value of $750,000.  Subtract $300,000 in construction costs and $25,000 in demolition costs, and the lot is now worth $425,000.  Because owners (or at least their realtors) are good at figuring out the value of their property, that's what the owner will ask.

Enter the McMansion ordinance.  The owner (or his developer customers) can now build just a 2,300 square foot house on the lot.  The new house will be worth $575,000.  It will cost $230,000 to build and $25,000 to demolish the cottage.  The net lot value is now $320,000, still significantly more than the cottage is worth on a per square foot basis, but a full $105,000 less than the lot's value without the McMansion ordinance.  (Many of the small properties in central neighborhoods are valued according to some sort of analysis like this; that's the only way to explain their $300 or $350 per square foot asking prices.)

In this scenario, the McMansion ordinance has cost the small lot owner over $100,000 in equity.  Although that's less than a third of the house's value, it's likely the bulk of the owner's equity.

While I think these numbers are roughly representative, they're not drawn from a real example.  Maybe construction costs per square foot should be higher, maybe sales price per square feet lower.  This does illustrate the hypothetical impact of the McMansion ordinance.

Note that the McMansion ordinance might have an adverse impact even if the value of small lots continues to rise (due to, say, increasing demand from singles and DINKS). The impact in this case will be reflected in a slower rate of growth for small lot prices, at least compared to the rate of growth for large lot prices.  That is, the small lots will be worth less than they otherwise would.

I've seen three arguments against this conjecture.  (Feel free to contribute others.) 

This can't be true because the value of small homes continues to go up.  For the reasons stated above, I don't think that proves anything -- it's relative growth that is relevant -- although it might make us feel less sorry for the small lot owners.

Small homes will be worth more if there is a regulatory guarantee that they won't be surrounded by McMansions.  This is probably true.  But I don't think a small lot with such a guarantee will be worth more than if you could build a big house on it.  For instance, if the example above is realistic (debatable, I admit), you'd have to believe that a "no-McMansion" guarantee will add $105,000 to the small lot's value.  Unlikely.

Small lots will be worth more if we preserve neighborhood character.  I've got two responses to this.  First, you'd again have to believe that neighborhood character is worth a bunch of money.  I think most of the value in central Austin homes is due to their proximity to central Austin amenities rather than "neighborhood character."  I don't believe neighborhood character will have that much price effect.  Second, even if it does, the McMansion ordinance does not really preserve neighborhood character.  For all its effort to regulate design and taste, we'll still see tear-downs and new, hulking houses.  Just not as many as before.  The McMansion ordinance was poorly drawn to regulate neighborhood character (which will make it seem more arbitrary when it does affect design or taste). 

So in the end, I think the McMansion ordinance will make small lot owners worse off than they'd otherwise be and large lot owners better off.  That has never seemed very fair to me, even if the value of small lots continues to rise.

I suppose I'd feel differently if most small lot owners supported this ordinance.  We don't know whether they did or not.  Some certainly did.  And some certainly opposed it.  Because the Task Force was not selected or structured to represent their interests, however, I don't think they got a fair shake.

Reason No. 6 to hate the McMansion ordinance

The McMansion ordinance will allow neighborhood groups to regulate taste.

The McMansion restrictions can be waived.  Since the restrictions are so drastic, there will be lots of property owners who think they need a waiver for one reason or another.

Some of the likely reasons:

Trees.  The property has a big tree in an inconvenient place.  The owner/developer wants to keep the tree but doesn't want to sacrifice too much square footage.  He requests an increase in the setback planes so he can get his allotted square feet without cutting down the tree.  (We'll hear this one a lot.)

Unusual natural grade.  The property originally had an unusual natural grade.  The grade's been leveled and matches the grade of surrounding properties.  But because height measurements are taken from the natural grade, the setback planes are "unfairly" low.

Unusual lot shape.  There's been little discussion of how the setback planes will work for irregularly shaped lots.  Prediction:  They won't.  Try to imagine setback planes imposed on a triangular lot.  (Some irregular lot owners probably will have a good case for a variance.) 

The Remodel.  The owner wants to add a second story to his house but needs a waiver from the setback planes to do so because of the house's unusual placement on the lot.

To get a waiver, owners will have to go to the new Residential Design and Compatibility Commission (the "RDCC").[1]

The RDCC is to be a commission of the activists, by the activists, and for the activists.  The NIMBY ideology is written right into its charter:  The litmus test for its nine commissioners is that they "have knowledge of massing, scale and compatibility issues in residential neighborhoods."  A candidate presumably can't have knowledge of MS&C issues unless he believes that we have MS&C issues in the first place. 

Five of the commissioners will be "residential design professionals." (Does this include anyone other than architects?)  Architects who've flouted MS&C principles need not apply, of course.  And there's no mystery about who'll fill the non-professional spots.

In case there was any doubt that the Commission will have a broad mandate to stamp out the aesthetically incorrect, the ordinance directs it to consider "consistency with the streetscape of the properties in the vicinity" (i.e., nothing too different) and "compliance with neighborhood design guidelines" (i.e., nothing too ugly).

The ordinance, of course, requires the property's immediate neighbors to be alerted.  And the neighborhood association.  And the neighborhood planning team.  And, by post, anyone casually walking or driving by.

Anyone who's seen enough zoning hearings knows what this will degenerate into.  The neighborhoods will use the waiver request to impose their taste.  (They will quickly detect how far they can go before the owner decides the costs aren't worth the benefits of the waiver.) These hearings will rarely be about just massing, scale or compatibility.  Owners who want a side articulation waiver will be told they should be using wood siding rather than stone, or stone rather than wood, or brick rather than stone.  Or they'll be told to get rid of some windows on their proposed second story ("it's too intrusive").  Or they'll be told to add some windows ("it's too monolithic").  We'll hear complaints about roof pitch.  Placement of porches.  Design of the garage.  Any design feature that can cause the slightest annoyance will be fair game.  Neighbors can expect a sympathetic audience from the RDCC.

Perhaps I'm too cynical.  Maybe the RDCC will be evenhanded, and show genuine concern for owners overburdened by the McMansion ordinance.  As a practical matter, NA's have long had the power to extract concessions from developers seeking to rezone property.  Sometimes they've struck deals that were good for everyone.

But given the militancy with which they fought for the McMansion ordinance, I'm not optimistic. 

Tomorrow:  less polemics, more economics.

[1]The Board of Adjustment can grant a variance, but it has relatively strict standards that must be met first, including that the regulation "does not allow for a reasonable use of property."  See section 25-2-474(A)(1) of the City's Land Development Code.

Reason No. 5 to hate the McMansion ordinance

The McMansion ordinance will penalize innovative architecture.

The McMansion Task Force was charged with "protecting" us from oversize houses.  But it evidently concluded this mandate was just a suggested starting point.  I say this because it decided to target "neighborhood insensitive"  architecture as well.  We're to be protected from the weird as well as the big.  To wit:

These houses are McMansions, according to the Task Force.  That ought to be surprising, since each house is 600 square feet smaller than the alleged 2,300-square-foot "minimum."

The trouble started when the Task Force concluded that it was not enough to require smaller and shorter houses.  Owners, after all, might take liberties without more precise guidance.  We could end up with houses built to the side of lots rather than the middle.  Or we could end up with long walls without the architectually correct amount of "articulation."  Or (gasp!) we could end up with flat roofs.

So the Task Force sprang into action.  The Building Evelope (blandly termed "setback planes" by the TF) was born. 

The Building Envelope (illustrated at right) is a make-believe tent anchored on the side lot lines and the front and rear setback lines.  Exactly what it requires is still something of a mystery.  There's no evidence that anyone outside the Task Force really understands what it requires.

For the houses above, what matters is that the tent starts on the side lot line at a height of 15 feet, and slopes upward at a 45 degree angle.  When it reaches the property's center line, it begins to slope downward again.  Thus, at the five-foot side setback line, a house can be no taller than 20 feet.  If you move ten feet from the side lot line, the house can be no taller than 25 feet.  Any part of the house that is 30 feet tall (the new maximum height) must be at least 15 feet from the side lot line.

This isn't a big problem if you're building a Craftsman, or Tudor, or Victorian, or Colonial, or any other house with a pitched roof.  But it's a big fat problem for houses with flat roofs.  By definition, a flat-roofed house that is 30 feet tall in the middle is also 30 feet tall at the sides.  In order to fit within the Building Envelope, each side must be set back at least 15 feet from the side lot line.  This removes a total of 30 feet of the lot's width from the buildable area.

There are thousands of lots, however, that are 50 feet or less wide.  The houses above, for example, sit on 47-foot wide lots.  Assume they're 30 feet tall. (They're really 35, I think, but this doesn't make any difference here).   If these houses had to fit within the new Building Envelope, they could be just 17 feet wide. They're obviously much wider than that, likely twice as wide.  Thus, a large chunk of each house juts out of the Building Envelope.  They would be forbidden under our new ordinance, even though they're only 1,600 square feet or so.

Even your average weird-house owner probably doesn't want to live in a house that's only 17 feet wide.  So he's got to decide:  does he accept a shorter house -- sacrificing valuable space, maybe even the second floor -- or does he instead abandon the flat roof design?  Tough choice.  But giving him a tough choice apparently is good for the rest of us.  At least that's what the TF must have concluded, since it set out to make him pay for his unusual architectural taste. 

I like the houses above.  I'm willing to tolerate some clunkers in order to get fresh and interesting designs like these.  Some people might dislike these houses.  That's fine, too.  I don't have a monopoly on taste. 

I don't recall any debate on whether we should penalize flat-roof designs, though.  For that matter, I don't recall any debate on whether the Task Force even ought to be in the business of regulating aesthetics.  I can't say for sure how such a debate would have turned out.  But I frankly doubt that most Austinites would have stood, or will stand, for this attempt to dictate blandly homogeneous design.  Weird is our slogan.  People who are uncomfortable with the weird perhaps ought to consider a good gated community, where  homeowners can regulate one another to their hearts' content.   

Reason No. 4 to hate the McMansion ordinance

The McMansion ordinance will make the rest of us pay more in taxes.

Okay, okay, so this is not so high minded.  Still, money matters.  McMansions replace relatively low-value homes and, in the process, expand the City's tax base.  The rest of us pay less in taxes as a result.

Here's an example. Suppose Smith's got a cottage in Tarrytown with an appraised value of $350,000.  A developer comes along, buys the cottage from Smith, and tears it down.  He then builds a $1,000,000 house, which he sells to Jones.

At current tax rates, Smith's property tax bill is less than 10,000.  At the same rates, Jones' bill will be roughly $27,000, a difference of $17,000.  (The difference will be even greater if the taxable value of Smith's home is less than its appraised value.)

At first blush, it might seem like the City's $17,000 richer, but that's not quite right.  Each year, the City calculates the tax rate necessary to bring in the same amount of money as the year before (the "effective rate").  The City, theoretically, has a constant stream of revenue regardless of the tax base unless it raises taxes (which it can do without risk of a revolt as long as it doesn't exceed the "rollback rate.").  The City thus does not directly benefit from Jones' new house.

So who gets that extra $17,000?  Well, the rest of us.  Each of us pays just a tiny bit less because this one property is now worth a whole lot more.[1]

Even if the City raises taxes, the tax hike will be spread out over a bigger tax base, again saving the rest of us money.

Now I admit that Jones isn't going to save the rest of us a lot in taxes, probably just a few pennies each.  But the McMansion ordinance will discourage the construction of lots of McMansions.  That's the whole point of the ordinance.  The pennies will add up.

If you're underwhelmed by this point, think about it this way.  Below is a map of Austin prepared by the city demographer charting the average percentage increase in single family home values by zip code between 2000 and 2005. 

The color key didn't copy real well, but I can make my point with just two colors:  dark red means the single family homes in that zip code increased in value by more than 100%.  Yellow means that zip code's homes increased in value by 40-60%. What is notable is that zip 78702 -- East Austin -- saw the value of its homes shoot up by a much larger percentage than the value of homes in zip 78703 -- e.g., Tarrytown, Pemberton, Clarksville.  Assuming the number of homes in these zip codes remained relatively constant, this means that between 2000 and 2005, the average East Austin homeowner saw his property taxes increase by a larger percentage than the taxes of the average homeowner in Tarrytown, Pemberton Heights or Clarksville.  There might be some merit to the complaint of East Austinites that they're getting taxed out of their homes.

Property taxes are largely a zero sum game.  Relative value matters more than absolute value (at least, until the City starts bumping up against maximum tax rates).  If we want to ease the property tax burden on the average East Austin homeowner (or far South Austin homeowner, or far North Austin homeowner), then the average property tax burden on other homeowners must go up.  This is where McMansions help.  The people building McMansions are volunteering for a tax increase.  They're effectively pushing up the average value of homes in expensive neighborhoods by replacing modest (but expensive) homes with large (super-expensive) ones. 

Because of the McMansion ordinance, there will be hundreds of small homes in expensive neighborhoods that can no longer feasibly be upgraded to more expensive homes.  While some people think that's something to celebrate, each foregone opportunity leaves incrementally more of the tax burden on the rest of us. 

[1]It's counterintuitive, but your tax bill can go down even if your appraisal goes up.  If everyone else's property appreciates even more than yours, then your property will represent a smaller share of the total tax base and thus will have a lower tax bill -- that is, assuming the City doesn't raise the tax rate.

Correction.  I originally miscalculated Smith's tax bill.  I put $11,000 when it would be less than $10,000.  I've fixed that, and corrected the difference between Smith and Jones' taxes to $17,000.