Several University of Texas fraternities and sororities will ask the Planning Commission tonight to carve their properties out of the University Neighborhood Overlay. Staff has endorsed the requests. I'm surprised, because this is a bad idea.
The UNO, approved in 2004, dramatically increased allowable heights and densities in a chunk of West Campus. It has resulted in the wholesale reconstruction underway there now. Over the next few years, we will see thousands of new units of student housing in West Campus. That is a good thing.
The relaxation of height and density restrictions predictably has hiked up the value of properties within the UNO. This has resulted in a steeper tax bill for the fraternities and sororities within the zone. The property tax bill for Sigma Chi's house, for example, tripled to $60.000 between 2004 and 2007. The appraised value increased from $857,000 in 2002 to $2,284,000.
Tim Aynesworth, coordinator for a student housing preservation group, said nonprofit student housing organizations do not benefit from the overlay's zoning guidelines. In response to the zoning changes, Aynesworth said they want their properties to be excluded from the overlay and returned to the classification as a multi-family base zoning district.
"We need to find a way to return to our original zoning district," he said. "By doing so, we will actually reduce the development potential of the property and hope it will lower its valuation."
The fact is, though, that fraternities and sororities are competing against other students for very scarce land. Right now, they are consuming a lot of land for a relatively small number of students. For example, the Sigma Chi property has just 13,591 square feet of living space on a 39,000-square foot lot (0.9 acre), a floor-to-area ratio of just .34. The lot has a 75-foot height-limit under the UNO, and could hold well over 100 student apartments (maybe a lot more).
Who deserves it more? I don't know. I don't even know how to make this kind of moral judgment. That's why I prefer to let prices sort it out. The cost of holding a piece of property consists of the opportunity cost and the tax burden. Fraternities and sororities are functionally shielded from the opportunity cost by our non-profit tax laws. The only cost they face is the tax burden. If we cut their property tax burden, there will be no way to tell how much they really value the properties. Inevitably, we will see fraternities and sororities hold onto properties long after they would have been converted to mid- or high-rise student housing. I don't see any justification for such a policy -- unless someone wants to argue that fraternities and sororities produce significant benefits to society at large, not just to their memberships.