Study: Austin home size limits hurt economy
From todays Austin Business Journal email newsletter is the article below citing a study that says the Austin “McMansion Ordinace” is hurting the Austin Economy.
I haven’t read the study, but the Homebuilders Association of Greater Austin paid for the study. The Home Builder’s Association is against the ordinance and is lobbying the Texas Legislature to pass laws that will effectively void it. So I’m not sure if the study results should be trusted.
The only questions I have would be:
1) Have home and/or lot values in the areas covered by the ordinance declined in value?
2) If homes in these areas have not declined in value, have values appreciated in equal proportion to the rest of Austin and/or similar areas not affected by the ordinance? (has the ordinance stunted the potential appreciation of homes in the areas affected)
In other words, is that puny little teardown in Tarrytown, on a 50ft by 125ft lot, now worth less than it would be if a bigger home could be built than what the ordinance now allows? It wouldn’t surprise me if the ordinance has had at least some impact, but MLS Sales data doesn’t bear that out as the central areas saw some of the strongest real estate appreciation numbers in Austin from 2005 to 2006. See my 2006 Austin Sales Market Summary for detailed area by area stats.
See the article below. The math seems confusing to be. I’d rather see a study that simply answers the above questions.
Austin Business Journal – 2:41 PM CDT Tuesday, March 13, 2007
A new study suggests that a city of Austin ordinance restricting home sizes is having negative effects on homeowners and causing a reduction in economic activity within the city.
The study conducted by Austin-based economic research and analysis firm Impact DataSource concludes that the city’s “McMansion” ordinance has forced increases in the cost of new homes and remodel projects in the areas it covers, making it difficult to finance improvements while limiting the ability of homeowners to sell their property. The Homebuilders Association of Greater Austin paid for the study.
The ordinance that went into effect in September 2006 limits development plans for owners of lots in the zone between Northwest Hills and Montopolis in the north and south sectors, and between Barton Hills and University Hills in the west and east sectors. A bill recently filed in the Legislature by Rep. Edmund Kuempel, R-Seguin, would force Texas cities to regulate home sizes based on one set of criteria and not multiple criteria like the Austin ordinance does. The city is fighting that bill, saying it would effectively “gut the ordinance.”
The study evaluated four properties, demonstrating an average loss of $229,888 of real property improvements, along with a $5,806 annual loss to local taxing districts per property and reduction in possible construction to an average of $451,375 per property. In total, of a possible 110 similar infill redevelopment properties listed for sale on October 31, 2006, improvements not added to tax rolls could total $25.2 million. Homeowners would lose $12.8 million in their share of actual and projected market value resulting in a further loss of $638,614 in annual tax revenues from these properties.
“The new residential standards make urban projects more complicated and more expensive,” says Jerry Walker, principal of Impact DataSource. “Regulations could add as much as $75,500 to the cost of remodeling and constructing a new residence in the affected area, further pushing middle-income residents to areas outside Austin and contradicting the city’s stated urban density goals. Young homeowners trying to upgrade or move to larger houses to accommodate their growing families are getting squeezed the worst.”