Priced Out

So many people are moving to Austin, you’d think the city was giving away a Dell computer and Austin City Limits tickets to every new arrival. People move here for the jobs in technology, or at the University of Texas, or in state government (the pink-granite Capitol is even bigger than its architectural cousin in Washington, D.C.). They may be tired of getting dressed up to go out to eat; in Austin, people eat filet mignon in flip-flops. Would-be Austinites are often music fans, who know the city has venues for just about any live music you want, any night of the week.

All this demand to live in Austin has started to outpace the city’s supply of land and homes, particularly the affordable kind. Since 1999, home prices have jumped from an average of $170,000 to nearly $240,000, a 40 percent increase. That jump—and, perhaps, a longing for some version of small-town living near a big city—has driven people to Kyle, 23 miles south of Austin. In 2000, when the tech bubble burst in Austin, there were around 5,000 people in Kyle, according to the US Census; by 2005, the town had more than tripled in size, to nearly 18,000 (23,000, by Kyle’s most recent estimates).

Kyle isn’t drawing new residents with tourist attractions. They are few, though author Katherine Anne Porter’s childhood home is now a museum, and there’s a 60-foot-tall red, white, and blue water tower that shoots up from the ground like a rocket (but doesn’t actually contain any water). Kyle’s largest employers—a woodworking company and a steel mill—employ fewer than 100 workers each. Kyle residents commute, mostly to Austin.

Those commuters want homes they can afford, with porches, lawns, and picket fences. Shane Bordeau, a technology consultant and sales executive with Austin-based NetQoS, Inc., moved from Austin to Kyle in 2000. He had lived and worked in Austin since college, but his wife convinced him they could live more comfortably in “the country.” After all, they bought a 2,100-square-foot house in Kyle with three bedrooms and a huge game room for around $117,000. In Austin, a condo of similar size would sell for $385,000, although, according to Adam Sadovsky in an Austin branch of Keller Williams Realty, it could sell for as high as $795,000.

“There was nobody out here,” Bordeau remembers, a bit wistfully. “We had one of the first houses in our neighborhood. There were hardly any roads, and we had a 22-acre field at the end of our block, with no one around us.”

But for the past several years, companies like KB Home and Choice Homes have been falling all over themselves to build houses for first-time buyers in Kyle. And the Kyle city council has cheered them on. Since 2001, the council has issued at least 1,000 building permits a year for single-family homes.

“Kyle was the same size for 100 years, and all of a sudden, for whatever reason, we finally had some interest in building houses,” says Kyle city manager Tom Mattis. “Affordability and a less obstructionist government are the qualities Kyle brought to the table. We got targeted by developers and it went crazy.”

The city may not have understood exactly what it was getting into. Mattis says the council approved thousands of lots for homes without being sure it could provide them with utility services. Traffic getting on and off Interstate 35 began to snarl. In 2002, the council instituted a moratorium on new housing for a year and a half to catch up with the backlog of approved lots.

Outside of the logistical problems, Kyle officials realized they were surrounded by clone starter houses. Some council members wanted a more diverse housing stock, so that Kyle would also attract people who wanted larger homes. “We’re glad folks are coming out and saying, I can’t afford a house in Austin, I can afford one here,” Mattis says. “But the consensus was after we build about 12,000 of those [starter] homes, that should be enough; as we look out in the future, we should provide diversified housing stock. So let’s raise the bar a little bit to make sure we have healthy mix of housing products in the end.”

That “raising of the bar” came in the form of two lengthy ordinances the city council passed in November 2003: a subdivision ordinance and a zoning ordinance. The ordinances increase a house’s minimum size (from 1,000 to 1,200 square feet) and lot size (up twenty percent), add masonry requirements to a house’s exterior (brick, stone, etc.), and set a minimum garage size (480 square feet).

Those new requirements, according to Harry Savio, executive vice president of the Home Builders Association of Greater Austin (HBA), mean that an entry-level home in Kyle costs $138,500, as opposed to $100,000 pre-ordinance. That might seem like good news for homebuilders. But the Home Builders Association saw the new ordinances as discriminatory—and, coincidentally or not, bad for business. 

Here’s Savio’s argument. To qualify for an entry-level home costing $138,500, a family would need a minimum annual income of more than $44,000 (based on assumptions about taxes, mortgage rates, and insurance costs). Most whites in Kyle can afford that, based on the median annual income for whites ($54,056) in Hays County, where Kyle sits. But $44,000 is higher than the median annual income of both Hispanic and African American households in the area ($38,856 and $35,451, respectively). By the city’s estimates, Kyle is currently more than 50 percent Hispanic (including residents who are part-Hispanic) and about 8 percent African American; according to 2005 census figures, Texas is only 35 percent Hispanic and 12 percent African American.

Savio isn’t happy that such a large segment of Kyle’s population (Hispanics and African Americans) is now, allegedly, priced out of the city’s housing market. In 2005, the HBA, the National Association of Homebuilders, and the National Association for the Advancement of Colored People sued the city of Kyle under the 1968 federal Fair Housing Act, claiming the ordinances discriminate against Hispanics and African Americans by making it harder, or impossible, for them to buy a home there. Savio freely admits his motives are mainly economic: he can no longer make a starter home available to a large group of potential buyers. But he also sees that the new ordinances raise social justice issues, and he isn’t persuaded by Kyle city council members who say the ordinances aren’t intentionally discriminatory. “If you discriminate as a result of your policies, whether you intended to discriminate against a class or a group of people or not, that still violates the Fair Housing Act,” Savio says. The lawsuit isn’t seeking damages; the HBA just wants the Kyle city council to get rid of the 2003 ordinance.

The city of Kyle filed a motion to dismiss the suit, arguing, among other things, that the HBA is worried about a hypothetical problem, not a real one. After all, the city has remained over 50 percent Hispanic in the years since the ordinance passed. People keep moving to Kyle, and builders keep building. “If we had a problem here in Kyle, if there was a lot of discrimination in some way, I think people or builders would quit coming,” said council member Linda Tenorio. “But when you issue over 1,200 [housing] permits in a year, that’s a lot.”

On top of that, says Mattis, the ordinance doesn’t actually forbid a developer from building a starter home in Kyle. A single home must meet new size requirements, but developers building multiple homes can make at least some of them as small as they were pre-ordinance—as long as they take additional measures like clustering the homes, adding green space and landscaping, and water conservation measures. “[We] did raise standards,” Mattis says. “But we actually lessened requirements in other categories to achieve an appropriate mix.”

Last summer, a federal judge in Austin gave the HBA a preliminary victory by rejecting the city of Kyle’s motion to dismiss the case. Kyle’s attorneys worry that a victory for the HBA would mean that virtually any ordinance in any city that increases the cost of housing could be invalidated by the Fair Housing Act.

Nearby cities are also concerned about the outcome of the case. The cities of Pflugerville, Round Rock, Jonestown, and Manor argued in federal court in January that they be allowed to enter the suit. The case is expected to go to trial in February 2008.
In the meantime, Austin is trying hard to keep housing stocks “affordable.” The city’s median home price is one of the highest in the state, and last November, voters approved the city’s first-ever affordable housing bond. Housing groups said more than 50,000 Austin households were paying more for housing than they could afford, and the bond was one way to avert a housing crisis.

Back in Kyle, homeowner Shane Bordeau has been battling a housing crisis of his own. He and his wife wanted to move to a larger house in Kyle to accommodate their growing family. But selling the old house was no cake walk. “There were so many brand new houses on the market that we couldn’t sell our house at all,” Bordeau remembers. In late 2006, the couple managed to sell their home, after it had been on the market twice in three years. Even though his daily commute into Austin is 45 minutes each way, Bordeau says he was never tempted to move back to the city. The “country” life in Kyle, he says, suits him—and others who can afford it—just fine.