Affordability for the long run

~ dankeshet

The major theme of the 2014 Austin elections was affordability and a major theme of City Council since then has been defining the word. Long-time readers of this blog are no stranger to tussles over the definition. Michael King took on the subject in the Austin Chronicle, taking aim at the Statesman’s editorial board and their false equation of affordability with “low property taxes”. I agree with King’s take here; the “taxpayer advocate” advice to cut, cut, cut has all the wisdom of a business leader saving money by eliminating the sales or R&D departments. Public spending can obviously sometimes offer public benefit.

But the part of the back-and-forth between the Statesman and the Chronicle I find most interesting is the question of growth. The Statesman states plainly that Austin’s growth “is not paying for itself,” while King offers the case that “growth does pay.” I’m a little irked by the question: we build homes for new people because they need homes, not merely because we can benefit as a city. But I think we can shed more light by changing the question a bit to: “What growth pays for itself?”

All growth isn’t equal

CMs Garza and Zimmerman had a debate I blogged about which kind of development imposes more burdens on the city: downtown towers or suburban sprawl?

In order to answer the question, I’m going to break the costs down into three types: building hard infrastructure (streets, sidewalks, water pipes), staffing soft infrastructure (police, firefighters, parks staff), and costs (externalities) we impose on one another through proximity.

The details of these questions can get pretty complicated, but I think the broad sweep actually isn’t tremendously complicated. For the most part, infill development–putting new buildings in places where there are already a lot of them–imposes lower costs and brings higher benefits to existing residents, while greenfield sprawl–expanding the city outward by putting new buildings in places where there haven’t been many before–imposes higher costs and brings fewer benefits to existing residents.

Infrastructure

To the extent that new buildings can make use of existing infrastructure without having to add anything new, this obviously costs the city less in the short and long term. If an old commercial building on Burnet gets replaced with a vertical mixed-use building that holds both a commercial shop and some apartments, the new combined building will benefit more people and pay more in taxes. If that can happen all while the new residents are using existing water and sewer lines, buses, electricity substations, etc., this is essentially free tax money to the city. If some of the new infrastructure needs to be replaced but some of it can be used intact, then we have a partial discount.

But even if all of the infrastructure needs an upgrade, it is still cheaper to provide it in the urban core. Replacing 10 miles of aging water pipes in order to handle new capacity (as happened in West Campus to accommodate the UNO boom) means that you have 10 new miles of water pipes to maintain. Adding 10 new miles of aging pipes to handle new greenfield sprawl means that you have 10 new miles and 10 old miles of water pipes to maintain.

The same is true for many of the city’s resources. Placing new families near existing parks means more kids get to play in the park. Placing new families far from existing parks means that for those kids to have the same opportunities, we will need to build and maintain more parks.

Soft infrastructure

Soft infrastructure is less clear. Until recently, the Austin Police Department based its recommendations on a constant ratio of 2 officers per every 1,000 people in population. This would result in the same costs no matter where growth occurs. If we are to gain (or lose) from growth, we may have to research new policies that change as the profile of our city changes.

Externality Costs

There are certainly costs associated with dense living: more people using the same roads can slow us down; more conflicts over uses of the same park means you may have to reserve the volleyball court in advance. In part, this is the flipside of better resource utilization: a park that only serves a few people will always be available when those people need it, but its costs are spread out over fewer people. The price of having the roads or parks to yourself is paying for more roads and parks.

But there are mitigating factors here. When buildings are close together, people don’t need to drive as far to get to their destinations, reducing the amount of traffic per person. On top of that, destinations that are closer together allow for more travel modes to become practical: walking, bicycling, taking the bus. This can set up a positive spiral: the more people who take the bus, the more frequent the bus can come, making the bus more practical for more people.

Conclusions

Even the analysis above is only cursory: except for those lucky enough to own the last house they’re ever going to buy, the major affordability issues we face are private, not public: mortgage payments or rent, not taxes. A measure to require all new buildings downtown have a pink granite facade to contextually match the Capitol would have enormous private costs but little direct effect on city expenditures.

But focusing in on the public costs, as the Statesman and Chronicle are doing here, we still need better questions than “should we grow?” We will grow as a city if our children want to live here, if friends from Dallas, Victoria, or Round Rock stick around after graduating UT or ACC, and if more folks like me who grew up in the Northeast decide they’re done with winter.

Similarly, the questions we have to ask ourselves about affordability are not simplistic ones about whether taxes go up or down. We can cut taxes and postpone spending for a short period–or redirect taxes in the short term from homeowners to renters and business owners, as this Council has opted for. But ultimately, if we build roads we need to maintain them. If we want a city that doesn’t have potholes, we need to pay for it.

To truly tackle affordability, we need to get beyond the short-term fiscal questions and move into the long-term structural questions about how the shape of the city affects the costs of building and maintaining it.  The question is not: “Should we grow?” The question becomes: “How should we grow?” Should we grow together or should we grow apart?

18 thoughts on “Affordability for the long run”

  1. Great post. Here is a good writeup by architect Steve Mouzon on police and fire service efficiency in urban vs. sprawled communities:

    http://www.originalgreen.org/blog/costs-of-sprawl—part-1/

    He makes a good point that, if you want to do real community policing (foot patrol), it is much cheaper on a per-citizen or per-home basis to do foot patrol in an urban environment than a sprawled environment.

    Don’t have time to look for the citations now, but I’ve read several studies showing foot patrol activities correlate to higher community trust of and positive feelings toward the police force.

  2. In regards to soft infrastructure, I’m pretty sure there are still benefits to density. I’d rather have a beat cop walk out of a central station and be immediately on duty, than spending an hour each day stuck in Austin traffic getting to/from his actual assignment (on the clock I’m assuming).

    1. Looks like Sean beat me. 🙂

      And of course, there’s all the hard infrastructure necessary to support that sprawling police presence.

      Oh, and let’s not forget increased incidents to cover. Isn’t something like 80% of all AFD incidents responding to traffic accidents (many from suburban commuters).

  3. Excellent article. For those who would like to learn more about this topic, there’s a fantastic book called Happy City – Transforming Our Lives Through Urban Design. It talks in great depth about the damaging effects of urban sprawl and how increased traffic and travel time has shown to be the #1 determinate in a city’s ability to increase depression in it’s citizens. Another point to mention on this topic is that increased density also leads to increased productivity, increased friendships, increased socialization, and more creativity in cities. Read the book Imagine – How Creativity Works for more on this topic. It’s a very fascinating book.

    On another note, I think some of the most damaging conversations that I hear our city officials discussing at times is the idea of creating “affordable” housing through subsidies. Recently I learned about a new project being built in East Austin that will receive somewhere around $4M in subsidies from the Texas Affordable Housing program. In theory, the idea of subsidizing housing seems like a good one, but the longterm effects are actually very negative. In this particular example I’m talking about, the developer will receive the $4M subsidy in return for capping rents at 60% of the market value for a 10 year term. Here are the problems with this:
    1) Another developer was about to acquire the lot next to the one receiving the subsidy and after learning about the neighbors subsidy immediately scrapped a project to build roughly 100 units due to the fact that they felt like they could not compete against the developer receiving the subsidy. This is a commonly occurring circumstance where subsidized housing will take a section of the city and cause all the developers to flee from it, reducing huge amounts of housing supply in the long-run rather than increasing it – which we desperately need to improve affordability.
    2) The developer who is receiving the subsidy is only required to keep the rents at 60% of market rate for 10 years. So what happens after 10 years? The rents immediately get raised and all those “affordable” units are instantly obliterated. In the long run the states $4M of money gets completely wasted because it does not create permanent affordability. The state would essentially have to spend that same $4M every year just to keep those 100 “affordable” units permanently affordable.
    3) Subsidized housing creates a “projects” effect. It causes a population with a much lower median income to inhabit an area that they could not normally afford. This then slows the demand/growth for that entire area of town and lowers the housing supply for the population that would normally live in that area unsubsidized. As a result the population that could naturally afford this area of town must move further out of town which then raises the prices all around the city for everyone.

    I’m all for more affordable housing, but we need to make sure we create permanent affordable housing through natural economic practices and not through these market manipulating subsidies that actually hurt the entire economy in the long-run. So please make sure that you fight against any city officials attempting to try and create these damaging housing subsidies.

  4. Our city housing department is so badly run, they lose track of contracts and agreements. I seriously doubt that they can keep track of all the willy nilly ‘affordable units’ that have been set up over even one decade. And as the Tribune noted recently, once someone qualifies for affordable housing, they never get kicked out because the resident makes more money. The model of ‘affordable housing’ is that there is no accountability for who it is helping, and for how long.

    And the federal government has been in a mode of reducing subsidies for affordable housing while the city council members like Pool, Kitchen, Tovo and Houston believe that our General Revenue fund needs to be used to absorb those reductions in federal funds. Back in 2007, Laura Morrison stated at an affordable housing forum that this scenario would never happen – feds reducing the funding for subsidized housing. But yet, in 6 short years it came true.

    The city needs to focus on affordability from a BIG PICTURE standpoint instead of sprinkling bread crumbs all throughout the city for a fortunate few who will benefit, This city needs to facilitate the creation of more housing at a more rapid pace, thereby impacting the market price of the units. The supply/demand equation needs to guide our city’s strategy.

  5. Sure, competition for the volleyball court naturally comes to mind first when one thinks of the drawbacks of increased density, but a (very) distant second is the heat island effect.
    But then, do people really mind being hot?

  6. On a mostly unrelated note, I would swear that I saw (on this site or a similar one) a map someone had done of Austin, showing property tax revenues(or assessed values) as a 3rd axis. Which showed just how much downtown/the central city subsidizes everyone. Anyone know what I’m talking about? Or has anyone done a tabulation by zip code of total property values?

    2. I would love to see how public safety dollars are spent zip code by zip code but I’m sure nothing like that exists. Everytime we give APD more officers they are sucked downtown for more events, babysitting the party scene, or overtime to patrol the trails……..the trails downtown, of course.

        1. Novacek – when you say “far less than what the city makes on the event” did you know that there is no real accounting of the money that the city “makes”. Does it go back into the General Revenue fund? Well, the hotel taxes go straight to keeping the convention center running. The alcohol taxes….do they cover all the effort it takes to do DWI enforcement? Who knows!!! There is no business – like accounting for that. If I ran a business I would not just say, “well I”m sure I’m making money somehow”…..I would ask my accounting department to show me exactly how the money flows. And then there’s the events like Halloween. Nobody compensates the city for all the extra police, fire and ems because it’s a general holiday.

          In fact, when the last council was trying to decide how much in fee waivers to give SXSW, the lawyer for SXSW — Mr. Whelan- – – said that SXSW has become like a holiday such as Mardi Gras and Halloween.

          So you cannot tell me that the city makes up for all that public safety effort by collecting fees of various kinds. There is no evidence that proves your point.

          2013 was the last year that I went down and advocated for extra public safety personnel. As soon as the council approved another 40- 60 officers and the budget was set, Art Acevedo began telling all of us neighborhood watch people that he was going to dismantle the DR program because he needed those officers downtown for the events because council refused to give him the overtime dollars he wanted. It’s all a game. That was the last time I would ever advocate for extra personnel for APD. I met directly with Art and his assistant chiefs, along with other neighborhood lealders from all around Austin. It’s all a game. You will notice that even this year, APD still does not come up with a good financial basis for asking for extra officers. He refuses to do it even though he has been asked to provide that information year after year.

      3. >> If I ran a business I would not just say, “well I”m sure I’m making money somehow”…..I would ask my accounting department to show me exactly how the money flows

        Which they do. For instance, the one they did for F1 (it was required for the METF funding).

    3. Novacek: regarding the zip codes, we have the prop tax records in a searchable but pretty complicated database imported from the TCAD dump. If you’d like to take a shot at it, send me email.

  7. Another reply to Noveceks claim that downtown subsidizes the rest of the city.

    As if they heard us talking, the Austin Monitor posted this story today:
    Police association proposes SXSW funding fix

    Editor’s note: I have limited the comment below to only one paragraph so as to avoid copyright infringement. The full article can be read at the link.

    Although it is an economic driver for the city, South by Southwest imposes significant demands on the Austin Police Department, which pulls many of its personnel away from normal duties to cover the event every year. The Austin Police Association is now proposing a fix for next year’s festival, due to take place in mid-March, that it hopes will help mitigate those impacts. – See more at: http://www.austinmonitor.com/stories/2015/10/police-association-proposes-sxsw-funding-fix/#sthash.6RJTi9wy.dpuf

    1. >>Although it is an economic driver for the city

      Literally in the first sentence, SxSW is overall a net revenue gain for the city.

      >> The Austin Police Association

      The Police Union (not the department, the union) wants more money. I’m shocked, shocked.

      1. Mary: I think there are legitimate questions about special events and whether they’re worth it–how much should the organizers pay, who pays for special details, etc. But the reason why I’m asking the questions I am is not to assess fairness of one area vs. another, or try to equalize spending. If it costs more to provide police service to everywhere in the city, so be it! Everybody needs police service, even if it costs more.

        The reason I’m trying to understand what the costs are in one type of area versus another is in order to understand as we build new buildings, streets, neighborhoods, etc., and change existing ones, how we can do this in a cost-effective way. The question of who pays how much for SXSW details, while important, doesn’t really play that much into that particular question. Downtown would still exist if it weren’t for SXSW, and dramatic changes to places like West Campus can happen without starting new SXSW festivals.

        So, while these discussions are interesting, I’m interested in costs for totally different reasons.

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