Gov. Greg Abbott and his veto pen will not kill the city’s “homestead preservation district” program, city officials said. But the veto will keep it from growing.
Over the past few years, Austin has been working on establishing such districts to raise money for affordable housing in certain gentrifying areas. As the tax base in a district grows, the city puts a portion of the extra tax revenue toward repairing and building affordable housing in that district.
The first district the city created, covering about 4.5 square miles of East Austin, is expected to raise $240,000 for affordable housing this fiscal year, according to Greg Canally, the city’s chief financial officer. The City Council set the boundaries for three more districts in December 2015 but hasn’t yet set up the taxing component.
As Austin grew, however, there was a problem: The 2005 legislation allowing cities to create such districts limited this power to cities with fewer than 550,000 homes. Austin has outgrown that limit.
So state Rep. Eddie Rodriguez, D-Austin, who authored the 2005 legislation, passed a bill this session extending this power to cities with fewer than 800,000 homes, which would have allowed Austin to retain all of the original bill’s authority. To Rodriguez’s surprise, House Bill 3281 was among the 50 bills that Abbott vetoed Thursday.
“It’s Austin-bashing at its finest,” said Rodriguez, noting Abbott’s antipathy to various city policies and even the Austin air, which the governor recently said lacks “the smell of freedom.”
“He has been very open to his disdain for Austin and his opposition to local control,” Rodriguez said.
In his veto message, Abbott said the bill would “stymie” the free market and exacerbate the city’s housing affordability problems.
“Directing large amounts of property tax revenue to select city projects has the effect of increasing the tax burden on other property owners,” Abbott said in a statement. “We should not empower cities to spend taxpayer money in a futile effort to hold back the free market.”
Council Member Sabino “Pio” Renteria, whose East Austin district has faced intense gentrification, pushed for expansion of the homestead preservation districts after joining the City Council in 2015. He said the bill’s veto was part of a “Trumpian tantrum” by Abbott.
Renteria said the governor “proved that he has a dangerous misunderstanding of basic housing policy and was unable to grasp the intent and mechanics of this program.”
City officials say the fully established East Austin district — roughly bounded by Interstate 35, Lady Bird Lake, Springdale Road and Martin Luther King Jr. Boulevard — won’t be affected by the veto because it is grandfathered in. The city in 2015 estimated that area, which the city calls district A, could raise about $5.7 million over the next decade for affordable housing in that area.
That money represents 10 percent of the new property taxes generated by the growing tax base there. The revenue started flowing last year.
But the city won’t be able to do anything with districts B, C and D in Southeast, East and North Austin, as the council hadn’t yet set up the mechanism to channel some of the tax revenue toward affordable housing. Those zones didn’t meet the 2005 criteria for such a district, but Rodriguez’s bill this session would have fixed that.
State Sen. Kirk Watson, D-Austin, called the governor’s veto “petty politics.” Watson, who carried the homestead preservation district bill in the Senate, said Abbott staffers told his office that if a certain amendment preventing the city from capping property values was added in the Senate, the governor would support the bill.
“And even though we added that, the bill was still vetoed,” Watson said Friday.
HB 3281 was not without legislative opponents. It passed the Senate 23-8 and the House 123-20 in its final form.
“The homestead preservation district has been an important tool for Austin to help low-income residents of quickly gentrifying neighborhoods,” Watson said in an emailed statement. “While this veto is clearly designed to punish the city of Austin, the real effect is to punish families who are struggling to find affordable housing in their community.”