Breaking Down What the HOME Initiative’s Passing Means for Austin

After hundreds of people spent hours testifying at City Council's special called meeting, Dec. 7, Council finally adopted phase one of the HOME initiative.

The Home Options for Middle-Income Empowerment ordinance will permit three housing units on most single-family lots and the usage of tiny homes on those lots. It also will eliminate rules that limit the number of unrelated adults who can live together.

These land use changes are not revolutionary (a number of cities across America have already passed similar measures) and they are unlikely to have a dramatic impact on Austin's housing supply, which has lagged behind household growth over the past two decades. (Replacing one house with two or three will not do as much to bolster Austin's housing deficit as building large apartment complexes.) But, with citywide impacts, they do represent some of the most far-reaching and sweeping changes to Austin's development rules that elected leaders have made in decades.

The broad strokes of HOME did not alter much from what we have previously reported, but Council did make some changes. Three amendments from Council Member Chito Vela modified floor-to-area ratio (FAR) rules, which limit the amount of space a structure can take up on a given lot (e.g., a 0.5 FAR on a 2,000-square-foot lot means that the building on that lot can be no bigger than 1,000 sq. ft.) to provide more FAR to multi-unit structures. Two Vela amendments also reduce front and side setback requirements, which determine how far back a property must be from front and side streets, for two-and-three-unit structures. Taken together, the amendments should make it easier to build two and three units on more lots throughout the city.

CM Alison Alter (who, along with CM Mackenzie Kelly, voted against ordinance) reinserted regulations on short-term rentals (STR) into HOME that staff initially removed. These regulations limit the number of days a unit in a duplex can be used as a STR in a calendar year, though enforcing those regulations has been difficult. Staff suggested removing them because a federal court ruling issued in August struck down Austin's STR rules and Council had already been planning on revising the rules for all land uses next year – so staff wanted to wait to tackle the complicated regulations in a holistic manner. A Mayor Kirk Watson amendment will require staff to report back on the progress of implementing HOME through a variety of data metrics in six, 12, and 18 months, then once annually for the next five years.

But these changes were not enough to sway Alter, who believes HOME will not produce the kind of "missing middle" housing it was designed to incentivize and that it could actually exacerbate displacement of Black and Latino Austinites. "I understand the desire to do something," Alter said before Council voted. "But ... we also have a responsibility to do no harm. ... I don't have confidence that this proposal will deliver on the promise to create units that teachers and other public servants can afford."

"After all," Alter continued, "there's no affordability mechanism [in HOME], not even a fee to contribute to affordable housing."

It's true – HOME does not include the kind of affordability requirement Alter has pursued in prior housing reforms, though that is by design. An affordability requirement for HOME would have required a third unit to be income-restricted (that's a set-aside rate of 33%; other affordability programs typically require 10% of units be affordable).

Restricting the rental or sale price of one unit would also make these kinds of projects more difficult to build, because property owners would have to pursue nontraditional sources of financing, like government subsidy, or plan to generate less revenue from the project, which would make obtaining loans from a bank to fund redevelopment even more difficult – not to mention the added bureaucratic hurdles presented by navigating such programs.

It is also likely that the new housing built under HOME will not be affordable to Austin-area teachers or people earning similar incomes (starting pay for an Austin ISD teacher is about $59,000 per year; a 2023 Redfin report estimates that homebuyers in Austin need a household income of $126,000 to afford a median-priced home). But if HOME works as intended, it will produce smaller homes on smaller lots, which are likely to be less expensive – even if just by degrees. Those houses would likely sell at prices below the median-priced home in Austin, making them more attainable to a broader swath of the middle-income spectrum. That said, even producing higher-cost units could free up older, cheaper housing stock that low- and middle-income buyers struggle to secure as they compete in the market against people with more buying power. (After Houston enacted similar land use changes, researchers found a boon in town houses that were affordable to median income earners, built mostly "in higher-income, largely White neighborhoods," which "enabled affordability and reduced displacement pressures," according to a Pew brief on the research.)

Over the last two election cycles, Austin voters have shown a preference for pursuing market-based solutions to the city's housing crisis – i.e., policies that make it easier to build all types of housing all across the city. Groups like Community Not Commodity – one of the primary funders and organizers of opposition to practically all of Council's recent attempts to revise the city's housing rules – have turned to the courts for relief.

And they have been successful. In 2020, opponents of the Land Development Code Revision sued the city to prevent Council from adopting a holistic revision to the LDC and won. This year, the same group successfully sued to overturn much more modest reforms after Council adopted them.

District Judge Jessica Mangrum handed down her ruling Monday, Dec. 11, voiding three housing reforms Council passed in 2022: one easing Austin's rules that limit development near single-family homes, one that allowed residential development in commercial zoning districts, and one that expanded the reach of Austin's vertical mixed-use (VMU) density bonus program, which incentivizes large multifamily housing along transportation corridors. A recent analysis from city staff found VMU to be one of Austin's most effective affordable housing programs. (The lawsuit also unsuccessfully targeted the popular Affordability Unlocked bonus program, which has produced deeply affordable housing for Austin's poorest residents.)

We don't know what HOME opponents will sue over, but we do know that they can't sue over protest rights, which was one of the claims they prevailed on in the 2020 LDC lawsuit. State law allows property owners to protest zoning changes to a nearby property by filing a petition signed by 20% of neighboring property owners, but a supermajority vote by the governmental body tasked with approving the rezoning – in this case, nine CMs – overrides such a petition. Instead, opponents are likely to sue over the way city officials notified property owners of the proposed zoning changes in HOME or the fact that the city would not accept electronic protests of the proposed changes.

In remarks delivered before the vote, CM Natasha Harper-Madison framed passage of HOME as a long-overdue response to prior government action that led to the displacement of Black and Latino Austinites from the city's Eastside neighborhoods. "The truth of the matter is we should have been fighting this fight for a long time," Harper-Madison said. Alluding, perhaps, to the political battles to come when Council takes up phase two of HOME in the spring, Harper-Madison continued: "I suspect it's going to be a fight that we fight forever. We'll never stop fighting this fight."