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Op-Ed: Reducing Occupancy Limits Hurts Affordability Without Solving Problems

The Austin City Council will discuss occupancy limits for so-called "stealth dorms" tomorrow. Opponents say laws limiting housing occupancy could affect affordable housing in Austin.

Tomorrow, the Austin City Council takes up an ordinance that would lower occupancy limits on single-family zoned property. If approved, the maximum number of unrelated adults allowed to live together would fall from six to four. 

Supporters of the change is needed to stop the spread of so-called "stealth dorms" – neighborhood homes built or remodeled to hold as many renters as possible. Opponents say the change will hurt Austin's declining stock of affordable housing. 

Julie Montgomery is a Program Coordinator & Research Associate, Center for Health and Social Policy (CHASP) at the LBJ School of Public Affairs at her alma mater UT Austin.

An occupancy limit reduction would make housing more expensive for all of us. It wouldn’t really solve the unfortunate quality of life problems experienced by some neighborhoods. And it is a costly distraction from the challenging work that policymakers, staff, and advocates need to do to address Austin’s housing shortage.

The Big Problem: Our Housing Shortage

Supporters of the occupancy limit reduction, most of whom hail from neighborhoods north of UT Austin, say that six "unrelated" adults is too many to live together in a single-family-zoned house or duplex. They argue that such homes built for six adults are essentially multi-family structures disguised as single-family dwellings, and they perceive these homes as messy, loud, and architecturally unpleasant.

As of the end of 2013, Austin's occupancy rate was an astonishing 96.9%, and our per-square-foot rental rate was at an all-time high. The owner-occupied market is also breaking records. So, not surprisingly, this part of town – like all neighborhoods near the core – has seen a fair share of demolitions as developers build new houses. Some of these have been rebuilt with a larger frame and rented out to six adults; some, even more through illegal means.

I lived in the Hancock and North Loop neighborhoods for over five years both while I was a student at UT and after. I empathize with concerns about how these neighborhoods are changing. But Austin is far more than a few neighborhoods around the university, and reducing maximum occupancy will only exacerbate our citywide housing shortage and worsen household affordability.

An Occupancy Limit Reduction Hurts Affordability

The City’s own housing department released an Affordability Impact Statement (AIS) saying that reducing the occupancy limit would have a negative impact on housing affordability citywide. The AIS noted two ways in which an occupancy limit reduction could negatively impact affordability: first, by limiting tenants’ ability to split the rent multiple ways, and second, by increasing the city’s occupancy rate, which is very strongly correlated to the cost of renting. This is basic supply and demand: since no reforms to expand housing supply are coupled with this reduction, renters will be competing for a smaller pool of rental housing, which drives up rental prices.

The housing department’s AIS also observed that the affordability impact of an occupancy limit reduction would likely fall hardest on vulnerable groups such as low-income residents. And since African Americans, Latinos, and immigrants are more likely to live in poverty, the AIS pointed out, a reduction may have a disparate (more burdensome) impact on these groups. LGBTQ couples and families whose relationships are denied recognition by the law may also be disproportionately burdened by an occupancy limit reduction on “unrelated” adults.

Homeowners, too, could feel the financial sting of a citywide occupancy limit reduction. The tighter the housing supply, the more valuable residential space becomes, so homeowners could see their property assessments and taxes rise.

Some supporters of the occupancy limit reduction claim the housing department’s analysis is inaccurate because the new larger structures being built have higher rents than the smaller homes they replace. This argument, however, assumes that those small bungalows would not be redeveloped if there were no incentive to replace them with “dorm-style housing,” in particular. That is simply not the case. Due to Austin’s rapid population growth, there are powerful market pressures pushing the redevelopment of smaller, older homes in the urban core. Until we make even a dent in the pent-up demand for more housing, developers will choose to build the biggest, nicest homes they can within zoning regulations, whether that’s a large duplex with three bedrooms on each side or a single massive house that very few of us (but someone) could afford. It took us years of neglecting our housing supply to get into this dire situation, and it will likely take years of rapid building to get us out of it.

Smarter Solutions Help Everyone 

An occupancy limit reduction wouldn’t provide any immediate relief to neighborhoods’ quality of life concerns, either. If the reduction passed, existing six-adult homes likely would be grandfathered. If the reduction passed, those homes that were already illegally rented out to more than six unrelated adults likely would continue to be so. Common nuisances, such as noise, excess trash, and illegal parking, would not vanish from problem properties. But we do have existing laws to address these nuisance issues, and we do have an existing six-person occupancy limit. Therefore, we should prioritize a stronger, interdepartmental approach to enforcing laws currently on the books.

Most of our energies, however, must be focused on long-term alleviation of the citywide undersupply of housing. The City's land development code (LDC) rewrite, aka CodeNEXT, could facilitate greater density and additional housing stock in our urban core. Central neighborhoods concerned about single-family-zoned lots serving unrelated adults could support and accelerate this process by advocating for the up-zoning of lots in their areas to multi-family. In addition, the University of Texas at Austin should follow through on its plans to build several new dormitories and expand some existing dorms to provide 2500 additional on-campus beds for students. Only by increasing the housing supply in the central city can we broadly improve household affordability.

An occupancy limit reduction is the policy equivalent of using an index finger to plug up one leak in a shattering dam of housing demand: it won’t work, it prevents us from tackling the larger problem, and those right in the middle of the struggle get squeezed the most. Reducing the occupancy limit would make Austin less affordable for all and most heavily burden our neighbors of color, our artists and musicians, our waitresses and cashiers, our construction workers, and, yes, our students. I believe we're better than that. Let's tell City Council that's not the future we choose for Austin.

Julie Montgomery is a leader of AURA, a grassroots organization of Austinites that advocates for sustainability, affordability, equity, and quality of life through transparent, data-driven governance. You can find her on Twitter @JuliaMontgomery