Editor's note: To view this story with additional graphics as it appeared in the March edition of Community Impact, click here.

A new state law has cities across Texas grappling with the loss of control over land in their outer limits, including Austin where hundreds of property owners have removed themselves from certain regulations.

Since Senate Bill 2038 went into effect last September, properties in a city’s extraterritorial jurisdiction, or ETJ—the unincorporated area surrounding city limits—can remove themselves from some regulations.

In Austin’s ETJ, at least 300 release petitions were filed as of March 14. Most were approved so far.

Municipalities have opposed the new law given the loss of local influence, while supporters have said it limits burdensome oversight and grants property owners more flexibility. Community members are concerned about the scale of development that’s now allowed closer to home.

“It’s different when you, all of a sudden, have people coming in that have different objectives for your neighborhood,” Southwest Austin ETJ resident Dayna Smits said.

In a nutshell

Under SB 2038, cities including Austin can’t stop property owners from leaving an ETJ as long as application materials are found to be valid. The law also halts civic ETJ growth alongside any annexations—cities’ gradual expansion of territory, services and regulations—as of 2023 or after.

Those in the ETJ can seek the release of any land from their city in one of two ways:
  • A resident or majority of landowners in the area can petition the city for release.
  • A smaller portion of residents in the area can petition for a local election. Only registered voters within the proposed boundary can participate and decide on the issue; a majority vote releases the land.
SB 2038 was authored by state Sen. Paul Bettencourt, R-Houston, who said he intended to reign in Texas cities’ passive plans for expansion.

ETJs explained

Extraterritorial jurisdictions stretch miles from city limits and are linked to cities' expansion plans through annexation. In ETJs:
  • City safety, quality of life and development rules apply—one reason why property owners would seek to leave unincorporated areas
  • City taxes aren't collected
  • Residents can't vote in most city elections
  • Roads and public spaces are generally served by a county or special district
Put in perspective

The new law could affect future development plans around Austin’s edges in areas that once fell under the city’s broader set of rules.

Through the 2010s, residents in Southwest Austin’s ETJ utilized the city’s public review in an effort to cap the size of the proposed Live Oak Springs subdivision behind their neighborhood. The project would have brought more than 80 homes to the end of lightly traveled country roads in a city-protected water quality zone.

Local pushback over safety, traffic and flooding concerns led Live Oak Springs to be scaled down in 2019 to 30 homes and ended plans for a proposed access bridge over Slaughter Creek.

The group thought they’d reached a compromise on the project years ago. However, the Live Oak Springs properties have now been removed from Austin’s ETJ and are no longer subject to previous oversight.

New project plans are now being reviewed under Travis County’s less restrictive set of rules, once again raising worries about a potential wave of new residents and traffic in what locals thought would remain a quiet, less built-out area.

Property owner David Knapp, who successfully petitioned to remove the site from Austin’s ETJ last fall, didn’t return requests for comment.

Sorting out the details

Michael Linehan, president of Austin-based development consulting firm LSI, said he believes the new law and ETJ release process can make properties more developable—and therefore more valuable—by bypassing certain environmental regulations and Austin’s “notorious” permitting process.

“By just submitting that letter with your deed to remove yourself from the ETJ, you get [additional developable area], which makes your property significantly more valuable or developable,” Linehan said.

Although properties might have the potential for increased valuations, Linehan said most residents won’t see major differences in their area if they or their neighbors release a property; he said there are no clear downsides, or significant benefits, in many cases.

A closer look

Hundreds of properties of all sizes were released from Austin's ETJ or were pending as of mid-March including:
  • Austin Executive Airport
  • Tesla's Giga Texas
  • Austin Zoo
That land now falls under looser county review related to development and environmental regulations, which could affect how the sites are used in the future.

Zooming in

Austin and Travis County officials opposed SB 2038 when it was moving through the Texas Legislature last spring.

City officials are concerned over the lack of public input and “equivalent regulations” in unincorporated Travis County, where protections for water quality and natural features like Barton Springs and the Colorado River don’t apply.

Travis County staff can only enforce their development policies—a much smaller rulebook than Austin’s. ETJ residents that left are now served by county sheriff’s offices. A county representative didn’t provide information on how ETJ releases are being handled.

Led by Grand Prairie, more than a dozen cities are now fighting SB 2038 and the state in court over claims that the new law interferes with local decision-making powers protected in the Texas Constitution.

Customers within Austin Water’s service areas would continue to receive water service from the city utility. Austin Energy’s service and coverage area are also not affected by the new legislation, according to the city.

What's next

Austin has received a steady stream of release requests since SB 2038 went into effect with well over 5,000 acres released.

Nikelle Meade, a partner with law firm Husch Blackwell specializing in land-use, said the flexibility and loosened permitting requirements outside Austin’s reach are well-received by landowners looking to “control their destiny.” And despite some contention between cities and petitioners over certain parts of the process, she said she believes it will “absolutely” continue to be a popular option.

“The end result could be that development around Austin becomes less expensive to complete, thus making the developments more affordable for the end-users,” she said.

Bettencourt said he valued positive reviews of the law for now, while changes could be in line after more time and analysis.

“I was expecting there to be a steady stream of these applications and not a tidal wave of it. So we’re going to be looking at those results long-term because what gets measured gets fixed,” he said.