The Statesman has an article today on the proposed redevelopment of the Stoneridge apartments off South Lamar, which I previously wrote about here. The developer wants to tear down 141 low-income units and replace them with 300 more expensive units. It would be the kind of vertical mixed-use development the City has been pushing for transit corridors. The property is now zoned commercial -- the apartments are a non-conforming use -- so the owner/developer needs the property rezoned.
The Statesman portrays the zoning request as a choice between affordable housing and increased density. Affordable housing advocate Heather Way apparently has the same view, stating that she supports the project "only if low-income families can benefit from it and only if it doesn't displace low-income families." (Not surprisingly, Jeff Jack and Zilker Neighborhood Association adopt the same line, but I covered their opposition in my last post.)
I was surprised to see that neither the Statesman nor Way understands the difference between zoning and rent control.
Both assume that if the City refuses to rezone the property, it will remain affordable housing. That's quite a stretch. There are at least three things the owner/developer can do without Council permission, besides maintain the property as is:
- Renovate the apartments and raise the rent. Suppose (i) the apartments rent for an average of $550/month; (ii) they could be renovated for an average of $30,000 each; and (iii) they would rent for an average of $850/month after renovation. Then the renovation would cost $4,230,000, but would bring in an extra $507,000 per year in income, exceeding the $423,000 or so a reasonable owner would demand as a return on his investment.
- Convert the apartments to condominiums. Several low-income apartments have been converted in the area. Some are asking over $200 per square foot. If you assume the average Stoneridge apartment would fetch $150,000 after conversion, the conversion would be worth $21 million minus the $10-12 million cost of conversion. I doubt the apartments, as low-income housing, have a going value of more than $6 million or so.
- Convert to commercial use. Good shopping on South Lamar is scarce. As is office space. These properties would doubtless be lucrative if converted to either.
I don't know how all the numbers break down. But I'll wager that Way doesn't either. (Jeff Jack and the Zilker Neighborhood Association don't care.) Given the demand for rental housing and condos in the area, it seems unlikely that these units will remain low-income housing for long. The only way to keep the units cheap would be to enact some form of rent control (which is a bad idea, and which, incidentally, would also be opposed by the NAs.)
Put simply, the Council can't control whether the affordable units stay or go; it can only control whether more units can be built on the property. If Council refuses to rezone the property, (i) we will lose an extra 159 housing units in the area; and (ii) we will have zero affordable units on the property rather than the 30 promised by the developer.
I also suppose it's asking too much to expect the Statesman or affordable housing advocates to take the long view. If we permit developers to build to the density demanded by the market, the price of housing eventually will settle very close to the cost of construction. This is as cheap as housing can get without a subsidy. There will be more affordable housing for everyone, including those Way purports to defend.
Update. The Council did the right thing and approved the rezoning application on first reading. They did this despite (i) NAs' demand that 45% of the new units be reserved as affordable housing, and (ii) genuinely emotional (if misdirected) appeals from several of the current Stoneridge residents. Special kudos to McCracken who (diplomatically) chided the neighborhood activists for trying to impose onerous affordability set asides after supporting a 10% set aside in the VMU compromise.
