Brigid Shea’s recent Statesman editorial implies that Austin’s affordability issues are substantially driven by municipal taxes and rates. The author bemoans that: “In the coming year, Austin residents will see an average $150 increase on their water and electric bills and an average $20 increase on their property taxes. This is before they’re asked to vote on a new health care proposition that will add another $100 annually.”
The piece goes on to offer three directions to make Austin more affordable:
1. An unspecified homestead exemption on property taxes for non-elderly and/or disabled
2. Ending the “100 percent reimbursement to extend large water and wastewater lines to new developments”
3. Reducing the practice of “giving away the store” (that’s as specific as the piece gets) for economic development projects
As I have previously outlined, the median Austinite’s major expenditures are housing (the mortgage or rent, not the property taxes), transportation costs (car and insurance payments) and federal taxes. And we have to think about more than costs: part of the reason for affordability concerns is the stagnation of wages.
Assuming government stays the same size, a homestead exemption would shift revenue generation towards property taxes from rentals and sales taxes – both of which are likely to be regressive and place modestly higher affordability pressure on non-wealthy renters. While a capped homestead exemption would be more progressive than a flat rate one, the regressive contour relative to rental housing would remain.
Similarly, while reducing the infrastructure reimbursement might hit developer profits and leave supply untouched, it is also possible that the capital behind new housing development will simply choose not to build the lower price supply. This might be successful anti-sprawl policy, but reducing housing supply will not help reduce the cost of purchasing a home or renting. Quite the opposite.
Finally, as I have already discussed, the subsidy/incentive policies of the City are not significant enough to impact Austin’s affordability in any substantial way. They are just too small as a part of the budget and the jobs landscape. The allocation of subsidies certainly should be made more just and efficient – and I personally lean towards a universally available credit that facilitates the local ‘economic gardening’ approach. But regardless of the changes, this area will not yield meaningful improvements to Austin affordability.
One interesting sub-plot to these three policies is that they would certainly be helpful to the affordability of existing homeowners; assuming they are all pure specimens of homo economicus, this group of Austinites has an interest in having their homes maintain high asset value but low tax and public fee costs for preserving that value. Hence a policy scheme that constrains new housing supply and shifts the burden of financing municipal government to rentals makes sense for this group. This might be a winning political coalition, but it is doubtful to prove an economically egalitarian approach.