Housing program short of its goal?
Austin's effort isn't helping working poor families, critics say


By Jeremy Schwartz
AMERICAN-STATESMAN
Thursday, May 05, 2005
(Story originally published in the Austin American-Statesman on December 22, 2003)

Two years ago, Cliff Fisher became another casualty of Austin's high-tech bust, losing his job as a computer sales manager at Dell Inc. But getting downsized might have been the best thing for Fisher when it came to finding a house to buy.
With the dip in his yearly income, the 28-year-old qualified for the city's affordable housing program and was able to buy a two-story, 1,400-square-foot home on the city's east side, overlooking Oak Springs Elementary School, for $115,000.
As part of the city's SMART Housing program, the house was reserved for someone making less than 80 percent of the median family income in Central Texas, which is $66,500.
In Austin, that meant that an individual making nearly $40,000 qualified for the home, which received tax breaks and a sped-up review process that probably saved the builder thousands in development costs.
Previously a renter in the Hyde Park neighborhood, Fisher could not afford a home on the city's west side.
"I bought into this neighborhood hoping it was on its way up, like Hyde Park was 40 years ago," said Fisher, who has since been rehired at Dell. "I love the diversity over here."
Critics of SMART Housing say Fisher's story illustrates a disappointing trend in a program that they had hoped would make significant inroads into the city's affordable housing shortage and would help combat gentrification.
And with city officials pushing for a controversial change to reduce the amount of time SMART homes must be reserved for lower-income residents, they say the program is in danger of becoming an affordable housing program in name only.
When city leaders unveiled SMART Housing in 2000, it was seen as the most aggressive city program yet to encourage affordable housing in Austin. And shortly after its creation, SMART Housing was named by city officials one of the city's best tools to fight the problem of gentrification in East Austin neighborhoods.
Gentrification — an established neighborhood being infiltrated by and eventually filled with wealthier residents — has long been an East Austin concern.
There's no doubt that in terms of numbers, SMART Housing has been a success: Nearly 3,000 single-family homes and apartment units have been built under the program, almost 10 times the number built under three years of the city's previous affordable housing program.
That's 3,000 homes and apartments built to exacting environmental, handicapped-accessibility standards that might otherwise have been built outside the city limits or not at all.
But whether the program has met goals of increasing the city's affordable housing stock and combating gentrification is another matter.
Three years after SMART Housing began, numerous housing experts say the program has created few units they would call affordable, and instead of halting gentrification might actually be stimulating such unwelcome change in East Austin.
"I think it's an infill housing development program," said Elizabeth Mueller, a University of Texas professor who co-authored a 1999 study that outlined Austin's dire affordable housing situation. "I don't think we should allow (developers) to do the minimum, get the benefits and not add to the amount of affordable homes."
"We have these units, but they're not affordable," said Susana Almanza, co-director of PODER, an East Side activist group. "They're not helping anyone by building these units, but they get to claim them. It's not fair to say they're doing so much for the working poor when they're really not."
SMART benefits
SMART Housing officials say the economics of building new homes in Austin, where land values are steadily rising, make it nearly impossible to create housing for truly low-income residents without significantly more subsidies than the city can afford.
City officials say the program has filled a need for residents in the range of 80 percent of median family income. They use the term "reasonably priced" and say that before the program, there was little production of such homes.
They also note that most SMART homes are significantly less expensive than the city average of $184,826 and include the benefits of green building and handicapped accessibility standards.
Those benefits also apply to the third of SMART homes that are sold at market value: In a subdivision, developers do not have to sell all the homes at reduced prices but get higher fee waivers if more of the development is dedicated to lower-income buyers.
In essence, the program seeks to lure developers into the city limits and to stimulate growth of homes and apartments.
SMART Housing — which stands for Safe, Mixed-income, Accessible to the mobility-impaired, Reasonably priced and Transit-oriented — is separate from the now-defunct Smart Growth policy, which sought to move growth from environmentally sensitive lands in the southwest part of town to the city's core.
With a team of officials dedicated to permitting SMART Housing, funded with a budget of $500,000 a year, developers can pass through the city's notoriously labyrinthine review process in a fraction of the time regular projects take. The savings, which can be into the tens of thousands of dollars, are passed on to lower-income buyers.
City Housing Director Paul Hilgers said aiming single-family homes at people making 80 percent of the median income — and apartments at folks in the 60 percent range — is the most effective way to leverage funds and allow the city to funnel federal housing money to lower-income residents through other programs.
"SMART Housing is really the foundation of the housing policy; it's not by itself the solution," Hilgers said. "We require other tools."

What about the rest?
At the top of the list of critics' complaints about the program is that it doesn't target those most in need, because someone making $40,000 a year, or a family of four making $56,000, qualifies for affordable housing.
In the lower-income neighborhoods where most of the SMART Housing units are located, critics say, the disparity is striking. In those neighborhoods, average incomes are closer to $15,000 to $30,000 a year, according to the U.S. Census Bureau, a far cry from the incomes of some of the people moving into the new homes.
"If everyone in a particular area is at 30 to 50 percent (of median family income) and you build at 80 percent, you're not helping gentrification," Almanza said. "You're bringing in a higher bracket of income, and those are generally not people of color."
PODER has advocated lowering the income threshold; city officials say very low-income homeowners would struggle even to pay property taxes.
Also, city officials say that without SMART Housing, homes would be built even more expensively.
"If we're unable to bring SMART Housing incentives, those lots will go as high as the market will allow," said Stuart Hersh, the city's SMART Housing coordinator. "Once they go to high-income, they're lost to low-income forever."
In that sense, the program acts as a bulwark against unchecked gentrification, at least slowing the process, officials say.
"Are you simply gentrifying at a lower rate?" asked Paul Rogers of the Guadalupe Neighborhood Development Corp., which has built several homes under the program. "If they're using SMART Housing to bring in people at 70 to 80 percent (of median family income), that's still, in a sense, gentrification, and nobody at the city really gets that."
But Hersh said the program is sensitive to gentrification pressures, citing an eastside home that city officials redesigned to make smaller and more affordable after Guadalupe officials expressed concern over its size.
Still, many SMART houses are more expensive than the homes immediately surrounding them.
For example, Fisher's new home is valued at $115,416 by the Travis Central Appraisal District, 19 percent higher than the average home value of $97,156 for his neighborhood.
According to a list of SMART homes provided by the city, in any given neighborhood, about half the homes are valued above the average price, and about half are below.
Builders and city officials say it's not realistic to build a house that will sell at $70,000 and say that without greater subsidies, lower-priced housing won't get built.
"It's a conundrum with the market and (average Austin-area income) so high," Hilgers said. "This is a market incentive program. We don't want incentives to drive away the market."
Through last year, 28 percent of SMART Housing units were priced for folks who make 80 percent of the median family income, 14 percent for those who make 60 percent of the median, 19 percent for those at 50 percent, and 2 percent at those under 40 percent. The remainder are sold at market rate.
Developers include the city itself, nonprofit housing agencies such as Habitat for Humanity and for-profit companies. Many praise the program for speeding up Austin's development review process.
"SMART Housing has been a fantastic program for us," said Andy Erben of KB Home. "We have over 375 houses in the program. The expedited process is a big incentive. We got a complicated project from square one to preliminary plat in six months. Without (SMART Housing), it could have taken one to two years."
Controversial idea
Next month, housing officials will ask the City Council for a change that they say will make the program even more attractive to developers but that has already angered affordable housing advocates.
Currently, SMART Housing units must remain affordable for at least five years, meaning that if a home is resold to a family whose income doesn't qualify for the program, developers must repay the incentives they received.
City officials want to reduce that so-called affordability period to one year as a way get more SMART homes built. The one-year rule would not apply to units that receive federal money, such as down payment assistance, which comes with longer affordability periods.
"What's happened is an increase in the number of subdivisions coming through that are not serving anyone at 80 percent (of median family income). We have the choice to capture some of that," Hilgers said. "Developers say they're more likely to be part of the program if we lower it to one year."
Critics say the proposed change only confirms their belief that SMART Housing is more about numbers than about affordable housing.
Others say that with just a one-year affordability period, what limited affordable housing the program produces will quickly pass into the hands of people who can pay market rate. So far, Hilgers said, no SMART homes have been resold.
Because of the outcry, which officials say took them by surprise, a council vote on the proposed changes has been delayed until January. Hilgers said that would give officials time to explain the benefits of reducing the time period.

"The folks interested predominantly in affordability focus on one year as if we're losing something, as if we're giving up affordability," he said. "But if the truth is, we will have less housing because of a five-year requirement, then we will have less affordable homes coming through the door."

Original Austin American-Statesman article may be seen at
http://www.statesman.com/search/content/metro/stories/
archive/race/122203_housing.html
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