Housing bond forces tough decisions for Council members

While three City Council members say they want to present an affordable housing bond to voters worth between $250 million and $300 million, it is unclear how many others on the dais are in favor of such a large figure.

First, some Council members are reluctant to support spending increases that will lead to tax hikes.

“I have concerns about any bond package that will raise the tax rate,” said Council Member Jimmy Flannigan in a recent interview with the Austin Monitor.

City staff has estimated that the city could take on up to $325 million of additional bond debt without raising taxes, while a $575 million bond would lead to a 1-cent increase and an $825 million bond would lead to a 2-cent increase.

While the $300 million that Council members Greg Casar, Delia Garza and Pio Renteria have proposed for housing falls way below the threshold that would prompt a tax hike, housing is only one of a handful of priorities likely to be included in a large, multipurpose bond on the ballot this November. The bond package recommended by the Bond Election Advisory Task Force is $851 million, with $161 million for housing and another $690 million for transportation, parks, upgrades to city facilities, affordable housing and stormwater infrastructure.

“I don’t think spending the whole amount on affordable housing is a good idea,” said Flannigan, adding that city subsidies are only part of solving Austin’s housing affordability problem. The other part of the equation, he said, is reforming the land code through CodeNEXT to enable greater supply of market-rate units.

Council Member Ora Houston has also signaled that she will likely oppose a bond package if it increases taxes. In a January letter to the bond task force, Houston wrote that “fiscal policies must allow individuals who are hanging on by a thin thread, to ‘live within their means’ and not have another tax rate increase for the 2018 bond.”

Council Member Ellen Troxclair, the only self-described conservative left on the dais, has made holding the line on taxes the central focus of her tenure on Council and is also unlikely to support a bond that increases taxes.

Others may believe that $300 million for housing is warranted, but not politically feasible. The largest housing bond ever approved by Austin voters was $65 million in 2013, and that came a year after they rejected a $78 million measure.

Mayor Pro Tem Kathie Tovo was one of those who advocated for pushing the 2012 bond up to $78 million, after a lower figure was initially proposed. After it was defeated at the polls, she wondered whether she should have settled for the less ambitious proposal.

“I remember waking up the day after that vote and thinking, ‘Wow, was that part of what made it unsuccessful?’” she said. “We were all really upset to see those bonds fail.”

Asked for his thoughts on the housing bond, Mayor Steve Adler said in a statement, “I’m a strong and emphatic supporter of affordable housing but have not yet arrived at a specific number.”

Council Member Alison Alter also refrained from endorsing a specific figure, but she noted “serious concerns from housing staff about the city’s capacity to effectively invest more” than the $161 million proposed by the bond task force.

Mandy De Mayo, who oversees affordable housing initiatives for the city’s Neighborhood Housing Community Development Department, told Council members at a recent meeting that “you could give me a billion dollars, and I wouldn’t be able to spend it in five years,” but she told the Monitor in an interview that she believed deploying $300 million was possible.

“Those were reasonable and thoughtful numbers that were put together,” De Mayo said of the variety of different housing bond proposals evaluated by the task force, including the $300 million one. “We went through quite a bit of analysis.”

De Mayo did add, however, that the city will need to add more staff to make sure that income-restricted units are in fact being leased at the discounted rate and that they are only going to those with incomes low enough to qualify for the below-market-rate rent.

The debate over the housing bond is also largely shaped by seemingly unrelated national political factors, notably President Donald Trump.

Housing advocates point to the potential of an anti-Trump “blue wave” this November, arguing that the electorate at the polls will likely be much more liberal and more inclined to support an aggressive housing measure.

Also weighing on the housing debate is a tax bill Trump signed in December. That’s because one of the main ways that nonprofit housing developers get money for projects is to sell tax credits to banks (worth either 4 or 9 percent). The large cut to the corporate tax rate that was included in the tax bill has made purchasing tax credits much less appealing to banks. As a result, they are not willing to pay nearly as much as before, leaving affordable housing projects with less money.

“The price on credits is down 10-15 percent from a high two years ago,” said Walter Moreau, executive director of Foundation Communities. “That can amount to about $2 million per new (apartment development), which means we have to fundraise a larger gap.”

While the corporate tax rate lowered the value of each housing tax credit, Moreau noted that Congress also increased the number of 9 percent tax credits by 12.5 percent: “Austin will likely receive enough credits to build three new affordable housing communities each year, and possibly four.”

Photo by John Flynn.

The Austin Monitor’s work is made possible by donations from the community. Though our reporting covers donors from time to time, we are careful to keep business and editorial efforts separate while maintaining transparency. A complete list of donors is available here, and our code of ethics is explained here.