Birds Eye View of the Austin Real Estate Market from Civilitude President Nhat Ho
The Austin housing market is beyond a temporary shock in supply and demand. It has accelerated exponentially and permanently shifted the local housing market. This phenomenon can also be called a “crisis” because it will leave a significant portion of our community behind unless we drastically change how we invest in housing.
The pre-COVID data from 2017 to 2020 appears to reflect a fair increase in housing costs. The standard metric used calculates 80% of the Median Family Income (MFI) and then compares that value to the median sales price for single family homes, as well as the median rent price. However, the income to housing cost ratio in Austin was never truly affordable to begin with. We just had a preservation of the “status quo.” For many years, policy makers have justified derivative land use solutions such as secondary unit (ADU), vertical mixed use (VMU), and 10% affordable density bonuses, but the plans have never quite moved the needle. This is not to say those programs were not helpful, they just haven’t created the additionality or momentum Austin needs to become more affordable. Then when covid hit, there was just no way to absorb the impact of the subsequent housing boom and the resulting need for affordable housing.
Drone angle view of Austin, Texas on a sunny day.
With waves of people relocating to Austin, there has been a sharp drop in housing availability and an increase in median sales prices. This migration of people seems unlikely to slow down any time soon, even as supply chain issues, inflation and market unpredictability stabilize. Most of the people buying homes in Austin moved here for higher paying jobs, which skews the MFI data upward. This means there are fewer competitive buyers and renters. Putting the numbers into perspective, you’ll find that the current 80% MFI household will be moving towards 60% and further down the line, potentially as low as 30% MFI. If housing policies do not catch up quickly to provide “deep affordability” below 80%, we will leave people behind, permanently.
Fortunately, not all is grim. The silver lining of the pandemic was that it forced everyone to break the status quo. When office and hospitality development were in chaos in the first half of 2020, many institutional investors and market-rate developers pivoted to affordable housing. Thanks to policies like “Affordability Unlocked”, which increases height allowances, waives compatibility setbacks and removes minimum parking requirements, many projects drastically increased the percentage of affordable units to 50%. Furthermore, the American Rescue Plan Act (ARPA) funds, coupled with a willingness from Travis County and the City of Austin to consider progressive tax abatement strategies, opened the door for non-profits to partner with developers to create not only deep affordable housing but also permanent supportive housing (think homeless housing, women and children’s shelter, elder care etc).
The key takeaway I hope to leave you with is that we must continue to scale and accelerate the momentum of our solutions to match the crisis ahead.