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Rich DePalma Digs Into Austin Affordable Housing and Code Next

Ryan Rodenbeck

Ryan started in Austin real estate as an investor in 2001. He looked at all investment opportunities — Austin foreclosures, condos, homes for sale...

Ryan started in Austin real estate as an investor in 2001. He looked at all investment opportunities — Austin foreclosures, condos, homes for sale...

Sep 25 31 minutes read

Show Notes: 

Rich DePalma Digs Into Austin Affordable Housing and Code Next


Transcript

RYAN: All right, guys, are you wondering who you should vote for in City Council race this coming election? We’re going to go over our candidate for District 8 in just a second. We’ve got our special guest, Rich DePalma, and we’re joined with my office manager, Sunny Tracey. They’ll join us in just a second as we go through what Rich has to offer to our city and City Council.

Welcome to Behind the Scenes with Spyglass Realty, with Ryan Rodenbeck and Matt Edwards.

All right, we are here with Sunny Tracey, my office manager, right-hand woman, and Rich DePalma. Sunny, one of your kids is in baseball?

SUNNY: No, my daughter was in class with Rich’s youngest son Nate a couple of times. They’re cute little friends. His wife is wonderful too, so he comes with a good set of people around him. He’s running for City Council in District 8, which is in southwest Austin, which is where I live too. When I heard he was running, I immediately thought this is somebody we need to get on the show.

RYAN: Yeah. City politics is one of the – well, it’s the only politics that I get involved in. Everything else is just kind of shut off. But I think that we’ve got a low voter turnout, and I think this election is a pretty big opportunity for Austin to really back some candidates. Correct me if I’m wrong, but the average voter age in Austin is over 60, right?

RICH: That’s a great question. I haven’t looked at it for the overall city. For our district, it’s actually younger because we do have so many single families. But it ranges – there’s a pretty big range where you have these, depending upon which neighborhoods, where you have these averages.

RYAN: I believe the last time I heard – I remember it was during the Uber/Lyft debate of a couple years ago – that the average voter age was over 60. Which is an issue because one of the issues that we talk about in Austin, which is a big deal, is affordability. Affordability in my opinion comes from lot density. One of the issues that we’re having is that when you have, especially in central Austin where the average voter age is over 60, the most vocal neighborhood activists are the ones that are voting. So I can understand why some city council have to – like, who is going to elect me? Who’s actually going to go vote for me? I think we have a real opportunity right now because we’ve got this phenomenon called Beto, right? He’s probably the biggest thing. Whether you like him or you do not, I think we’re going to have a better voter turnout in this election, and that would really help us push the candidates that are going to be helpful with responsible growth in Austin, right?

RICH: Right.

RYAN: Let’s talk about the latest issues that have occurred with Code Next. Walk us through that. Tell us what your understanding of it was. I’ve got an essence of it, but…

RICH: Sure. This is where we have an instance of a product being banked. I served on the AISD Facilities and Bond Planning Advisory Committee for our 2017 successful bond, which was a relief. During that point we were doing the Facilities Master Plan. When you’re doing the Facilities Master Plan, you’re coming through different drafts, and folks, understandably so, react to the draft. I’ve done it in the past as well when I see draft documents. I remember when 10-ONE first came up and they had the draft maps, I went to the meetings after that because I thought Oak Hill in southwest Austin was going to be negatively impacted. So we’ve had a lot of voices who were scared or nervous, who didn’t know, and then some leaders in the community – particularly in old Austin – who have raised concerns. Some valid, and some I’ve got to question. You’ve got to really question what the intent was. But at the same time, when you have folks on the other far extreme who have said, “we need to build on parks,” then that adds fuel to the fire of what the intent is. I think we had so much agenda rhetoric that it really did kill our process, and we didn’t see what that final product would’ve looked like. And who knows? We all may have been, once we saw the final product from the City Council, we may have said “yeah, they fixed all the issues” – or it would’ve been “we’ve got to go to Draft 4.” I always call for Draft 4 just because the first draft should never have been released. This was an ‘F’ on anybody’s standard. Draft 2 had some really great components. You had the transect zones, and people had some concerns with it. But then they went in a totally different direction in Draft 3. So people were giving feedback on Draft 3, not knowing how it was going to be realized. I think that’s where the fear was. But there’s a lot of great information. That $8.5 million is not all gone for anything. The council has directed City Manager Cronk to come back in February with the process on how we move forward. The green water infrastructure, what they call beneficial use, was phenomenal. This is how using your berms and swales and stormwater collection systems actually helps unify the city. And it also helps mitigate the stormwater impact that you have. Those are some of the things that you have in there. But then we’re going to have to address what you had talked about on the density side. If we’re going to move forward with Imagine Austin, which is transit corridors, you have the density and you have your neighborhood centers, then we’re going to have to make that move forward. The question is going to be, how can we marry the existing neighborhood plans? Because that’s a huge concern. Not so much in southwest Austin; I think the southwest Austin neighborhood plans are pretty much in line with the vision. Unfortunately some of our ordinances aren’t in line with the vision. But there’s going to be some sort of discussions relating to that. When I sat on the AISD Facilities and Bond Planning Advisory Committee, when you want to have that sort of academic programming, you have to have enough butts in seats supporting that academic programming to make it work out. Same thing with transit. If you want to have that public transit and have those great transit options, you have to have enough butts in seats on that bus or light rail in order to make it work out. The more you get those butts in seats, it’s not – nobody’s trying to figure it out. You can see it in metropolitan cities across the United States, and it is dense transit corridors in a way that gives you enough bodies there. So folks can go ahead and come over to –

RYAN: So we can’t have enough butts in seats because we don’t have enough people living in the central core, because there’s not enough room for them and because they cannot afford it, right? Speaking of affording, I’ve got to tell you, if you’re watching this on Facebook and you want to subscribe to future broadcasts, type the word “agent” in the comments section. Give us a like, share it if you feel like it. If you’re watching on YouTube, feel free to subscribe. Also, last week we did a broadcast showing how to buy, renovate, and cash flow duplexes. Kelly’s going to put a link to austinduplexagent.com, where you can get our eBook on that. I just thought of that with lot density because I think – you and I were talking about this before, but without any variance, if you’re building on a residential lot, you can build two to three to four at the most, right? In that scope, you have your impervious cover, again, without any variances. It’s something like 750 to 800 square feet is the smallest unit you can build without special circumstances or variances. That was okay in the ’70s, ’80s, possibly the ’90s, but we’re seeing stuff right now where – just yesterday, Threadgill’s is closing. That’s only part of it, but another restaurant closed a few weeks ago because they couldn’t get enough people to work there. This problem is just going to balloon from there, because we need to have blue collar, working class citizens be able to live in central Austin.

RICH: The challenge – and this is a challenge for everybody who’s watching. I want you to go talk to your clerk who is at the grocery store, the person who’s cutting your hair, whoever’s rendering you some sort of service, and I want you to ask them, “Where do you live?” It’s a regular exercise for me, and the results are 90% of the time they’re coming from elsewhere – as far as, in my case, New Braunfels. Then we say, “wow, we have a transportation issue.” Well, no kidding. When we’re placing people outside of the city, of course we’re going to have a transportation issue.

RYAN: These two issues are directly linked, transportation and affordability. It all revolves around lot density. It’s kind of the thing with Code Next, but if I’m a block away from Lamar or a block away from Burnet or any one of these central corridors, I should be able to build on a 0.20, even 0.15 acre, 8-plex there. People in Chicago and New York are living in 500 square feet fairly comfortably.

RICH: Yeah. When we’re looking at – we have to build up the transporters, there’s no doubt about it. When we do so though, we also have to be mindful of the stormwater reclamation systems, which we got underneath this last version of Code Next. The more impervious cover that you take up, of course you’re going to have flooding issues too. But this is how we marry the two together. Then we have to have the conversation relating to what the parking requirement is, because now if you’re in a real transit corridor, and if you’re going – there have been corridors expanding out, and if you are a millennial and you’re outside of that, or even if you’re a retiree and you want to go ahead and have that downtown lifestyle, it is a burden to actually own a car these days. Similar to those – I lived in San Francisco in my 20s, and that was the worst thing in the world to own a car. You didn’t need to do it. Right now we’re seeing a lot of folks who are taking – you can go right now and you’ll see people going in and leaving work on electric scooters. So we’re really seeing how transportation availability is changing.

RYAN: Innovations, yeah.

RICH: Innovation is really changing how that commuting pattern is and what the need for that parking requirement is. There’s nothing more frustrating than when you’re going to a building – at least for me, because you can think of that sort of housing, and you just see empty spaces. At the same time, we still have to be careful and making sure that there are certain areas and certain circumstances that hopefully the market will drive, that “yeah, we’re going to make sure you have that number of parking spaces.” But we have to figure out what that policy looks like in case the market fails to drive. What’s that consideration look like? But we have a lot of opportunity. I want to talk to you specifically on density in southwest Austin, and what does that mean? Because it scares some people. It’s interesting, because they think what’s going to happen – like in my neighborhood, they think they’re going to tear down a single family home and build a four-story multifamily apartment housing. That’s not the case.

RYAN: It never was the case.

RICH: It was never the case. Now, if you’re in an older neighborhood, maybe they are going to put a duplex in, or maybe it’s a quadplex. But it’s going to be context specific. It’s interesting – I’ve driven through west Austin, and there’s one group – it’s a quadplex. They’re all separate, though. Maybe they’re individual townhomes. But this was created on a spot that had to be a normal single family home at one point, and they’re smaller units. And then they have an anti-Code Next sign out. I thought, you’re what they were trying to do, to some extent. And even to me, I was like, wow, that’s too many units on that property. This is where we’re trying to have – in southwest, the two challenges that I’m seeing that we’re facing is our seniors – I want people to really take this away, because if you’re not knocking on doors, you don’t see the amount of folks who are isolated, who are living in a larger single family home because they have nowhere else to go. Their support network is there or their doctors are there. It’s the only neighborhood that they’ve been in for 30 years. That’s the problem. One close friend of mine, a couple, they’ve lived in southwest Austin for probably about 35 years, been married over 50 years. Because there’s no senior housing available, the openings, her husband is over off of Manchaca. So she’s the dutiful wife going two to three times a day to visit him. In the meantime, she has her single family home that she’s having to take care of. There should be that option within everybody’s communities.

SUNNY: I just sold a home off in 3-7 – or 3-6, actually, to a guy whose wife had just passed, so he was moving on to senior living. Lived in Oak Hill for 35 years, and to get a place nice enough that fit his needs and his wants, it’s way up over off north of 183. I was like, “Why are you moving so far?” He’s like, “There’s nothing around here.”

RICH: We are failing our seniors across the city. When you look at the amount of SF-1 housing that we have in southwest Austin, and that’s what gets permitted, we are absolutely failing our community in a big way. I already feel bad enough that we don’t have a senior center in southwest Austin. It just adds to that isolation. On the flip side, we have so many young families, and 53% of marriages nationally end in divorce. There have been more moms in my living room – I get choked up on this – two to four kids, and they’re talking to my wife, and “What are we going to do?” Not only are they going to have to move – in some cases they don’t, but in most cases they do. They have to move, and now that mom’s support network is there in the area. So now she’s moved out of the support network and we’re worried about – we talk about these systemic solutions like transportation; education is the other thing. Now putting these kids – and I came from – my parents had divorced, and it’s a trying time for like that year and a half. Now we’re putting them in a new school with new friends because we don’t have the available affordable housing.

RYAN: You’re exactly right. I think what this comes back down to is what we lack in Austin is a City Council, largely, that is acceptable to reasonable change in our zoning, in our regulations. I think it’s a problem. That brings us to another topic that I’m pretty passionate about, which is short-term rentals. A few years ago, we had short-term rentals and the city of Austin put out regulations which I thought were fantastic in the sense –

RICH: This is Council Member Riley’s elective?

RYAN: I’m talking pre-moratorium.

RICH: Yeah, I think this is what Council Member Riley at the time – who happens to be one of my supporters – but yeah, I think he put it out there. It sets goals for neighborhoods.

RYAN: I think it’s 5% per zip code. Look, I get behind the argument that you don’t want your entire zip code full of short-term housing and basically hotels everywhere. But when you’re telling me that – I’ve got one of the last permits on one of my duplexes on Burleson, and I turned it into short-term rental. We have not had any problems, and I mean none. I’ve had shitty tenants in one of those duplexes that were just partying – long-term tenants – that were just partying all night, leaving their trash on the ground, they’d park in the street. I’ve had it all. If I have a crappy tenant on that Burleson one, that short-term rental, it’s for one to three nights. And then if I want to flag them as a bad tenant, then no one’s going to rent to them again. I think it’s really irresponsible of our city to have completely washed that away. I also believe that this is a good option for people. One of my neighbors is recently divorced; he’s wanting to move somewhere closer, but smaller. Does not want to sell his house right now. Why shouldn’t he be able to rent that out if there’s no other – this is a direct neighbor. I don’t even care. I just know that he’s going to be responsible with it. I think at the time when all this moratorium went down, there were a couple of bad actors. They identified three or four houses that were just really irresponsible for renting to – so what is your stance on that?

RICH: I would have to look at the data. I remember when that was all happening in front of the council. I have not looked as far as what the data says, and I’m very data-driven. If the data says yes, we had specific areas during specific times of the year, that’s something we need to address. We don’t let bad policy stay for bad policy, and this is regardless of whatever it is. The fact that you’ve done it – like, “okay, next” – you have to go back and review to see what the effect is in any city policy. I had a great conversation with APD – actually, the Police Officers Association – on one of their policies that they were talking about. It’s the exact same thing. So we have to go back and revisit to see, has it met the intent? And then just modify. It’s okay to modify. That’s something I would have to look actually at the data set. I do know there’s some concerns that have been expressed to me – again, a lot of my school service, the more short-term rentals you have in a concentration of a neighborhood particularly surrounding a neighborhood school, it drops enrollment, and that’s bad for the school. So you have to marry that policy with those concerns and see where it’s at.

RYAN: There’s reasonable –

RICH: And it could be even something where you’re talking about corridors, right?

RYAN: Yeah, exactly.

RICH: Maybe all of a sudden you have these transit corridors and it’s open for STR altogether. The other component, though, that has to be brought in if we look at the data set part of the conversation – affordability, we’ve all talked about as a major issue. When you take housing stock out for STR, then you’re reducing your overall housing stock and potentially driving up the market a little bit. But I’d have to see the data to see, is it a percentage that would actually move the needle or not?

RYAN: Another failed policy – did you want to address something?

SUNNY: I was going to say too, I’d be interested to see the data on then compared to now, only because it seems like the market has gotten so much better at regulating that system itself. If you’ve worked with Airbnb and HomeAway, they’ve come a long way in 5 years.

RICH: They have, yeah. I agree.

SUNNY: I think that it’s probably eliminated some of the problems in itself, so it might start to be a self-regulated situation to where it doesn’t need as much.

RICH: Another thing that would be helpful – whether a policymaker or not, if it was me or somebody else or the rest of the council coming forward and maybe working with ABOR to look at what the – always keeping in front of the national trends or national policies. What’s showing? Do you think we can keep from having to spend money to do our own analysis and use the existing data set, plugging into the model and seeing how this is a framework, going into whatever that city is and seeing what’s working, what’s not, with the particular ordinance that you’ve done? That helps to drive a quicker decision.

RYAN: When this was going on, I had discussions with some people at Airbnb.

RICH: Have you met Curtis?

RYAN: If you remove all the short-term rentals on investor-owned properties, what you’re creating when this is all done is you’re going to have to hire 50,000 code enforcement people because you’re never going to be able to regulate it.

RICH: That is a major concern on a lot of different things any time we create that additional regulation. I think there is a place for regulations.

RYAN: Sure, me too.

RICH: Health and safety, absolutely. But we always have to evaluate, one, do we have the ability to regulate? Or is there going to be – like what we get from the state pretty often, an unfunded mandate. And then what’s the actual cost and what’s the implementation? This is something that is very real in the city of Austin – particularly what code compliance has on their plate or could potentially have on their plate.

RYAN: Something else I wanted to ask you about just came up in a board meeting for ABOR. We were talking about – not a board meeting, outside the board meeting. But like the ECAD, which is our energy audit. There are certain regulations or policies that are put forth that when I first look at them, I’m like “this doesn’t really make sense.” Then I go back and I’m like “okay, that makes a little sense.” What I mean by that, for instance, the bag ban. When that first came out, I was like, do we really need to do that? But looking back, is it that hard to just not sell plastic bags? It’s not that bad. The energy audit, looking back however long that’s been, 5 years, it’s a failed project in my opinion.

RICH: I’ve heard this.

RYAN: It’s one thing if it actually led to something, but it doesn’t. It’s a piece of trash. Sellers are –

SUNNY: Required.

RYAN: They’re required to do it. It’s a tax on the poor, by the way, because the seller is required to spend anywhere from $150 to $300. What do they call that? A transfer tax, I think. It’s not really a tax, but it’s one of these things that in effect, it is. I don’t know if that’s anything that’ll come up, but I just think that’s one of the things that, if you’re elected to office, you should look at it like, is the juice worth the squeeze?

RICH: That is a great point. I’m a huge environmentalist. I’ve said before, pragmatic environmentalist. I love energy efficiency and what we get, and there is that balance. There absolutely is the balance on what we do because of the impact of affordability, but then also how it’s executed and making sure that it’s done in a way that meets the intent. It goes back to the earlier conversation. We want to be able to look at policies. The good news is, we do have an auditor’s office. Corrie Stokes is our city auditor, and she does a fantastic job doing audits. You just have to be instructed to do them by the council. So this would be one area to look at. Here’s the intent, and go back to the council resolution and go back to the discussion. I think this might’ve been Mayor Leffingwell’s –

RYAN: Initiative, yeah, absolutely.

RICH: I don’t remember if it was while he was city councilman or mayor. But he’s very pragmatic as well. So you’re trying to get to that and figure out what that process is.

RYAN: What I heard about that was that the poor realtors – this was before I was really involved with the board – really got into this. At first that initiative was being pushed by like Fox Service Company and ABC because the first draft of it was going to not only require the energy audit, but require the seller to conform –

SUNNY: Retro.

RYAN: Yeah, retroactively conform. That’s not fair. Especially to people that are in tough areas of their life that have to sell, the last thing you want to do is pull out $5,000, $6,000, $10,000 for ducts. And here’s the other thing about it. You’re giving an opportunity for due diligence. Due diligence is largely on the buyer. If people care about that, if a buyer cares about that, they should be able to have that opportunity to do that without the seller having to pay for that. Again, it all comes back to, in my opinion, what has this done for our city? It’s done nothing.

SUNNY: Spent energy auditors’ money.

RYAN: Yeah. I’ll be honest with you, with the bag ban, that’s one of those things that’s like, gosh, why were we bitching about that?

RICH: Why is the legislature taking that up? I like the bag ban.

RYAN: I do too, now.

RICH: Having co-founded Friends of Dick Nichols Park back in 2007 and all the park cleanups and working with Keep Austin Beautiful on various cleanups – I love it. You can see the results. I pick up very few plastic bags. This would be, again, data-driven, looking at the analysis. What you have said, I’ve heard it before, so you’re not alone. You’re not crazy on what you’re feeling about it. I’ve heard it from sellers and I’ve heard it from the real estate community. It’s definitely something that warrants taking a look at to see if there’s a better way that we can still get what the intent was, but doing it in a more effective way that’s not regressive on the impact to folks, like you said, who were selling at a time –

RYAN: Distress.

SUNNY: Distress, absolutely.

RICH: There’s a whole range of reasons why people sell. Sometimes it’s moving to the bigger house or other location or job transfer, but in other times it’s death and it’s divorce and there’s some really…

RYAN: Job loss, any number of things.

SUNNY: Yeah. One more quick thing to discuss. We’ve got to wrap up here soon. The new bond that’s going to be on the ticket at the same time that you’re running, I got to hear a little bit about it the other morning. Give me just a quick two-minute, how do you feel about it?

RYAN: Tell us what it is first.

SUNNYIt’s a $925 million bond. It covers all sorts of things, from affordable housing to updates to the libraries, museums, parks, flood mitigation, health services, public safety, transportation, infrastructure. The task force was the panel that I heard speak, and they mentioned that it was largely a maintenance bond, if you will. It helped to improve things that were already there. it doesn’t have a lot of new things.

RICH: There’s some new.

SUNNY: Some new, but I guess the majority of it is kind of fixing things we have.

RICH: On bonds, what people need to remember, or know, if they don’t know this, is it is like your loan that you’re doing to repair your house. If you’re a homeowner and the city of Austin is the home and we’ve got to make some major repairs, you’re going to take out and you’re going to refinance in order to do that. It’s that line of credit that we’re going to use in order to get the work, because it’s capital projects. That’s what’s required. People will say, “Why aren’t we paying this from our taxes?” Our taxes only cover a certain amount, and it’s mostly maintenance and operations and programming within the city of Austin, and staff.

SUNNY: Right. I think they’re saying that it will increase city property taxes by 2 cents per $100, so if you have a $400,000 house, you can see $7 extra a month in your property tax bill.

RICH: We’re all impacted by these small – we’ve got to be really careful, as I said, on these incremental – every year, you always have a little increase, a little increase. I can tell you that I think people need to vote and look at it and understand – this is something I realized on the school bond – if you don’t fix it, there’s not a magical fairy that comes around and sprinkles some dust.

SUNNY: It’ll be a bigger problem down the road.

RICH: Yeah, given how much capital construction is when you have those escalated costs. If one comes every 5 to 7 years – usually a 6-year range – you’re looking at a much greater cost, and then the repair costs much more as well. In the meantime your community is done with that benefit. What this bond does – there’s a couple of projects. $40 million for our aging aquatic system. Our aquatic system has continued to decrease since 1996 when Dick Nichols was built. That was the last new pool to our aquatic system. Since then we’ve closed five pools. We’ve renovated a number of pools, but we have so many more that need renovation.

SUNNY: They do, yeah.

RICH: If anybody questions that, go to Maple Davis. It’s an embarrassment. It’s a lower socioeconomic neighborhood. The other thing I pulled out in the Aquatic Master Plan Task Force I was part of was making sure we get a pool out in southwest Austin because we only have one. You can give us credit for Barton Springs; I love Barton Springs. So there’s technically two, but we all know that’s not southwest Austin. These are some of the things. But it also has a new metropolitan park in deep west Oak Hill. That’s phenomenal for us. There’s some water protection land that’s also associated with it. But there’s a lot of great projects. Land doesn’t get any cheaper when we do land banking for affordable housing. We know that we have an affordable housing need. We have to be more strategic on how we address it. This is how we actually can get some of that density, vertical mixed use, maybe on some of these projects. With the amount of money on affordable housing that we’re putting here, we’re able to actually drive decisions rather than just leveraging existing grant programs coming from the state that dictate for us what we’re going to be responding to. I think that’s an exciting thing for us. But yeah, there’s a lot of aging infrastructure for sure, particularly within parks and recreation.

RYAN: I haven’t heard too much negativity about the bond. Maybe I’m just not listening enough, but it seems like most people support it. Look, we’ve got to get running here in a second. Kelly is going to put a link in the chat. If you’re watching this on YouTube, there will be a link in the description box of wherever you can find Rich.

RICH: At richdepalma.com.

RYAN: Yeah, very cool.

SUNNY: Thanks for joining us.

RYAN: Yeah, thanks for joining us.

RICH: Thank you for the invitation.

RYAN: If you’re watching this on Facebook and you want to subscribe to future broadcasts, type the word “agent” in. Give us a like on Facebook. If you’re watching on YouTube, give us a like and subscribe. We’re not going to be here next week; I’ll be in New York City for the Workplace by Facebook Customer Advisory Board, and then the next week I’ll be back with Matt. We’re going to go over the five things that you need to know to avoid when you’re buying a home in Austin.

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