ABSTRACT: This post is suggested for those who 1) are exploring options to make their current home/lot more affordable by dividing it up for someone else to own or rent. 2) those who are looking to rent or buy in city limits but are unable due to current market rates but might have friends that have a larger lot and would be willing to work with you to share land/costs, etc and/or 3) friends/family/acquaintances that are willing to go into a lot/home together and coop or condo as a way to reduce and share all associated costs, including taxes into the future. The proposed path doesn’t come without some burden and work, but when was the last time convenience offered you a bargain?
For as large as Texas is—and for the libertarians they claim themselves to be—there sure are a lot of restrictions on what you have to do AND can’t do on private residential land.
All one has to do is look into the complexities of trying to own an Airstream or rent a room here in Austin to quickly recognize the unbelievable layers of code and permitting that are required for any type of activity that involves a person finding a safe and comfortable place to sleep, either for a short period or permanency. Perhaps the most astounding set of restrictions that the City of Austin touts are the zoning and building permit barriers that ban the construction and/or operation of granny flats, accessory dwelling units and/or backyard tiny homes.
For residents facing an abhorrent housing affordability crisis— the City of Austin’s mere adoption of code to incentivize density within Austin neighborhoods could not only begin to stabilize housing here for both renters and owners, but increase the number of people within the city core and get this suburban format town on the track to being a city. See the embedded 2010 census image.
While Austin may be the fastest growing city in the country right now, little to no residential growth/densification is happening in the urban core outside of downtown high-rise luxury towers. There is an enormous gap of middle housing – which is a huge driver for the affordability crisis Austin is now facing.
Rather than belabor, I want to share a personal story that presents a perspective of resolve to Austin’s track record for reserving large urban lots for one’s personal kingdom.
In 2012, I sold a home I could no longer afford in the Zilker neighborhood — where my property taxes alone had escalated to over $650 a month. I attempted to offset such expenses by converting a garage to a small sleeping studio and renting it out – but a neighbor tattled on me to a City Council member who escalated the issue (Thanks Laura Morrison!). That event set in motion a very exhausting and educational period of how ‘anti’ homeowners and the City of Austin are to neighborhood densification (This was before/during the refinement of code that now clearly Accessory Dwelling Units, ADU’s).
With this experience behind me and knowing that property taxes in Texas are based primarily off the amount of land you own – I was on a mission to find the smallest lot I could find within Austin. I did just that. After some property hunting with my agent Blake Shanley and I successfully went under contract for an empty 2,100 sqft lot in the Chestnut neighborhood in East Austin for 45K. I was pumped. Plenty of room for a small 400 to 500 sqft home with a loft, a vegetable garden and enough left over for a small patio. Dreamy right!? Nope. Not allowed. Austin not only has code against having secondary homes/dwellings on large lots under 7,000 sqft, but laws against having tiny homes on their own tiny lots. While this was a legally taxable residential lot, it was zoned substandard due to being under 2500 sqft and therefore considered unbuildable. Even with the emerging small-lot amnesty that this neighborhood endorsed, a home was not allowed unless I was granted an approved variance from the Austin Board of Adjustment. Getting in front of this group was a three month wait – which I accommodated. However, upon preliminary review – I was told that this lot has a chance in hell for being legally built on. I gave up. (Update: Three years later, during a drive by, I saw that a 1300 sqft. home had been erected by a developer and sold for $353,000 dollars. So progress and leniency is making its way slowly into the housing market.)
Now the good news – a property discovery and process that led to the best living situation I’ve ever had.
It is now summer 2012. I’ve all but given up on the chance that I’ll ever be able to afford a home in Austin proper. With a remaining thread of hope, I take to perusing craigslist by chance that some For Sale by Owner (FSBO) might be in the spirit of selling some simple and reasonable home to another reasonable person. To my shock, at the top of my craigslist search appeared a small dilapidated 480 sqft cottage FSBO—a place I now call home.
There is much more to this story and the home, however. It is the legalities of how this property/home were formed that make it special—a loophole for those homeowners that are ready to take on the critical role of bringing affordability back to Austin by densifying their lot(s).
When I inquired about the cottage, the realtors that owned the property told me that the 480 sqft cottage shared a lot with another smaller home. Their reason for posting the small cottage on craigslist was to gauge interest in such a small home that was in poor shape. As crafty fool, I was completely up for the remodel challenge but before dust could be made, we had two tasks at hand. 1) the property had to be divided, filed with the secretary of state as a condo and bylaws had to be drafted and approved. 2) then I had to buy it. (For 120k!)
The owners of the property and I worked with Julie Alexander Law, to move thru what was a rather seamless and simple process. After what took roughly two to three weeks, the documents were drafted, the condo was filed, and we were set to close. A couple months later the adjacent cottage, my soon-to-be-condo-neighbor, sold without a hitch.
Today, my neighbor and I share a corner lot in North Loop. We both have our own detached cottages, our own utility lines, our own private entrances, etc. Our bylaws are simple – that there are NO extra rules above and beyond following city code. There are no approval processes, no color schemes or themes. There is no HOA fee – nothing! The only thing we have agreed to share is liability insurance for the condo association – which is a marginal cost. We also share gardening tips. If we ever want to change anything, each unit gets one vote. So nothing can change unless both agree. We each have 50% ownership of the lot so if expansion of our homes is ever in the picture, we each are allowed up to 50% of the maximum impervious coverage allotment permitted by the city. The best part – because land values are the majority of property taxation here in Austin (currently 2.38%), we split that cost 50/50 plus whatever each our home valuations come in. So instead of my property taxes coming in around 5k – 7K a year like neighboring single family house lots in North Loop, ours are half that. Yep – my taxes are around $2,700 a year and I get the exact situation that anyone around me gets except a smaller yard that I requires far less maintenance.
Anyone passing by would have no clue there is a lot share going on because the lots in Austin are so huge and deserving of such divisions.
If you currently own a home/lot and feeling financial pressure, either from taxes, cost of living increase, had a child and/or a job change – then you should look into the condo option as way to divide your property and sell a portion – as well as benefit from a reduction of ongoing property taxes. If you do this, you have the luxury of drafting up the documents however you wish. You don’t have to surrender 50% of your lot, it could be whatever size and portion you are willing to give up. You get a reduction in costs, some extra cash and the folks who share the property with you become invested community members at a fraction of cost to own in the urban core.
If you are looking for a home but finding the prices too high, consider searching for a property that would qualify for a duel condo setup and find someone to go in with you on the purchase. Again, you have the luxury of drafting the condo association bylaws however you please.
Imagine if more and more qualifying lots all over Austin, those over 7,000 sqft or granted a variance, did such a thing. The density and affordability Austin needs to become a dynamic city full of people of all income levels can start to really happen.
If you have any questions about this process, feel free to message us through the contact section of the Supply & Labor website. Happy to be transparent and share anything we can about this experience. I may even post a draft of the bylaws as followup.
If you have additional insight or lessons learned please add to the conversation through the comments below.
If you are a naysayer to density within the urban core of Austin, I’d ask you to refrain from taking this conversation to a dark place. This post is for people who are looking to for resolve and have a commitment to the character, affordability and quality of life in Austin. This is not about preserving your way of life, but allowing people of all styles and livelihoods a chance to invest and thrive in this fine City.
Best of luck in sharing!
Here are some resources suggestions:
Aura on Facebook. An amazing group that has gathered to help shape Austin a place with improved public transit, a better connected grid, affordable housing, etc. They post great articles and very focused on the granny flat movement in Austin. Click here for the AURA Facebook page. Or review this grassroots motion to Austin City Council to legalize granny flats.
AtxUrbanists on Facebook. Another group advocating for granny flats and accessory dwelling units in Austin. Click here for the AtxUrbanists Facebook page.