January 9, 2007
City Council Tries to Save East Austin (Again)
On Thursday, City Council will hear a presentation from city staff regarding land banks, land trusts and funding options under the Homestead Preservation Act (HB 525), which was passed in the State Legislature after being filed by East Side state rep Eddie Rodriguez. The details are "complicated," but from what we understand, homeowners in the designated district (Town Lake to Manor Road, and I-35 to Airport Boulevard) would be able to donate or sell their land to the city and the city would lease it back to them. The homeowner technically maintains ownership of the house. The homeowner's property taxes would not rise, but if they eventually want to sell the house, they only get a "fair return" - not the market value of the house. The city would buy the house and use it as affordable housing - selling it to another person under similar restrictions or renting it. This summary is incomplete and possibly inaccurate, but that's all we've got.
This sounds similar to rent control: it appears to remove homeowner's incentives to maintain and upgrade their property. If the owner is guaranteed a "fair" return and isn't getting the full market value of investments in upgrading their home, then the owners are unlikely to make substantial investments in their homes. Additionally, this seems like a bad financial move for most homeowners: they may get a short term benefit of lower property taxes, but they give up the long term benefit of selling their homes at market value. That may actually make this plan a reasonable idea - only people who really want to stay in their house indefinitely and don't have (or don't care about) heirs that might benefit from inheriting a valuable piece of property would participate.
We preferred the previous proposal, which simply capped property taxes for long-time residents. That more simply and directly addressed the main problem with gentrification (that increasing property taxes force out long-time, fixed-income residents). The current proposal is extremely complicated and bureaucratic. Many people who don't understand the program might opt in and unwittingly deprive their descendants of their inheritance. Much of the program's budget would go to maintaining the bureaucracy. Additionally, we aren't thrilled about concentrating "affordable" housing in East Austin. We'd prefer to see affordable housing spread throughout the city.
Interesting quote from the New8 article on the subject - "The reason [a long time East Austin resident is] not a fan of the new condos and apartments is they drive up property values." When we were kids, neighbors hated seeing apartments go up nearby because they thought they drove down property values. Those were different times - all the poets, they studied rules of verse, and the ladies, they rolled their eyes.
Image by Outregis on Flickr. Note that this image is of a house on Rainey Street - on the side of I-35 not included in the proposed ordinance.
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Aww Shilli you could have used a photo of the dump I live in for this post.
Or the 2 bedroom / 1 BA dump down the street from me with the caved in roof and non-operational chicken farm in back that's selling for almost $400,000. :)
Every 'solution' to this problem has liabilities. The capping property tax solution forces up everybody else's property taxes and removes some legitimate incentives older folks might otherwise have to sell their house and move into a condo or a retirement home (meaning supply of homes are further artificially restricted for young people).
The solution that has the least liabilities, in my opinion, is the income tax. Speaking as somebody who would have paid more during most of my residence here in Tejas that way, it's still the right way to go. A small property tax like you get in other states for local needs; but fund schools statewide via income taxes.
This, while well intentioned, is probably a bad idea. The rest of Austin is changing, why shouldn't East Austin? My house appraisal has gone up $70k in 4 years. Who is gonna pay my taxes for me?
Municipal efforts to get involved in housing prices in this way traditionally result in great inequality. This plan removes incentives to redevelop and improve property, while other taxpayers/property owners pay for it.
The real problem, as M1EK points out, is not rising home values, but our state's total reliance on property tax to support schools and other programs. Huge property tax bills are the "surprise" that forces those on fixed incomes out of their homes and leads to a lot of mortgage foreclosures.
Let me tell you what East Austin needs saving from: the shitty and teeth-grindingly terrifying driving that takes place on Airport Blvd, especially south from 38th. South of MLK to about Springfield is the worst.
I drive this road every day, and every day, I see people driving for long distances in the chicken lane, driving on the wrong side of the road until a spot opens up for merging, reckless pulling into and out of parking lots with nary a glance, not to mention the bleary-eyed jaywalkers who seem to believe they are impervious to the impact of speeding automobiles (or who radically miscalculate the time they have to cross the street).
If my insurance company knew how bad the driving was on that road, I swear they'd double my rates.
This isn't really related to this post, I know, but seriously, my biggest beef with politicians who propose good intentioned but road-to-hell legislation is that they don't demand the same services (like enforcement of traffic laws) for their constituency that wealthier parts of the city receive. Save East Austin by first saving life and limb.
The only way to level the public's burden for schools and infrastructure is to levy a state income tax. All else has been tried and failed. Why do Texans allow the Lege to try and reinvent this badly-designed wheel every 2 years? Take a hint from the Northeast states that learned this the hard way three decades ago, and get away from relying on property taxes as primary finding sources. Raising one class of people's taxes at the expense of others is a ridiculous shell game. The sooner those Bozos in sculptured ostrich-skins over on 11th street get that message, the better off we'll all be.
Actually, this is a tool, not a solution. It's a good idea because it provides an option for those who just want to live out their lives in what they consider their neighborhood. I was at a meeting with several of these people last night, and you should know that we are talking about elderly people, most of who are the second generation in their house or on their block. They have survived racism, government indifference and land grabs, crime, violence, drug dealers. They told stories of their parents struggles in East Austin, of being forced out of the rest of Austin (some of their parents were literally evicted from the homes they built and marched on foot by the Austin police to East Austin when West Austin was legally designated a whites only neighborhood). For some of these people, the emotional ties with the neighborhood are stronger than the profit they could make by selling to the highest bidder. And while their is near universal agreement that all the affordable housing should not be located in East Austin, very few are saying we need to scale back providing affordability east of 35. Instead, they want to increase affordability citywide. And you should also know that the vast majority of people are calling for diversity - they welcome the hipsters coming east, just not at the expense of the grandmothers who were born here. They are pushing for as close as they can get to the idea of a spectrum of races and incomes living together on the same block, and against the "SoCo model" where a diverse neighborhood was transformed into one where residents are only divided by where they made their fortunes - California or Texas.
No, they're pawns, Sudo. Again. This whole mess stinks. This is a way for the poor to 'get out' and it's a way for the city to 'get in'. It's only a couple notches below extortion.
If you drive down Caesar Chavez, you'll note the number of homes that have been converted to businesses. These, like many others, are multi-generational. Passed on before the first or second boom. A fantastic inheritance, if the givers can stomach the taxes beforehand. This would be lost.
Also, this 'diversity' you speak of is wrong. It's inorganic, and it has to end. Why can't we just recognize diversity and celebrate it when it occurs naturally? That's the only time it counts anyway. Drop the race card, unless you really think the city is the equalizer. We should not let the city steward anything beside basic services.
The reason so many of us were only able to buy on the east side is because so many on the east side let their properties go to shit. It was a bad place to invest. But everything else got atrocious, and young people like us we're willing to spend the money and take chances. Wow, all of a sudden it's a good place to invest. All of a sudden the city wants in.
A lot of retired and lower income families did well in this market. Homes bought forty years ago, paid for fifteen years ago, sold for 4, 5, or even 6 times the present day dollar amount, paying for the rest of their lives and leaving a huge chunk for their families. Empty lots worth 10k are being offered for 15 times that amount on my street. This is the only way some of these people will ever see an enormous chunk of change. If Shilli's summary is basically correct, this is bad news.
Sorry to disagree, Genie. You present a nice story, where the young hipsters are the saviors, defending the people who actually built this neighborhood from their own ignorance and a willful slide into blight. It's a good enough tale to inspire an Ayn Rand novel. Unfortunately, the well documented facts punch it full of more holes than an Aztecs in Apocalypto.
Do you really believe that current residents of the East side are looking for a way to "get out? Can you explain what it is about the people in this area that makes them unable to appreciate the location? You don't want to live in Manor, why would you think they do?
I appreciate that some do place a higher value on how big an inheritance they will leave their kids than their own quality of life in their golden years. There will still be plenty of them around to sell to highest bidder. To paraphrase Rumsfield, Henny Penny, the sky is not falling on Caesar Chavez's businesses. Many of these former houses were businesses long before Perednales Lofts, and while you might not have been shopping in the neighborhood, others were.
As to the diversity, it's not the diversity that's inorganic, it the lack of diversity. Minorities were forcibly relocated to the eastside. Until it became illegal in the 1980's, banks habitually refused to lend east of 35. Anything that the powerful white citizens west of 35 didn't want built in their neighborhoods was forced into powerless east Austin. Gasoline Tank farms covered square miles of homes with noxious fumes, dumps and recycling plants attracted rats, hundreds of diesel busses would start their engines almost simultaneously each morning creating a wave of exhaust fumes noticeable inside houses over a mile away. Halfway houses, housing projects, etc, were all placed exclusively east, while police substations, parks and beautification projects were located west. Don't kid yourself into thinking that you are some kind of pioneer “willing to spend the money and take chances". People before you fought long and hard to make that money and those chances available. You should kiss their feet for giving you the opportunity you are enjoying.
And finally, if you really think that $150,000 will transform your life, allowing you to live the remainder of your days in leisure while still providing an inheritance to make your children giddy, I'll offer you that chance right now. I'll bet I can hook you up with someone who'll buy you out today for $150,000. You can take you money and move to... um, where, exactly? Oh, wait, you moved to East Austin because it IS the only affordable place to live.
Please spare me the plight of East Austinites who bought houses in 1978 for $45,000 that are worth $300,000+ today. I'd love to have such a "problem."
The fact is, gentrification, though it does raise property taxes for some, is a good thing overall. Increased investment always boosts the quality of life in blighted neighborhoods. I've walked around E. 6th near Robt. Martinez, and E. 11th at San Marcos, and can say those neighborhoods look much nicer than they did in the early-90s.
What about W. 6th west of Lamar, and South Congress between Barton Springs & Oltorf? Those are formerly blighted neighborhoods, mostly residential, that are now home to thriving small businesses, stores and restaurants. Are you telling me that's a bad thing?
The solution is to toll property taxes for residents who have lived in those neighborhoods for 20+ years, for as long as they physically occupy the house. If they sell or rent, tax valuations go up to FMV. That's fair to them, and fair to people who want to sell or improve their properties to take advantage of increased demand.
So many people in East Austin, you know, were underprivileged anyway, so this is working very well for them.
Sounds like a great way to keep the east side blighted and call it "diversity".
Nobody is making the old folks sell their now valuable homes. My neighborhood is about 65% older generation who've lived there for 30-40+ years, survived the crackhouse times etc.. They are no fools to how much their homes are worth, but know that at some point, they won't be occupying that house anymore (not for eviction, but simple mortality). Their children all live elsewhere in the city, and while they may want to inhabit the same house, its not likely due to the expense of remodeling, and besides, they have their own homesteads. Might as well sell the place when the house is passed on to them.
Hi, there is some VERY VERY important information missing from the Austinist's article and the other comments.
See, the part of the bill that allows people to sell their land to a land trust in order to stay in their community is only one part of it.
Here is another important part of it...the house owner can get the value of their land back in all sorts of incentives (i.e. money for home repairs, possibly even cash).
The exact arrangement will depend on the unique circumstances and choices of each home owner opting to participate. That's what's good about this bill...it allows for flexibility; it's up to the City to make the program worthwhile to folks.
While the primary intent is to help out the elderly in the area, keep in mind that there are people with roots in the East Side who are still in their 20s-50s who are not retired but might be in trouble let's say five to ten years from now. This allows people a chance to stay in their community in a worst case scenario where they can't afford their taxes anymore. So, they're not really denying their heirs a more valualble property in the future if they wouldn't be living there anyway. Also, the home owners would still be building long-term equity on the house which they could then pass down to their kids.
Also, the bill helps in construction or new affordable housing and rentals on the East Side.
I think it should be noted that the people behind this bill didn't just randomly draft it...they looked at all sorts of cases around the country and considered various solutions.
This bill is not THE solution but it's the first time any action is going to be taken around this issue after years of talk. It's about time and it should be encouraged.