Rent hikes and higher home prices are often the focus of the discussion, but the cost of government and household expenses have risen as well during the past five years.
“Citywide, Austin has had 58 percent [property value] appreciation over the last 10 years [and a] 38 percent [appreciation] in rents during the same period,” said Mark Sprague, state director of information capital for Independence Title. “Wages have stayed flat in the same time.”
They attempted to do both last year, from issuing bonds to support affordable housing to offering incentives to companies such as National Instruments to bring high-wage jobs to Austin.
Frances Ferguson, board president of nonprofit HousingWorks Austin, called the city’s growth a challenge.
“We’ve got to not just protect the affordability of housing, but also figure out some mechanisms to [keep the city affordable for retail and creative businesses], or this city is not going to look like Austin anymore,” she said.
Supply and demand
Historically, Southwest Austin homes have been in demand because of the area’s highly ranked schools, Sprague said.
Housing supply has been limited by the recession and environmental codes.
Most of Southwest Austin falls in the recharge or contributing zones of the Edwards Aquifer. The 1992 Save Our Springs Initiative limits the amount of impervious cover, or covered ground, that can be placed in those areas—thereby limiting density.
Austin’s population has continued to grow, and there was an insufficient supply of homes put into the pipeline during the recession, Sprague explained.
Housing supply citywide is still not meeting current demand or the pent-up demand of the past seven years, he added.
“This supply constraint could lead to a further escalation in home prices above and beyond normal trends until industry production returns to historic equilibrium,” he said.
Sprague said Southwest Austin has experienced steady appreciation during the past five years.
Limited supply has caused prices to rise. Buyers have had a hard time finding what they want at the price they want.
“The opportunity was two years ago, when the market still showed signs of flat values and inventory was plentiful,” he said.
Bob McKenna, owner of Austin Real Estate Partners, said prices in some neighborhoods have spiked in the last year. He said he has seen buyers bid up the price, offering $10,000 to $20,000 above the original asking price.
“Before long, sellers got wind of that type of market and started to price up,” he said.
He has had several potential buyers get priced out of the Southwest Austin area because of higher home prices and rising interest rates. Some families have opted to move within the area to match their needs or financial situations, he said.
For example, a couple may move from an entry-level home to a larger one in the same neighborhood as their family grows and downsize when their children leave.
“I recall one family moving into and out of four homes in Circle C based on family size and circumstances,” he said.
McKenna said there is some truth to the cliche that “out-of-towners” are willing to pay higher prices.
Austin has the second or third cheapest cost of living when compared with the top 100 metro areas, Sprague said. However, Austin is expensive when compared with the rest of Texas.
“It’s all relative,” he said.
Independence Title defines South Austin as south of Hwy. 71, west of I-35 and north of SH 45 SE. On Jan. 7, the South Austin market had 178 active listings, according to the firm.
The average home price was $398,288 and the median was $299,247. Of the 178 homes, 37 were priced less than $200,000—a common benchmark when discussing affordability.
According to the federal government, housing is considered affordable if a renter’s rent and utilities, or a homeowner’s principal, interest, taxes and insurance, cost less than 30 percent of the resident’s monthly income.
In Southwest Austin, HomeBase is continuing development of Westgate Grove, 50 single-family houses near the intersection of West Gate Boulevard and Cameron Loop.
Local nonprofit Foundation Communities has proposed expanding its Southwest Trails affordable housing community (see sidebar).
In October, the nonprofit announced that it would build Homestead Oaks, a community for 140 low-income families near Brodie and Slaughter lanes.
In November, Austin voters approved $65 million in bonds for projects related to affordable housing. The funds are earmarked for repairs as well as new home construction.
Activist Gus Peña said he wants to see City Council follow up after the election.
He said Austin needs transitional housing for the homeless, rental assistance and defined prices for affordable housing: no more than $350–$450 per month for one-bedroom apartments and $550–$600 for two-bedroom apartments.
In 2013, developers were purchasing infill properties to build smaller projects, as well as building out existing subdivisions, to meet demand.
John Rosshirt, co-owner of real estate firm Stanberry & Associates, predicted that Austin may see proposals for 100–300 square-foot apartments called micro-units if mass transit could accommodate those residents.
A recent Leadership Austin event included guest speaker Chris Bradford, who serves on the advisory group for the revision of the city of Austin’s Land Development Code.
Bradford posed the idea of preserving multifamily housing and supporting infill projects such as garage apartments, duplexes, fourplexes and sixplexes.
“Those can be added all over the place and provide a sort of invisible density that will be an important source of new supply,” he said.
Additional reporting by Peter McCrady