Affordable housing in Fredericksburg farther from reach

Posted on July 28, 2008
Filed Under Fredericksburg Living, Fredericksburg Texas Home Buying, Fredericksburg Texas Real Estate Market, Fredericksburg Texas Real Estate News |

By Bart Schaetter

An application for a change in zoning from R-2 Mixed Residential to Planned Unit Development (PUD) for Barons Crossing, an ‘affordable housing’ subdivision just south of Highway Street across from the livestock auction barn was denied 3-2 Friday, July 25, by the City Council after nearly seven months of negotiations.

A motion was made Friday morning at a special workshop meeting held in the second floor conference room of City Hall to deny the PUD and Councilmen Tim Dooley, David Pedregon, and Tom Musselman voted in favor of denying it. Mayor Jeryl Hoover and Councilman Jeff Jeffers were the only two votes in support of the PUD, according to Director of Development Services Brian Jordan.

What is Barons Crossing

Barons Crossing was a proposed three-phase, 91 unit development located south of Highway Street and north of the future extension of Sunrise Street to be built by Timeless Luxury Homes, LLC. I obtained some information from the City Council Agenda, dated July 7, 2008, to tell you a little about the project.

The above shows the proposed Phase I of the development.
The above shows the proposed sample house elevations.

Click the link below to view more information on the proposed house elevations and floor plans.
BaronsCrossing Floor Plans Elevations

Click the link below to view more information from the Council Agenda on Barons Crossing.
BaronsCrossing Detailed Information

Click the link below to view the area maps of Barons Crossing.
BaronsCrossing Maps

The 91 houses, according to Robert Menking (the Realtor representing the developer), would sell between $111,000 and $154,000, with the median house costing $135,000. A quick search of the Multiple Listing Service (a database that the Gillespie County Board of Realtors uses to list all properties for sale, sold, under contract, etc.) shows nine houses currently available for sale in this price range (as of July 25, 2008). According to the City Council agenda for July 7, 2008, these houses would have been targeted at families with household incomes between $27,201 and $43,500 a year.

The agenda went on to say: “This target market has been identified in the Gillespie County Housing Needs Analysis (commissioned by the Gillespie County Economic Development Board) as a market that has significant demand for housing. The Needs Analysis concluded that there is demand for up to 51 units per year in this price range.”

Click the link below to view the Housing Needs Analysis for Gillespie County commissioned by the Gillespie County Economic Development Commission.
Gillespie County Housing Needs Analysis

The Long Road to Denial

Negotiations between Planning & Zoning, the City Council, and the Barons Crossing developers have been going on for seven months. The discussions included a trip to Austin to view a similar development and the formation of an Affordable Housing Task Force by the City Council to address the lack of ‘affordable’ housing in Fredericksburg.

I personally attended the two most recent general session Council meetings on July 7 and July 21. At the July 7 meeting, Council members expressed their concern for the houses reaching the targeted market. These concerns continued through a workshop last week and again at the Council meeting on July 21.

The two main financial issues facing the Council were giving waivers for impact fees (currently $3,000 per unit, and increasing to $4,000 per unit on Jan. 1, 2009) and park dedication fees of $500 per lot. The developers were asking for only $1,000 per unit of impact fees and setting aside a .25 acre park in lieu of paying the park dedication fees.

Below is a cost breakdown prepared by the Director of Public Works, Craig Wallendorf, for the City Council and provided to me by Councilman Tom Musselman, of what the City viewed as “concessions” to the developer:

Impact fees for 91 lots @ $4,000 (on 1-1-09) = $364,000
Park development fee & land dedication fee 91@ $500 = $45,500
Pavement savings from 28 ft. streets instead of 40 ft = $57,000
Savings from 4 ft sidewalks instead of 5 ft. = $ 6,500
Proposed relief on build out of Sunrise St; the City would have to build out: projected cost $ 16,000
Proposed relief on all items = $ 491,000, or $ 5,373 per lot.

This “cost breakdown” however, fails to take into account the new revenues that could be earned of off 91 new houses in Fredericksburg and 91 new families living here. Revenues include property taxes on 91 houses (91 houses x Median Price of $135,000 values the project at over $12 Million) as opposed to a 9.6+ acre property that currently pays less than $200 a year in property taxes due to an ag exemption (according to GillespieCAD.org). Other revenues include 91 houses paying water, sewer, trash, telephone and electric fees. Also think of the economic impact of 91 new families who could now afford to live in Fredericksburg buying their groceries, medicine, gas, and other things locally instead of Kerrville, Blanco, Harper, or Llano.

I think the cost breakdown is extremely flawed. The only real “cost” to the City would have been lost revenues from impact fees ($273,000, NOT $364,000 like the cost breakdown shows, because the developer was asking to pay $1,000 per unit, not $0 per unit), park development fees ($45,500) and the shared cost of extending Sunrise Street ($16,000), making the total $334,500 ($156,500 less than the “Cost Breakdown” above shows).

The developer building 4 ft sidewalks instead of 5 ft sidewalks poses no real cost to the City, nor does the construction of a 28 ft wide road instead of 40 ft wide road. If anything, a narrower road is cheaper to maintain.

I think at the heart of the Council’s discomfort with allowing the PUD to pass was the issue over Impact Fees. These fees are currently $3,000 per unit and will increase to $4,000 per unit on Jan. 1, 2009. The developers of Barons Crossing were asking for a $3,000 waiver to only pay $1,000 per unit (”costing” the City $273,000 in lost impact fees).

An idea that was placed before the Council was to place a forgivable lien on the houses in favor of the City of Fredericksburg and if a house would be sold within three to five years (the exact number of years was never agreed upon), the City would receive the difference in impact fees ($3,000). Exhibit B goes into more detail over the mechanism to recoup impact fees.

In my opinion, this mechanism should have solved the problem between the developer and the Council. Think of it this way: the Council is nervous about waiving $3,000 in impact fees because they’re afraid the houses will be “flipped” for a profit or bought up by investors because they are coming in at well below the average Fredericksburg home sales price (over $232,000 for 2008 YTD) and not go to the targeted market (families with household incomes between $27,201 and $43,500 a year.

Having this mechanism in place could have been a win-win situation for all the parties involved: a win for the developers because they get to build 91 houses and sell them for a profit to the targeted market; a win for the community because now 91 new families can afford to live here; a win for those 91 families because they can now afford to live in Fredericksburg; and a win for the City because IF the houses are “flipped” or sold immediately (or within 3-5 years), they get their waived impact fees back.

But the members of the Council were a little too uncomfortable (and probably rightfully so) going into these “uncharted waters” and decided to wait 60-90 days for the Affordable Housing Task Force’s report, which, ultimately, means that 91 families will have to wait until the report comes in, then wait for this developer or another developer to formulate another plan to bring ‘affordable’ housing to Fredericksburg, then wait for that plan to be approved (this one went through seven months of negotiations and still ended up denied), then wait for those homes to be built, which could easily be another year or more.

What is “Affordable” in Fredericksburg?

As I mentioned above, the Barons Crossing proposed houses between $111,000 and $154,000, with the median house selling for $135,000. A quick search of the MLS showed only 9 houses in the city limits of Fredericksburg priced in this bracket. (For a reference point: there are 28 homes in Fredericksburg available between $200-250,000; 32 available between $250-300,000; and 16 available between $300-350,000.)

The above chart compares the average sales prices of homes in the city limits of Fredericksburg versus those in the city limits of Kerrville. Year-to-Date, Kerrville’s homes sell for an average of $40,000 less than those in Fredericksburg, more than a full year’s salary for those families the Barons Crossing houses were intended for.

Affordable Housing is Still Possible

We will continue to watch the Barons Crossing development’s progress in a possible re-application for a PUD and keep the readers posted on any new developments that may serve to alleviate the demand for affordable housing in Fredericksburg.

If you have any comments, suggestions, or additional information feel free to post a comment on this blog or email bart@fbgliving.com

MLS data is subject to continual change as properties are added or their status is changed. All MLS data is as of July 25, 2008.

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Comments

3 Responses to “Affordable housing in Fredericksburg farther from reach”

  1. KL Stradley on August 1st, 2008 9:05 pm

    Very interesting. Housing priced between $111,000 and $154,000. Targeted income between $27,000 and $43,000. The “rule-of thumb” for many years was to purchase a house at no more than twice your annual income. This was a guide to prevent financial disaster. This formula would require an annual income of $55,000 to $77,000 to purchase a house in this area. Given the mortgage crisis facing our country today, this would seem a viable formula. I can foresee a lot of foreclosures in the future for this development. Remember, once the property is sold, the deveolper is gone. Who will be left holding the bag? FannieMae, FreddyMac?

  2. John Detmar on November 15th, 2008 9:29 pm

    You forgot to mention that the development plan called for 30′ wide streets - so narrow that parking would only be possible and permitted on one side. Front yard setback was to be reduced to 15′ - a 40% reduction from the normal R1 minimum of 25′. Lot width was to be 40′ - a 43% reduction from the normal R1 minimum of 70′. This would have been an extremely crowded subdivision with little privacy for homeowners. Insufficient parking would have been a permanent problem. I believe it would have been very unwise for the City Council to have approved this PUD, and I believe it reached the right result in denying it, regardless of its reasons. Our current minimum standards for residential setback, lot width, and street width serve many important purposes for the benefit of individual homeowners as well as entire neighborhoods and should not be discarded.

  3. Clarence C. Bryk on July 7th, 2009 3:40 pm

    Have you considered the cost of educating the children in this development? I suggest 91 homes would conservatively bring in 182 children into FISD. Currently a conservative estimate is that it costs $8000.00 a year to educate one student not counting the cost of of the buildings on the campus. 182x $8000.00= $1,456,000.00. If you divide that number by 91 you need $16000.00 of tax money from each house. Of course 2x 8000.00 is easier, but less dramatic.

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