Developers looking to build especially tall residential buildings in downtown Austin will now be required to offer public benefits in return, including money or space for affordable housing.
The new program will take effect in two weeks and replace a long-running and more ad hoc program, in which developers planning big downtown projects negotiated with the city over perks they would offer in exchange, such as park upgrades.
The City Council decided late Thursday in a 6-0 vote (Council Member Bill Spelman was absent) that developers of especially large downtown high-rises must include some units rented or sold at affordable rates or must pay fees that the city will use to build affordable housing citywide. Beyond those requirements, developers may choose from a menu of other benefits to provide, such as including environmentally friendly features or a day care center in the project.
It is called a bonus program — offer public benefits, get bonus square footage for a project — and city leaders have debated the idea for years.
“I think this will encourage a denser downtown, while balancing that against other priorities and critical needs, like affordable housing,” Council Member Kathie Tovo said Friday.
Some developers have said the program could function as a penalty that deters downtown’s growth. But supporters note that other cities, including Portland, Ore., and Seattle, have had successful bonus programs in place for decades.
Austin’s rules will not apply to commercial projects, such as new hotels.
Developers will pay an affordable housing fee of $10 for every square foot of bonus space they receive, if the project is in downtown’s core — roughly defined as 11th Street, Red River, the Colorado River and Nueces Street. They will pay $3 to $5 per square foot of bonus space for projects in other parts of downtown.
If developers instead choose to provide low-cost housing on-site, the new rules will require that 10 percent of the bonus square footage be affordable.
The fees will be reviewed and possibly reset every three years to make sure they are in line with market conditions.
Affordable housing included on-site must serve those who earn less than 80 percent of Austin’s median family income, which works out to $41,000 for a single person and $58,550 for a four-person family. Monthly rental rates considered affordable for those incomes are less than $1,171 for the single person and less than $1,464 forthe family.
Council members asked city staffers to use the fees to house chronically homeless people — those who frequent shelters and have little or no income.
Austin has had a bonus program on the books since 2008, but it has been an option, not mandatory, and no one has used it. Instead, downtown developers have preferred to negotiate benefits directly with the city.
The city has OK’d about two dozen high-rises downtown through the negotiated process in the past decade. Had the city required developers to contribute $10 for every square foot of bonus space they received, it would have $53 million today to use for affordable housing, according to a city tally.
Housing advocates have argued for years that if developers are given the privilege of building very large projects — with potentially bigger profits — they should have to set aside some money or space for low-income housing.
Developers have countered that downtown buildings are already a public benefit. They add to the property value the city can tax — bringing in revenue that can be spent on many services — and they house people in compact spaces that place less of a strain on roads, utilities and other resources than sprawling subdivisions, developers have said.
Nancy McDonald, interim executive director of the Real Estate Council of Austin, told the council Thursday that the proposed fees for downtown’s core were too high and could stifle development there.
“We have to strike a delicate balance so that this is not a disincentive. … We have to have a more reasonable fee-in-lieu,” she said.
Mandy DeMayo of the nonprofit group HousingWorks noted that the fees would be reassessed every few years.
“While some argue that the fees are too high and others that the fees are too low, at this point in the process … it’s important to actually start the program,” she said.