Should Austin Limit Home Sizes?

The Austin City Council is considering whether to limit the construction of “McMansions” – big homes that replace smaller homes that are demolished or removed. Central Austin Neighborhoods such as Tarrytown, Hyde Park, Travis Heights, Clarksville and Crestview are areas where lot values will support the construction of new or remodeled homes much larger that the homes originally built. Owners of the smaller homes in these neighborhoods complain that the giant remodels/rebuilds dwarf the quiant cottages of yesteryear, and that an unsightly and asthetically unbalanced mix of homes is created by these big homes.

Take for example a home we just listed in Crestview. The lot value is about $100,000, but the 1952 home is a spartan 998 square foot 3 bedroom 1 bath with a detached 1 car garage and hardwood floors. Not exactly what growing families are looking for nowadays. We’ve listed it at $182,000 and it’s ripe for a major remodel. Directly across the street sits a 2200+ sqft home, updated and expanded from it’s original size, which was probably also about 1000 square feet, listed for $379,000.

When a pricing gap this large develops in neighborhoods, a profit opportunity is born. And in America, few profit oportunities go unexplored. In this case, there is so much upside value potential on our small listing, that a buyer could purchase the small home and invest $100,000 in improving and expanding the home and not have to worry that the home becomes over-valued for the neighborhood. The $100,000 in expenses will most likely add $150,000 to the value of the property depending on the quality of the work done.

There is an unofficial formula I’ve always observed and followed that says a neighborhood will support home values 3 to 4 times the lot values. So when a neighborhood starts seeing lot values in excess of $100,000, that means homes can be built in the $300,000 to $400,000 range and they will sell.

So, in my example above, should someone be allowed to buy this 998 square foot home and add on to it or tear it down and rebuild? Of course they should. But should they be allowed to construct a 3200 sqft giant rectangle box?

I say government needs to stick to the important things and not dictate how we live or what type of improvements we choose to make to our homes. On the other hand, as someone who loves and appreciates our city and the beauty and special ambiance of its core central neighborhoods, I must say some of the giant bohemoths are indeed unsightly and seem out of place on the tiny lots upon which they stand. So I’d probably not object to some very minor and reasonable limitations. But it’s a tough question, really.

If you’d like to take a poll on this and see how others have answered, click here to visit the Austin Business Journal website and cast your vote. As of the time of this writing, the poll results are 2 to 1 in favor of one choice over the other. You have to vote to find out whether a more restrictive approach is winning out over owner’s property rights.