03.0 - Transfer of Development Rights Market Analysis - Presentation — original pdf

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Austin Equity-Based Preservation Plan Implementation: TRANSFER OF DEVELOPMENT RIGHTS (TDR) Market Analysis Historic Landmark Commission June 3, 2026 The Why Council Direction: Comprehensively reform Austin's historic tax incentive program to advance equity and align with specific recommendations in the Equity-Based Preservation Plan, including Transfers of Development Rights. (Resolution 20230323-059, Resolution 20241121-078 Motion Sheet #1) Downtown Austin Plan: Establish a Transfer of Development Rights system to allow Warehouse District property owners to sell unused floor area to property owners seeking greater density in other parts of Downtown. (Adopted 2011) Equity-Based Preservation Plan: Actively explore how a Transfer of Development Rights program could successfully support preservation of smaller-scale downtown buildings, commercial corridors, and historic districts in areas targeted for higher density. (Adopted Nov. 2024 as part of Imagine Austin Comprehensive Plan) What is Transfer of Development Rights (TDR)? How It Works • Voluntary, market-based tool • The owner of a protected property (sending site) sells unused development capacity • The developer (receiving site) purchases additional development capacity for a new building Sending Sites are properties the City wants to protect, such as historic landmarks. Receiving Sites are properties in areas targeted for higher population density and growth. Receiving Site Sending Site Sending Site Source: NYU Furman Center TDR & Density Bonus Programs Considerations for Integration • Similar areas, different scales • Affordability should remain a priority • Setting a maximum allowable height would provide predictability for developers and neighbors • Further analysis and refinement are critical to ensure that any future TDR program complements density bonus programs Example Receiving Zones + TDR + Density Bonus + By-Right = Maximum Allowable Height TDR Project Timeline 5 2 0 2 . v o N 6 2 0 2 . n a J Research & Analysis Technical Analysis Engagement 6 2 0 2 h c r a M 6 2 0 2 l i r p A 6 2 0 2 e n u J We Are Here Program Structure 6 2 0 2 y l u J Final Report Survey & Focus Group Housing & Planning Committee Historic Landmark Commission Council Memo 1 2 3 4 TDR Stakeholder Committee Review TECHNICAL ANALYSIS Technical Analysis Study Areas Potential Sending Zones Example Receiving Zones Scale of TDR Supply Potential Sending Parcels 447 parcels may qualify as sending sites Sending Zone Historic Landmarks Eligible Landmarks E 11th & 12th St E Cesar Chavez & E 6th St Downtown West Campus S Congress Ave Hyde Park Addition 20 8 169 22 3 0 Total 222 27 22 126 32 12 6 225 Total Potential Sending Parcels 47 30 295 54 15 6 447 Scale of TDR Supply Unused Floor Area Existing Floor Area TDR Sending Capacity ~37M sf unused floor area under base zoning * Rounded to nearest 1,000 SF. These figures do not include restrictions from Capitol View Corridors. Current Market Conditions Average TDR Value to Sellers ~$165/sf At-Risk Historic Assets ~20% of eligible (potential) historic landmarks worth more as new development Eligible Landmarks At Risk of Redevelopment Study Area E 11th & 12th St E Cesar Chavez & E 6th St Downtown West Campus S Congress Ave Hyde Park Addition 27 22 126 32 12 6 Total 225 % 85.19% 4.55% 14.29% 3.13% 19.11% 23 1 18 1 0 0 43 Current Market Conditions Austin’s Real Estate Market is in a Downturn: Multifamily Rents 25% Since Q2 2022 Multifamily Vacancy 12.6% Home Prices $94/ft² To ~$306 from a peak of ~$400 (Apr. 2022) Data sources: CoStar Group, Integra Realty Resources (IRR), Redfin (January 2026) Downtown Office Vacancy 25% Building Type Feasibility by Example Receiving Zone Scale of TDR Demand Average TDR Value to Buyers Today $0 Developers are unlikely to pay for additional entitlements through TDR. Rents do not support increased development costs. Market Recovery • 8 of 11 prototypes become financially feasible under 2020-2021 market conditions • Create a TDR program before market recovery threatens potential historic resources RECOMMENDED PROGRAM STRUCTURE Principles for Successful TDR Programs 1. Clear Preservation Objective 2. Strong Receiving Market 3. Predictable Development Bonus 4. Administrative Simplicity 5. Permanent Preservation Outcome 6. Integration with Existing Zoning & Development Incentives TDR program recommendations informed by national precedents, including: Boston San Francisco Seattle Los Angeles New York City Dallas Palo Alto King County, WA TDR Program Structure Recommendations Element 1: Sending Site Eligibility • Properties with historic landmark designation (H zoning) in sending zones Element 2: Receiving Site Eligibility • Properties in receiving zones where additional development capacity meets City priorities for density Element 3: Geographic Transfer Limits • Development rights can be transferred between any sending and receiving zones TDR Program Structure Recommendations Element 4: Transfer Mechanisms • Standard real estate instruments (deed restrictions, covenants, sale agreements) Current Market Conditions: • Standardized forms Average TDR Value to Sellers ~$165/sf Average TDR Value to Buyers $0 • Centralized tracking system Element 5: Pricing & Valuation • Market-based pricing through direct negotiation • TDR bank provides pricing benchmarks, transaction support, and early market stabilization Element 6: Transfer Ratios • Base 1:1 transfer ratio • Targeted adjustments available to support priority outcomes TDR Program Structure Recommendations Additional Bonus Height Element 7: Height & Floor Area Caps • Established height limits within receiving zones • TDR may be used in combination with density bonus programs Element 8: Program Administration • Administered through existing City departments with tracking system • TDR bank to support program implementation Additional Bonus + Additional TDR Height TDR Program Structure Recommendations Element 9: Regulations & Enforcement • Existing standards for historic landmarks ensure long-term preservation • TDR proceeds can be reinvested into the sending property Element 10: Program Phasing & Pilot Implementation • Phased approach, beginning with further analysis • Pilot program for real-world calibration • TDR bank plays a more active role early TDR Program Structure Recommendations A successful TDR program in Austin will: 1. Align with existing incentives 2. Address market feasibility constraints 3. Work within legal and regulatory context TDR Program Structure Recommendations Implementation & Next Steps Phase 1: Incentive coordination, expanded research, and public planning process If the program works with existing incentives: Phase 2: Pilot program and systems development Phase 3: Expand to full program Initiate ASAP: Further analyze and plan for a TDR program now before market recovery threatens additional potential historic resources.