Austin continues to add more housing than any other major U.S. city, but new residents are still pouring into town faster than builders can keep up while the cost of living in town grows monthly, according to real estate data.

New city development policies forwarded in June could generate bigger and more affordable construction along busy corridors where the city is poised to grow even more. City officials said they hope to ensure new development creates denser neighborhoods linked to amenities and transit while building up much-needed housing stock.

The June changes expand a program bringing taller mixed-use buildings on major streets and could reduce restrictions on projects near single-family homes. Those steps are among the most notable the city has taken on since a proposed rewrite of its land development code stalled this spring.

But the changes are not backed by all in the community, with some concerned that new allowances could cause disruption for neighborhoods and businesses without bringing enough benefits. And among more supportive developers and council members, some said the action may not bring enough relief to Austin’s housing pressures and affordability concerns.

“I’m not saying that I’m opposed to those changes by any means; I think it’s a good incremental progress. It’s just, to me, it feels like a drop in the bucket,” said Chris Affinito, president of Austin developer Heartwood Real Estate Group.

Compatibility constraints

Both updates are aimed at encouraging development on Austin’s major corridors—Burnet Road, Congress Avenue, Lamar Boulevard, and future Project Connect rail and bus routes, for example—where, to varying levels, many believe denser housing belongs.

One move City Council initially approved June 9 aims to loosen Austin’s strict limits on building height next to single-family homes, or compatibility standards, which some developers point to as a hindrance on new construction. The regulations are designed to protect existing single-family homes from being overshadowed by larger developments within a certain distance, and cover limits on yard sizes, height and overall building size.••One aspect of compatibility acts as a cap on new building heights stretching outward from an existing residence. Alongside other local development requirements, compatibility can often force developers to reduce or abandon construction plans.

Austin’s current height limits, and the distance over which a home’s influence extends, stand out when compared with Dallas, Houston, San Antonio and other rapidly growing peers such as Charlotte, Denver and Atlanta. Erica Leak, a development officer at Austin’s housing department, said the limitations are “the most restrictive” that city staff are aware of.

“There are a lot of fast-growing cities, but ours has been growing faster; our housing crisis is worse; and there is an obvious reason why that should be solved fairly easily,” Affinito said.

Over the past several years, Austin attempted to rework compatibility standards through a revision of the city’s 1980s land code. A group of homeowners successfully challenged that process in court, leaving a broader rewrite off the table, and many still believe the limits should not be reduced. Community Not Commodity, which did not favor council’s recent process, said considerations for homeowners should still be in place regardless of the city’s push for new development.

“Access to light and air has long been recognized as integral to a quality urban life and as a fundamental part of zoning. This protection is more important as redevelopment occurs and cities get denser,” the group said in a statement. “Compatibility between structures and uses, not incompatibility, is the foundation of affordable, livable large cities.”

The proposed updates would not completely wipe away Austin’s decades-old limits on building height and other characteristics. Rather, the changes would grant denser developments more leeway with compatibility when building on busy streets. Council’s proposal is now being reviewed ahead of a final vote as soon as September.

More mixed-use

In June, council members also agreed to broaden one of Austin’s most prolific affordable building programs: vertical mixed-use, or VMU.

The program allows for a trade-off granting taller building heights in exchange for more affordable housing within. Several dozen such projects including Lamar Union, Ella Parkside and E6 Apartments were completed through the program and dozens more are in the works.

Projects built through the program feature a mix of market-rate and income-restricted multifamily housing stacked atop shops, eateries and other services.

The program update approved in June, called VMU2, expands both height allowances and affordability requirements for future projects seeking to go even more vertical and could bring more housing and commercial options to active areas, officials and city staff said.

While VMU has produced more housing than many other similar city incentives, the majority of all sites eligible for the program have not used it—in part due to Austin’s compatibility standards. And despite council opting to allow up to 50% more height through VMU2, staff analysis found that existing rules limit between half and two-thirds of those properties from building that high.

Along large stretches of roads tapped for potential mixed-use projects, homes set even several blocks back from a busy corridor can cap a new building at just 30 feet based on compatibility—an often unworkable restraint for multifamily projects also requiring commercial space and long-term affordable housing, developers say.

Across hundreds of eligible properties, only around three dozen buildings have gone up and about the same amount are now in the works, according to city data. Taylor Smith, deputy director of government affairs for the Austin Board of Realtors, said it is “difficult to see” the expanded program becoming a success following VMU’s “limited” track record since its creation in the mid-2000s.

Development outlook

While pointing out the possible ceiling of the change, Smith also said the recent action represents a solid starting point for discussion of housing topics that had historically been rejected in Austin.

“In such a tight housing market, it is critical to prioritize housing, take meaningful steps to improve our housing inventory, and continue to balance the diverse needs and desires of our city,” Smith said.

In addition to a mixed reception overall, an aspect of VMU2 is likely to be challenged in court. Douglas Becker, the lawyer who handled the land code lawsuit, said he may sue over VMU2 given council’s choice to grant extra height without allowing for resident pushback—the same topic the city previously lost over in court this year.

Mayor Steve Adler, who pushed for that aspect of VMU, also said he sides with those who view the updates as a half-step. But after highly contentious land-use discussions in the past and ahead of next year’s turnover on council, he also said the measures’ unanimous passage may signal a longer-term shift.

“For us to have a process where we could make some impact on [compatibility]—even if it didn’t go as far as many people would have liked to see it go—it represents a significant move among a lot of people that weren’t willing to even participate in the conversation a year before,” he said.

For now, more dense projects are in progress citywide, and the door is open for the first of these projects to break ground through the VMU program expansion while the overall effects of the compatibility ordinance are yet to be determined.

Affinito, while supportive of the path council started on, said he is not convinced the recent updates will unlock new opportunities for developers like him.

“Unfortunately, I think it’s a bit of a Pyrrhic victory,” Affinito said. “The fact that this passed, in theory, means that [council is] going to put the issue to bed for a little while. Meanwhile, I’ve got four properties, VMU, and neither of these ordinances materially affects any of them. Nothing changes as far as I’m concerned.”