Evaluating the density bonus as a tool for affordable housing production in Austin, TX

Inclusionary zoning practices include policies that require or incentivize real estate developers to include affordable housing units in their market-rate developments. In Austin, this is done by a policy mechanism called the density bonus, which offers developers the option to include more density than is allowed in the base zoning in exchange for including affordable units or paying a fee that will be used toward affordable housing development in other locations. Austin has employed density bonus policies since 2003, which have produced 1,665 affordable units and have raised over $6.5 million dollars used toward developing or preserving affordable housing in the city. They City of Austin plans to expand the use of density bonus programs to produce affordable housing in future changes to the land development code. This study evaluates the success of Austin’s density bonus programs and how proposed density bonus programs may perform. Costs and location of density bonus programs and other city-funded affordable housing programs are compared to evaluate the performance of the density bonus programs. The analysis finds density bonus units are much cheaper to the city and out-perform other city-subsidized units in terms of providing affordable housing in areas that do not have existing concentrations of poverty or minority populations. In addition, the study analyzes how local rents and other regulations affect density bonus unit production and finds the proposed density bonus programs are unlikely to be successful without accounting for hyper-local housing market trends. Last, the study offers recommendations for Austin’s density bonus programs based on the analyses