The Austin HOME Initiative: Understanding the Recent Legislation
Understanding the Recent Legislation:
Home Options for Middle Income Empowerment

The general consensus is that living in Austin is becoming prohibitively expensive.  How to fix the situation is a topic of much contention. While parties to the debate can agree that a major factor in skyrocketing housing prices is limited housing supply, particularly for middle- and lower-income residents, the common ground for what can be done to remedy the issue largely ends there.

Following the final demise of Code NEXT in 2020, a previous attempt by the Austin City Council to increase house supply and in the hopes of decreasing demand, the Council passed the HOME Initiative (Home Options for Middle Income Empowerment) by a vote of 9-2 last December after much public debate.  The HOME initiative changes allow for three improvements to be built on one single family zoned lot when previously the limit was one. Critics contend that the new allowable density will erode neighborhood character and proponents argue that increased supply will drive prices down.

How the new rules will influence values in the Austin area remains to be seen with many critics forecasting even higher land prices due to increased potential yield by developers.  This dynamic has contributed to a similar fear of inflated land evaluations by local appraisal districts.  While that might ultimately prove to be true for non-homesteaded properties, homesteaded residences (we believe) can take comfort in section 23.01(d) of the Texas Property Tax Code:

(d) The market value of a residence homestead shall be determined solely on the basis of the property’s value as a residence homestead, regardless of whether the residential use of the property by the owner is considered to be the highest and best use of the property.

While this section of the code was intended to protect homeowners, whose principal residence would be more valuable as a commercial property (forcing them to pay taxes on unrealized commercial gains for their residential homesteaded property) it would likely afford similar protections to the land values of homesteaded single family residence properties.  Although the maximal value might be derived from building the allowable three improvements, section 23.01(d) allows an exception to that rule.

How these changes will ultimately affect the housing market in Austin remains to be seen. The implementation of this law will take place in 2025 and we will be watching it closely.


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