Lawsuit Threatens Council’s Modest Progress on Housing Crisis

AMLI 5350 on Burnet Road is a VMU building, meaning in exchange for affordable units the city allowed it to be built taller than it would have otherwise (Photo by John Anderson)

The group of homeowners that sued the city in 2020, effectively killing efforts to rewrite the Land Development Code, has struck again. This time, they’ve filed a lawsuit aimed at undoing recent, less ambitious LDC changes City Council adopted to address Austin’s housing supply and affordability crisis.

The lawsuit, filed by attorney Doug Becker in Travis County’s 201st District Court, takes aim at three recent changes Council made to the LDC: first, an update to the city’s Vertical Mixed Use density bonus program, which allows developers to build taller and more densely on the city’s core transportation corridors, so long as they build on-site affordable units. Second, Becker et. al. are taking on a relaxation of the city’s compatibility rules, which restrict building height near single-family homes. Third, they aim at an ordinance that would allow residential development in areas zoned for commercial use. The suit alleges that the city violated state law by failing to provide affected homeowners notice that the three policy changes would affect the zoning on their property or of neighboring properties. The suit also argues that Affordability Unlocked, a popular bonus program that incentivizes development of deeply affordable housing, violates state law on similar grounds.

“The City of Austin repeatedly refuses to follow mandatory zoning procedures and to provide statutory protection to city property owners,” Becker wrote in the lawsuit. In March 2020, after Becker and the same plaintiffs filed a lawsuit against Council’s attempts to make citywide changes to the Land Development Code that would allow for greater housing density by right, District Judge Jan Soifer ruled that the city did so illegally. In her ruling, Soifer decreed that the city must send individual and written notifications to property owners, or owners within 200 feet, “whose zoning regulations or zoning district boundaries are being changed.”

Soifer’s ruling, which was upheld two years later by the 14th Court of Appeals, caused deep paranoia at City Hall. Council Members feared that whatever changes they adopted to allow more housing density throughout the city would be under threat from litigation. So, they proceeded slowly and carefully; the VMU2 and compatibility reforms were envisioned as modest changes less likely to spark public backlash or another lawsuit.

In a statement, a city spokesperson said property owners were notified of potential LDC changes “in accordance with the requirements in state law, the City Land Development Code, and the Acuña lawsuit,” for VMU2, residential-in-commercial, and compatibility proposals. The spokesperson also sent drafts of two notices, sent Oct. 28, 2022 (compatibility) and March 14, 2022 (VMU2).

Former Mayor Steve Adler defended Council’s actions in a conversation with the Chronicle. “We are in a crisis,” Adler said. “The city must do and try everything to increase housing supply so more of us can find a home and afford to stay here. Council’s near unanimous actions last year were limited, done with notice, and will hopefully be upheld by the courts. It’s a shame a relatively small group holds up the city and continues to try to preserve the status quo.”

At an April 19 Council work session last year, the city’s Law Department briefed Council on how state law governing property owner notice and protest rights applied to proposed zoning changes. When Council adopts a zoning change – i.e., they allow a property owner to build six units on a lot instead of two – neighboring property owners within 200 feet must be notified individually and be allowed to protest the change if 20% of affected owners choose to do so. But with VMU2, a majority of Council Members believed they were just changing the LDC text – not the zoning of any specific property – so the city would not need to individually notify owners of the estimated 1,700 affected properties or surrounding owners, which city staff argued would be cumbersome and expensive.

VMU2 changes only affect properties already zoned VMU, so the zoning category of those properties would not change – just the particulars of the category. Instead of building to a maximum of 60 feet, developers could now build to 90 feet if they provide a certain amount of income-restricted housing. At the time, Mayor Steve Adler argued that the nature of the program changes would not require individual notice; Council Member Ann Kitchen offered an amendment to the VMU2 ordinance that would have required every VMU property to be rezoned as VMU 2 on a case-by-case process. That would have been a slow-moving process that would delay badly needed housing units – especially along forthcoming Project Connect transit lines where VMU developments will be most desirable – but it would have offered more legal protection to the city. Kitchen’s amendment failed 7-4, with CMs Mackenzie Kelly, Kathie Tovo, and Leslie Pool voting in the minority.

It is not surprising that the homeowner plaintiffs have filed a lawsuit – Becker threatened such a possibility in June before Council adopted the VMU2 program changes. But it is surprising, though, that the lawsuit also takes aim at Affordability Unlocked. Council approved the bonus program in 2019 and since then, has become one of the best tools available to developers interested in building deeply affordable housing – which is a costly and rarely profitable endeavor. A year after Affordability Unlocked was implemented, 2,700 housing units were set to be constructed utilizing the program, with 2,300 of them being affordable. Project Transitions, a local nonprofit that provides housing and services to people living with HIV/AIDS, was able to expand its housing stock because of the program.

* Editor's note Wednesday, March 8, 12:33pm: This story has been updated to include a statement from the city. Updated Thursday, March 9, 4:30pm to correct that CM Alison Alter did not vote against the amendment that failed 7-4. She was in support. We regret the error.