February 5, 2012 Brian Kelsey

Keeping Austin Affordable

An open letter to Brigid Shea (and other aspiring city council members):

Dear Ms. Shea,

I applaud you for focusing your mayoral campaign on affordability. The Austin American-Statesman is right to push you and Mayor Leffingwell for specifics on how you would make Austin more affordable, but I’m hopeful that you are up to the task. I’ve lived in Austin since 2002, and I’ve heard nearly every city council candidate in my ten years here talk about affordability, but I haven’t seen too many serious proposals that cut through the talking points to the core of our affordability challenge. But given the jobless recovery we’ve experienced over the last few years, and the growing income inequality that’s finally gaining traction in the mainstream media, maybe this time will be different.

Ms. Shea, I’m sure you’ve been doing your homework as you prepare to take on Mayor Leffingwell. So none of what I’m about to lay out here is going to surprise you. But here’s the affordability challenge as I see it:

Let’s start with what people are calling the jobs/housing balance. Below is a map comparing home prices to wages in the Austin area. Specifically, it shows the “median multiple,” which in this case is the ratio of the median residential sales price by zip code for the first seven months of 2010 and the median wage for all jobs at businesses located in the same zip code. In other words, can workers afford to live near their jobs? I apologize for not updating the data, but things have been a little crazy since I created this map for a Leadership Austin event way back in October 2010.

Historically, the ratio of home prices to household income has been around three-to-one (e.g., $150K home value to $50K annual income). As the map indicates, there are quite a few areas around Austin where the ratio far exceeds 3:1 and workers would find it very difficult to afford a home anywhere close to their jobs. Most of central Austin is in the 4.8 to 8.9 range and some areas to the west of MoPac can even get up to 14.3. I doubt many people older than high school working in the Hill Country Galleria call Bee Cave home.

So you’ll need to update this map with current home sales and wage data, and I’d also recommend accounting for rental units somehow so you capture both sides of the housing market, but you get the general idea here. Affordability is as much of an economic development issue in terms of where jobs are located as it is a community development issue in terms of where affordable homes are located.

We also need to talk about Austin’s changing demographics.

Austin is getting wealthier, or at least some people are. In 2000, 13.6% of households in Austin had at least $100,000 in annual income. In 2010, it was up to 20.1%. The very top is growing even faster. In 2000, 2.8% of households had at least $200,000 in annual income. In 2010, it was up to 4.9%. I know 4.9% doesn’t sound like much, but it’s about 16,000 households–more than double what we had here in 2000. And while I’m sure many of these highest-income households still prefer Loop 360, a growing number are choosing downtown and other central neighborhoods, and I expect that will continue.

The Statesman is correct in pointing out that real median household income has lost ground over the last ten years, but that’s not the whole story. Total inflation-adjusted household income in Austin grew by approximately 12% between 2000 and 2010. That’s roughly $2.4 billion added to the local economy fueling demand for housing, shopping, and apparently new restaurants and bars. Austin, as a whole, is getting wealthier.

So, Ms. Shea, if you are truly serious about tackling affordability, and you are facing growing demand from very high-income households, I’m afraid the law of supply and demand puts you in a tough spot. Whether it’s through density changes or creative housing forms, any serious proposal to improve affordability in Austin must start with increasing supply. I assume many of your campaign supporters live in central Austin, and have likely been participating in the Imagine Austin process, so I’m sure you’re surrounded by people with ideas for how to make that happen. I look forward to hearing your proposals.

You’ll also need to tackle the jobs issue. While I’d be interested in your views on a living wage policy, my guess is that’s a political non-starter in Austin. So the only other way I know of to increase wages for the 80% of households not making $100,000 or more is to focus on education and workforce training. Here’s what you’re up against: nearly four out of five new high-wage jobs (pay > overall median wage) projected for 2010-2020 will require a postsecondary degree, from a one-year certificate to a Ph.D. Here’s the race/ethnicity breakdown for people age 25+ in Austin who have a postsecondary degree: Asian 71%, White 54%, Black 31%, and Hispanic 21%. Keeping Austin affordable for everybody will require closing these gaps. We need to rethink our education and workforce systems to make sure we are preparing people to succeed in today’s economy, and get serious about the investment required to do it. I’m sure you agree.

We also need to get serious about recognizing what it really costs to get by in Austin. According to the Center for Public Policy Priorities, assuming employer-sponsored health insurance, a family of two parents and one child requires approximately $40,000 in annual income to make ends meet. Now, you’d need to separate out the students from this group, but the Census Bureau estimates that we have about 137,000 households in Austin earning less than $40,000 per year. Put another way, that’s 42% of all households in Austin that can’t afford to sustain a family of two adults and only one child. This is what we’re up against when we’re talking about affordability in Austin.

Ms. Shea, I realize this is a lot, especially for my first letter to you. But I want you to have some data to work with as you roll out your proposals to keep Austin affordable. Hopefully you’ll be able to pin down other people when they offer the usual platitudes without ever taking the time to truly understand the affordability issue here.

Good luck with your campaign.

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Comments (3)

  1. Brian,

    Nice map. I believe, though, that you are speaking about the overall macro-economic situation in Austin when you write about an affordability challenge. When I have heard Brigid Shea speak about the Mayor and Council being out of touch with the City of Austin’s increasing costs to the residents, I take it that she is referring to what the Mayor and Council can directly affect, such as property taxes, utility rates, fees, services and the like. But further, I hear the needed references to improving the quality of life (as much as ‘stand of living’) and the environment that long standing Austinites can still remember.

    One other point, Mr. Kelsey, in your data and slant toward solutions, I see one glaring assumption that you are making. Your referenced solutions, for example with regard to education, are assuming a stable economic and investment external environment in the term of the next 2 to 4 years. Beyond what the Mayor and Council can do, that very well may or may not be the case.

    Personally, regardless of the economic environment, I’m for cleaning house down at an unresponsive, out-of-touch City Hall with only Sheryl Cole worthy of re-election among the Mayor and Council members standing for election in 2012.

  2. Thanks for the comment. My focus was more on housing supply, but I appreciate the clarification on Ms. Shea’s platform. As for my assumptions, they are all very glaring.

  3. Yes, I should have also said, assumptions of a stable economic environment may be equally wrong and disruptive to not only housing supply but also demand, beyond what the Mayor and Council can directly affect.

    Keep an eye on the value of the dollar and resulting cost of energy. Those are the giant gorilla’s in the room that nobody here seems to be noticing.

    Again, Austin needs a more responsive Mayor and Council with better vision and new direction.

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