Last week, Austin took a significant step towards addressing housing challenges with the passage of the "Home Options for Middle-Income Empowerment” (HOME) Initiative. This groundbreaking initiative aims to empower the middle-income demographic, by reducing barriers to building and thus increasing the housing stock within the city limits. However, the heated discussion at town hall which lasted until after 10 p.m. also included a significant amount of commentary about short term rentals and the impacts of the HOME initiative on airbnbs within Austin.
Understanding the HOME Initiative
The HOME Initiative is a series of code amendments to Austin’s Building Code. Three main changes were approved last week that will have significant impacts on the local housing market.
increasing the number of units that can be built on a single family lot to 3 units
allowing tiny homes on single family lots
eliminating restrictions regarding the number of unrelated adults that can live in one home
It should be noted that not everyone was in favor of these changes. After hearing commentary from a plethora of community members, the amendments ultimately passed with a 9-2 supermajority. If you want to hear the full recap, you can actually watch the entire meeting here. The amendments which take effect on December 18th will apply to any applications filed on or after February 5th, 2024. These amendments will have significant implications in the Austin real estate scene as they apply to all properties zoned SF-1, SF-2, and SF-3. Previously, you could only build a maximum of two units on one lot. When Austin previously amended the building code to allow for ADUs, i.e. two properties on one lot, we saw a massive influx in what are referred to as condo regimes. Developers would buy up single-family lots, usually demo the existing structure and build two new units. The units would then legally be defined as a condo regime so each unit could be sold independently. Now, there is an opportunity for investors to come in and create three homes on one lot. Additionally, ADUs were capped at a maximum of 1,100 square feet. With the passing of the HOME initiative, city staff recommended a simplified approach to the land development code which relies on floor to area ratio (FAR) standards that are based on lot size. This will potentially allow for not only more units on each lot, but the potential for larger square footage units on each lot too.
Short Term Rentals and the HOME Initiative
While STRS were not the main topic of discussion during the special called meeting of the Austin City Council, they certainly made an appearance. Various residents voiced concerns over the potential implications of removing the unrelated adults restrictions which could increase the proliferation of large guest count airbnbs within the city limits. Additionally some Austinites considered how increasing the maximum number of units to three per lot could increase the number of airbnbs within the city, thus taking available long-term rental units off the market which is not the intention of the HOME initiative. In order to understand how the HOME initiative relates to the STR regulation, you need a bit of historical background.
Austin STR Regulation of Lots with More than One Unit
The City of Austin’s STR regulation currently divides permits into three types. Type 1 permits are for those properties in which an owner has a homestead exemption on the property, ie. it’s their primary residence. Type 2 permits are for non-owner occupied properties and Type 3 permits are reserved for multi-family units. Up until August, the City was not issuing any new Type 2 permits. However, a federal suit forced Austin to begin issuing these permits again. But, the City has yet to determine and vote on a proper policy for regulating these that is not based on ownership type.
Within the regulations for the various Types of permits, there are different rules for handling multiple units on one lot. For Example Type 1 and Type 2 STR regulations state that not more than one partial unit at the property can be simultaneously rented for any period less than 30 consecutive days. To make matters more complicated, the City of Austin building code states that a secondary dwelling unit constructed after October 1st, 2015, may not be used as a short term rental for more than 30 days in a calendar year. Duplex properties can currently operate as two simultaneous full time airbnbs, but each side of the duplex must apply for and obtain a short term rental permit independently. Four-Plexes are usually zoned as multi-family and are thus subject to Type 3 STR regulations.
As you can see, the rules surrounding STR permitting for more than one unit on a lot are complex. During the Council Meeting last week, there was a motion to amend the part of the code that deals with duplex use so that this part of the building code now addresses duplex, two-unit, and three-unit residential uses. During this part of the meeting, council consulted with the City’s law department and they recommended removing STR limitations specific to two-unit residential uses. The aim of this is to be better equipped to develop a holistic approach to STR regulation in the future that will fit within the changes created by the HOME initiative. Rather than having a haphazard confusing set of rules for each type of property with more than one unit on it, they want a streamlined set of rules for all two and three unit residential lots.
After a deep dive into the full meeting, the sentiment among council seems to be that there shouldn’t be more than one airbnb operating at a time on any lot. In reference to the STR amendment passed through the HOME initiative, Trish Link with the City of Austin’s Law Department clarified, “if someone was to apply for a short-term rental license, whether they live there or not, if one of the units could be used as a short-term rental regularly, the other one could be used as a short term rental for 30 days out of a calendar year.” The HOME Initiative special meeting also brought attention to the challenges among code enforcement for policing these regulations and the greater issue with the federal lawsuit restricting Austin from regulating short term rental based on ownership type. It appears that STR regulation changes are a high priority for the council in 2024.
Austin's recent passage of the HOME Initiative is undeniably a transformative chapter in the city's housing narrative. As the dust settles, short term rental operators find themselves at the intersection of regulatory change. Staying abreast with the local politics will allow experienced STR investors and operators to continue to thrive within the ever changing landscape.
