Old Homes = New Yuppies?

City Council Member Raul Alvarez (Photo By John Anderson)

"I don't think that just because it's a historic home ... that all of a sudden we [should] put more value on a structure than we do on people," says Susana Almanza. "That's what's happening." Almanza, the executive director of the Eastside environmental-justice group People Organized in Defense of Earth and her Resources, believes the city's historic zoning process is exacerbating gentrification in East Austin by driving up property taxes and encouraging affluent individuals to replace current residents. On June 29, the City Council responded to her concerns, echoed by other neighborhood advocates, by placing a 90-day moratorium on new historic zoning cases east of the highway and creating a task force to examine the relationship between historic zoning and gentrification.

Not everyone is convinced there is such a relationship -- including the moratorium's sponsor, Council Member Raul Alvarez. "It's not clear in my head how much of an impact historic designation is having," he said. "We feel that it's possible that it could have an impact in terms of increasing property taxes ... but let's look at it closely to see whether that's really true or not." Meanwhile, Julie Morgan Hooper of the Heritage Society of Austin -- the city's leading historic preservation group -- points out that fewer than 30 historically zoned properties exist in all of East Austin.

But numbers aren't the issue, Almanza argues. The presence of a historic structure in an area, she says, "is like having the White House in your neighborhood." Values of homes in the $30,000 range can jump to more than $100,000 because of their proximity to historic properties. The resulting higher taxes work against neighborhood continuity, since even a retired homeowner living on a fixed income but with property tax exemptions can face a higher tax bill. "And then people don't pay it, so they tend to get behind," Almanza said. "The next thing you know, you're losing your property."

Another concern involves buildings handed down from generation to generation. When parents bequeath properties to their children, the tax exemptions vanish and the inheritors must pay taxes on the full-appraised values. Today's tax payments on older Eastside homes can be higher than the original mortgages.

Owners of properties designated "historic" enjoy impressive tax breaks. Those using the property as their exclusive residence don't pay a dime in property tax to the city, county, or ACC on their structures, and only half on the land beneath them. (AISD gets half its usual figure on the structure and 75% on the land.) Structures used as businesses receive 50% tax abatements. The city asserts the property tax exemption is intended to recognize that historic buildings are generally more expensive to maintain than the average home; owners must keep them in good condition, submit to annual inspections, and present any changes to the exterior of the structure to the city's Historic Landmark Commission for approval. Almanza paints a picture of affluent individuals moving in, getting tax breaks, and driving up taxes for everyone around them. "If you look at that whole process, it's for wealthy people," she said. "You have to have a lot of money, and money up front, to keep that designation of zoning."

Steve Sadowsky of the city's Historic Preservation Office admits the possibility that rich people exploit tax breaks, but says the scenario is unlikely. "If somebody was very interested in historic houses," he said, "and they went and found out which ones are for sale, they go to the (Austin) History Center, they do their research, and they think, 'Okay, of these 10 that are for sale, this one maybe could qualify to be a landmark -- and so this is the one I want.' [It's possible,] but I don't think that's your average guy."

A proposed ordinance to create local historic districts, crafted by the Landmark Commission over the last two years and now before the city's legal department, could address some of Almanza's concerns. The ordinance would enable neighborhoods to define areas for the City Council to consider eligible for historic designation (areas along major streets in which 51% of the buildings are 50 years or older, and in more or less original appearance). Homeowners in that area would then receive the same tax abatement now reserved for individual historic landmarks, and special incentives would be available for historic districts in areas with deteriorated structures (read: the Eastside). Buildings receiving major historic rehabilitation would qualify for complete exemption from city property taxes for 10 years. Other structures within a district could have their taxes frozen at pre-designation levels, also for a decade.

Council Member Alvarez notes that the tax-freeze offered by historic designation is not much different from the solution proposed by Almanza and other East Austin advocates. He praises the efforts of community housing organizations and speculates about the possibility of a Proposition 13-type solution to escalating property taxes. Hooper of the Heritage Society supports the local historic district concept -- used by Nacogdoches, Abilene, and Dallas, among other Texas cities -- as a means to preserve neighborhood character: "not just the buildings but the people."

Almanza wants to see historic zoning disconnected from tax incentives entirely. "I'm hoping that they can make some recommendations for policies that would protect the non-historic people in the area," she says, "and look at some alternatives to how that whole thing is attached to the tax breaks."