How Does Austin’s VMU2 Zoning Program Create Affordable Housing?

It’s been about a year since the City of Austin approved new rules for development under the city’s Vertical Mixed-Use (VMU) zoning program, which allows properties on central transit corridors to exceed typical limits on height and density in exchange for a percentage of on-site affordable residences. Last year’s update created a new tier of the program, known as VMU2, which attempts to further subsidize affordable housing by allowing new buildings to rise even taller than before in exchange for a larger percentage of income-restricted units.

But to understand VMU2, you’ve got to understand VMU — and although Austin’s creaky old zoning code is generally an obtuse nightmare of thought-terminating complexity, the basics of the program as it was originally passed in 2007 are relatively easy to grasp. In short, new buildings on properties inside the VMU overlay are allowed to rise up to 60 feet, or about five floors, as long as they include ground-level retail space and offer 10 percent of the on-site residential units at rates affordable to Austinites earning no more than 60 percent of the Median Family Income (MFI).

This original iteration of the VMU program also relaxed parking requirements and removed restrictions on setbacks, floor area ratio, building coverage, and site area. The update to the program passed last year simply adds a new tier, called VMU2, that retains most aspects of the original VMU zoning but now allows a project to rise up to 90 feet instead of the previous maximum of 60 feet, as long as developers also bump the building’s on-site affordability percentages up to 12 percent of units at 60 percent MFI, or 10 percent of units at 50 percent MFI. While other more finicky elements like setbacks and parking reductions are also important to developers, the trade of more affordable units for a taller building is the easiest way to explain this to most people.

The City of Austin considers the VMU program one of its most successful affordable housing tools, with a tally of approximately 678 affordable units created and more than 1,000 more in the pipeline as of last year. While these numbers seem low compared to the city’s overall housing needs, what’s important to recognize about the income-restricted units built through VMU is that their affordability is subsidized entirely by the market-rate units in the building, meaning these projects don’t have to seek affordable housing tax credits or other sources of public funds. That makes these communities easier and faster to build, and we’ve already seen a number of projects announced under the updated standards passed last year. The VMU2 updates also address density near the future rail lines of Project Connect, providing a unique incentive by waiving compatibility standards that water down projects all over town:

VMU2 projects on the Project Connect Orange and Blue light-rail lines will have to make 15 or 12 percent of units affordable. The higher requirement is offset by reduced compatibility and parking requirements along the lines, where both VMU1 and 2 projects will only need to build 25 percent of the parking otherwise required by code, and where compatibility will only apply within 100 feet of triggering properties compared to the 540 feet of distance that typically applies.

— Austin Monitor

We couldn’t help but notice over the years that the development team for new Vertical Mixed-Use buildings often includes local engineering and planning firm Civilitude — and the company’s president, civil engineer Nhat Ho, might be the program’s biggest fan. We asked Nhat, as a seasoned expert on Austin land use, to pitch us on the finer points of why local developers should consider building under VMU2:

By-Right Bonus Height

“Any conditional overlay placed on top of a property’s base zoning related to height can be ignored under the program. Let’s say you have a property zoned CS-V-CO-NP and the conditional overlay (CO) component reduces the base height allowed at the site from 60 to 50 feet. With VMU2, your allowable height is now 60 feet plus 30 feet, not 50 feet plus 30 feet, assuming there are no additional private deed restrictions. With VMU2 also removing limits on FAR and units per acre, this extra height can increase the yield of an apartment building by 50 percent.”

Deep Onsite Parking Reductions

“Baseline parking is reduced by 75 percent under VMU2, then depending on whether you can add shower/changing facilities on site and save additional trees, you can get up to another 50% reduction applied to the remaining parking — which brings the absolute maximum reduction to over 87 percent. That means a 300-unit apartment can be parked with 75 spaces instead of 360 spaces, if market demand supports it. Imagine all the uses and cost reduction that can be reclaimed from needless parking!”

Less Compatibility on Rail Corridors

“For VMU-zoned sites located along upcoming Project Connect rail corridors, only the portion of the site within 100 feet of a single-family zoned lot is subjected to compatibility. While parking reductions and other elements of program are helpful, a lot of the time compatibility is the true limit of development.”

S.M.A.R.T. Housing

“If a project meets VMU2’s affordability requirements and is located on a rail corridor, it may be easy to also qualify for the city’s S.M.A.R.T. Housing program, which waives review fees, reduces utilities impact fees, parkland fees, street impact fees, and expedites the project review timeline. This could translate to millions in savings for a 300-unit project.”

 

Although we’ve already seen a number of projects announced under the VMU2 program, it’s worth noting that some of the efforts to further modify Austin’s zoning code to incentivize housing construction by removing parking minimums citywide or reduce compatibility restrictions could potentially undermine its benefits. “If these aspects of the code are modified, a lot of incentives will likely become less attractive or straight-up obsolete,” he says. “However, full-scale elimination of parking minimums has a chance of being challenged in court just like the most recent land development code revision, so it’s hard to plan for that today.”

Ho says only time will tell if VMU2 remains competitive, but for now, it’s better to have lots of housing development tools like this available — and with a lawsuit from the usual aggrieved homeowners already working to challenge even these small changes to VMU and other bonus programs, it’s clear that the city needs to continue exploring all its options for unlocking more housing construction across Austin.

This article originally appeared in TOWERS: https://austin.towers.net/how-does-austins-vmu2-zoning-program-create-affordable-housing/