Austin's Home initiative Brings new opportunities for developers and investors

In December, the City of Austin approved Phase 1 of The HOME Initiative delivering a preliminary set of short but significant changes to the land development code. Aiming to address growing affordability concerns, this initiative marks a leap towards progressive development in Austin. Additionally, this groundbreaking initiative will have significant implications for the Austin real estate market; investors and developers alike who take advantage of these new opportunities quickly will be well positioned for successful ventures.

What is Phase 1 of Austin’s HOME Initiative?

The HOME Initiative, Home Options for Middle-Income Empowerment, aims to address the pressing issue of housing affordability in Austin. With the passing of Phase 1, several changes have been introduced to the building code that are set to shape the city's architectural landscape. These modifications to the building code were approved in December, and the City started accepting plans incorporating elements of the HOME Initiative this month.  The changes approved in Phase 1 are applicable for single family Austin lots zoned SF1, SF2, and SF3. Notable changes approved in Phase 1 of the HOME Initiative include:

1. Allowing up to three dwelling units on one lot 
2. Easing restrictions for adding tiny homes
3. Creating sustainability/preservation bonuses for preserving older buildings

New Opportunities for Austin Developers and Investors

The passing of Phase 1 has opened up a myriad of opportunities for those seeking to invest in Austin's real estate market. One of the most significant advantages is the new ability to build three dwelling units on one lot. As anyone who has invested in Austin knows, land costs are one of the most substantial costs in any Austin area development project.  However, developers now can maximize their investment by building denser projects.  Economies of scale and lower relative acquisition costs will make developing single family lots more lucrative.

Back in 2015,  Austin modified the Accessory Dwelling Unit (ADU) regulations  easing the ability to build two units on one lot.  Savvy developers who took advantage of this were then able to procure lots in which they could either remodel an existing structure and build a new ADU, or build two new structures on one lot.  Oftentimes, developers would legally create a “condo regime”  thus enabling the sale of each structure independently.

​With the passing of Phase 1 of the HOME Initiative, the same opportunity exists- but now, you can build three dwelling units on one lot.  Furthermore, the somewhat arbitrary 1,100 square foot maximum size for an ADU is now removed.  With the home initiative, total development size is more holistically accounted for based on lot size and site conditions.  Developments will have to be built in accordance with floor to area (FAR) ratio requirements and impervious coverage rules, as well as take into account existing setbacks and tree regulations among other building code requirements. The initiative does have some maximums for the square footage of each dwelling unit, but these maximums are substantially larger than what was allowed with the ADU ordinance.  Furthermore, the initiative actually encourages the creation of three units on one lot by increasing the FAR for three unit developments.

Implications for Austin Real Estate Investors

Investors eyeing the rental market in Austin will find the effects of The HOME Initiative appealing too. The potential for increased density as well as larger homes on one lot presents a more attractive rental mix with the potential for higher gross rents than is currently attainable.  For a while, long-term rentals have not made great economic sense from a cash flow perspective in the Austin market. However, properties developed under the Home Initiative guidelines have a much higher likelihood of delivering an attractive return to investors. 


The passing of Phase 1 of The HOME Initiative has set the stage for a transformative period in Austin's real estate market. While the focus of the initiative is in increasing affordability; the initiative will also enhance the city's livability and create exciting opportunities for investors and developers. As Austin continues to evolve, those who seize the potential presented by The HOME Initiative stand to benefit from both financial returns and the satisfaction of contributing to a more sustainable city.