Tear-down trend transforming Central Austin neighborhoods

For six decades, a humble brown house sat at 1809 Pasadena Drive, blending in unnoticed with the other modest homes in Austin’s Crestview neighborhood.

Unnoticed, that is, until Austin homebuilder Paradisa Homes looked at the rectangular, 960-square-foot house and envisioned in its place something completely different: a contemporary, 2,700-square-foot home with an open floor plan, high ceilings and high-end finishes.

In late summer, a demolition crew got that transition started, reducing the home to rubble, and construction of the new house is ongoing.

“A lot of people think we are coming in trying to make a quick dollar,” said Thomas Brown, owner of Paradisa Homes. “But some of these houses are in severe disrepair, with deferred maintenance. We feel we are improving the neighborhood.”

It’s a transformation that is happening across Austin’s central neighborhoods a shift fueled by the city’s swift growth, changing demographics and strong demand for housing in the urban core.

The trend of tearing down older houses and replacing them with new, bigger homes, local real estate experts say, is sweeping established neighborhoods, including Crestview and nearby Brentwood; Travis Heights, Zilker and Bouldin south of downtown; Tarrytown in West Austin; and Swede Hill and Blackshear in East Austin.

It’s changing the character of Central Austin neighborhoods — and it’s adding to Austin’s ongoing debate over housing affordability by driving up property values and property tax bills.

But an even larger issue is at stake: What kind of city does Austin want to be?

“If we want to be a high-tech, creative city on the top of all the Forbes Top 10 lists, then we are probably on the right path,” said Austin developer Ed Wendler Jr. “If we want to be diverse, inclusive city, maybe we need to change paths.”

Supply and demand

Austin’s recent rebuilding surge is a change from the 1980s and 1990s, when buyers tended to remodel older homes rather than tear them down and start from scratch. Today, with property values surging, developers say it can make more financial sense to scrape the lots and build larger, higher-end homes that sell for $700,000 and above.

Homebuilders like Brown, of Paradisa Homes, say the trend is driven by basic economics: Builders are simply filling a need for homes for families. U.S. Census data shows an estimated 110 people a day are moving to Central Texas.

“Who am I to say someone should or shouldn’t move here?” Brown said. “I’m not going to single-handedly stop people from migrating to Austin, Texas.”

Paradisa has purchased more than 20 properties in Crestview and Brentwood, investing more than $10 million in houses that are selling for record prices in those areas.

In addition to Crestview and Brentwood, the 78704 ZIP code that includes Travis Heights and Bouldin and the 78702 zip code that includes East Austin near downtown are seeing a tide of tear-down activity.

Both of those ZIP codes have seen sharp increases in building permits since 2010, and their median home-sales prices climbed 37 percent and 72 percent respectively from 2007 to 2014, according to figures from the Austin Board of Realtors.

Anthony Siela, a founder of PSW, a local builder, said one factor driving the trend is the convergence in Austin of a vibrant downtown, arts and music scene, a major university and the Capitol in close proximity.

“To have all of those in a contained area is unique to Austin,” Siela said. It heightens the desirability of Austin’s central neighborhoods to local residents, he said, as well as to people moving from the West and East coasts “who are used to it and who see the value of investing in desirable areas.”

Eldon Rude, a local housing industry expert, said that while the trend of new construction replacing older homes in Central Austin neighborhoods isn’t new, its intensity has heightened during the past four years.

“This surge in building activity … is partly the result of a strong influx of out-of-state buyers who not only prefer to live in a new or remodeled home that is centrally located and close to Austin’s cultural centers, but can afford to do so,” Rude said.

For the sellers, many of whom raised their families in the homes, the demand for lots in their neighborhoods offers an opportunity to cash out at a price that can exceed the value of their property. For the buyers, it’s a chance to live in a central area, near shopping, dining and entertainment, while avoiding the headaches that can come with an older home.

Good schools and being near downtown are what drew Ben and Sarah Ellinor to Crestview when they began house hunting earlier this year. In April, they closed on a new 2,290-square-foot house that replaced an older, smaller home in the neighborhood, which is west of Lamar Boulevard and north of Koenig Road.

“It’s like a small town within a big city,” he said. “It’s got an original shopping center with a grocery store, deli, pharmacy and barber shop. We can walk to nearby restaurants, and I can ride the bus or the train or even bike to work.”

But not everyone sees the transition some central neighborhoods are undergoing as a positive.

‘Gutting the neighborhood’

Mark Rogers has lived in East Austin for almost 30 years. He and his wife rented for eight years and then bought a house in 1994, paying less than $60,000 for the land and building. Now, he estimates that the property would sell for about $325,000.

But for Rogers and some other residents, there’s more at stake than rising values. With the fabric of some areas changing so quickly, it can be disconcerting to see older homes and landmarks disappear.

“It’s kind of like losing memory through the loss of structures,” said Rogers, an affordable housing developer who has a doctorate in art history from the University of Texas. “That’s what architecture does – it connects you to your memories and your experiences, and when you have so much change that a whole neighborhood and eventually a city changes, we kind of have collective Alzheimer’s. You can’t take your kid to places and say, ‘This happened here, and this happened there.’”

Similarly, longtime Brentwood resident Mary Standifer says the changes have come swiftly in the north-central neighborhood where she and her husband, Dale Henry, raised two children in a small house built in 1955.

“I don’t expect the neighborhood not to change,” Standifer said. “It’s just part of life. But this seems like an awful lot in a very short time.”

As new residents move in, “there is a sense that people are gutting the neighborhood, not blending with it or becoming part of it,” Standifer said. “You want people to move here because they want to join in your neighborhood, not because they want to reinvent it.”

Don Leighton-Burwell was just out of architecture school in the early 1980s when he and his wife, Pamela, bought their Brentwood home. Houses there at the time were selling for about $55,000 to $70,000.

“We bought thinking we’d ultimately trade up,” Leighton-Burwell said, “but fell in love with the neighborhood and the neighbors.”

Before the city adopted an ordinance designed to limit so-called “McMansions” from overwhelming neighborhoods, builders were putting up duplexes that were “entirely inappropriate in scale” for Brentwood, Leighton-Burwell said.

The ordinance was passed in 2006 to limit home size on a site, Leighton-Burwell said, but it had a downside: “You can’t legislate good design. It shot itself a bit in the foot by being a little too formulaic. You can meet all the code requirements and have a fairly ugly structure that doesn’t pay homage to a neighborhood.”

As the historic preservation officer for the city of Austin, Steve Sadowsky knows the issues many residents are facing in established neighborhoods.

“It is not reasonable to expect someone who is paying top dollar for a Central Austin lot to live in a 700-square-foot house, so we have to look at ways to make it more attractive to preserve the existing house,” he said. Those can include constructing an addition or building a second unit to generate income.

Though some Austinites blame transplants from California for changing Austin, Sadowsky said that is unfair.

“At least some of the transplants from California and other places are used to living in smaller dwellings or apartments or condos and can appreciate the character of our older neighborhoods and the size of the houses there,” he said. “I think what is important is that we really begin to stress that if you love Austin, then you should try to fit into what we have built here, and not try and change it to be just like the place you came from.”

‘Gentrify an entire city’

For some residents, there’s a larger issue at stake for Austin, which goes beyond the impact of the new homebuilding in individual neighborhoods: affordability.

The current trend points to the central areas of Austin being available only for high-income residents, with middle- and lower-income residents being squeezed farther out

“Most think about gentrification as wealthy white folks moving into East Austin, which was predominately a minority area. But it is possible to gentrify an entire city,” Wendler said.

The soaring prices are conspiring to squeeze middle-class buyers out of Central Austin neighborhoods, Wendler said. “Crestview is a perfect example. My biggest concern for Austin’s future is that we become like Aspen, San Francisco, New York City, Boulder, or the new urbanists’ favorite, Portland.”

Wendler said that while Austinites complain about the “techies” moving here from California, “I don’t think they have anything against well-paid, highly educated transplants. I think they are lamenting what is happening to Austin, and they are worried about whether they fit in — or can afford to fit in.”

Crestview is a case in point. Based on 2000 census data, 57 percent of its households had incomes of $25,000 to $75,000 a year; 22 percent of the households were high-income (above $75,000) and 21 percent were low-income, below $25,000.

“It was a predominantly middle-class neighborhood, but also economically integrated,” Wendler said.

By 2012, its demographics had changed dramatically. Census data showed the number of middle-class households fell to 44 percent from 57 percent, while the high-income households increased to 34 percent.

Wendler points to a recent article about San Francisco residents who protested the influx of high-income residents by blocking buses that were transporting employees to the Google campus.

“Austin isn’t at the point, yet, but you can see the start of a backlash,” Wendler said. “We are hollowing the middle class out of Austin.”

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