One of the talking points that came up repeatedly in the occupancy restriction debate in front of City Council is the fear on the part of many homeowners of being outbid. Landlords in some neighborhoods can make more money renting to many unrelated people than to a single family. Developers can make more money developing for landlords to rent to many unrelated people than developing for a traditional family. There is significant (property) value to a homeowner in having the right to rent a house out to unrelated people or the right to sell your home to another landlord who will, or to a developer who will remodel for renting. Why then, would homeowners be lowering the value of their homes–for many people their most valuable asset–by collectively seeking to deny themselves this right? Because they want to live in the homes, and, if they choose to live in them, they are not exercising that right anyway. (Put in kinder words: “We live here. Our neighborhood isn’t just about profit.”) They perceive that there is a positive amenity in living in a neighborhood with fewer unrelated people per home (“a family neighborhood”), so by denying their neighbors a right they weren’t going to use anyway, they are better off.
But property taxes are assessed not on the potential value of a home if it had all its development rights, but on the assessed value. By lowering the occupancy rates, the city is lowering the values on these properties, and therefore lowering the taxes assessed in these neighborhoods. Note that this isn’t merely because new development would raise the values of the new homes, but also because the land the existing homes sit on would have greater value as a potential development site. I don’t mean to say that the reason why neighbors were up at City Council fighting against roommate houses was in order to lower their tax bill at the expense of all the other taxpayers in the city, but it certainly would be the effect if the ordinance were to pass.
But the occupancy restrictions are a relatively minor restriction compared to the simple fact of the single-family zoning prevalent throughout Central (and the rest of) Austin, the urban straightjacket, as Charlie Gardner calls it. When the University Neighborhood Overlay (UNO) was created in West Campus allowing greater density, the property values of all properties jumped pretty much instantly, because the right to develop them was valuable, whether put in use or not. By choosing to limit development on the interior of central city neighborhoods, residents in those neighborhoods are collectively waiving those development rights and choosing to lower their own taxes, at the expense of the rest of the city’s taxpayers. The effect is also present in single-family zoned areas in outer Austin, but its much smaller there, because the right to develop in outer Austin is less valuable than the right to develop in central Austin. If the whole of Austin were to upzone (i.e. allow more dense development) tomorrow, it would be central Austin that would see the most new development.
If you read the piece linked above, you know that I see the single-family zoning in the urban core as the central problem at the core of many of our problems, so my preference would be to upzone. But in the absence of that, I believe that we should at least give neighborhoods the option of upzoning and assess taxes on the value they waive if they don’t take it up.