The Downtown Commission is asking City Council to reject new height limits for downtown towers and, instead, replace the city’s Downtown Density Bonus Program with a funding system tied to future property-tax revenue. Their recommendation, which was approved last week, contrasts with the Planning Commission’s call a day earlier to set a 700-foot cap in the Central Business District that would double the 350-foot limit proposed by city staff.
Both votes came as city planners push to adapt to Senate Bill 840, a new state law that took effect Sept. 1 and stripped Texas cities of their ability to regulate floor-to-area ratios (FAR) for residential and mixed-use projects. The law greatly reduces Austin’s bargaining power for requiring community benefits like affordable housing and green space in exchange for greater building height or density.
Under SB 840, mixed-use or multifamily construction is now allowed by right in most commercial zones, with a minimum of 36 units per acre, or 54 if a city already permits that density, and height of at least 45 feet. Because the law prohibits FAR limits, developments with Central Business District (CBD) zoning could theoretically have no height limits.
City Planner Alan Pani told the Downtown Commission that the state law reduces the incentive for CBD parcels to participate in density bonus programs, which historically generated the city’s largest fees-in-lieu to support affordable housing. Staff has proposed creating a 350-foot base height, roughly equivalent to an 8:1 FAR, to preserve a rationale for staying in the bonus program. Developers wanting to exceed that height would still need City Council approval through the density bonus program.
Commissioners questioned whether setting any cap was justified. Commissioner David Carroll called the 350-foot proposal “arbitrary and hurtful to this program,” arguing it would further erode the flow of revenue into Austin’s affordable-housing trust.
“You’re proposing 350 feet, which seems arbitrary to me. I’m not sure where that number is coming from, but that difference in real-world practice will leave a lot of money on the table that will not go into that affordable housing trust fund,” he said.
Pani acknowledged the number was chosen partly to reflect current construction trends and partly to prevent down-zoning that could discourage new projects. Median height for sites participating in the Downtown Density Bonus Program has hovered near 220 feet, staff analysis shows, though newer towers commonly surpass 500 feet.
At the same meeting, the Downtown Austin Neighborhood Association (DANA) pushed commissioners to oppose any base-height limit and to eliminate the density-bonus system entirely. DANA proposes capturing a portion of incremental property-tax growth from unrestricted development and dedicating it permanently to the city’s Affordable Housing Trust Fund, an approach modeled on the fund’s original funding mechanism.
The commission adopted DANA’s recommendation, asking Council to “remove height and FAR restrictions downtown” and direct a share of resulting revenue “to the Affordable Housing Trust Fund or a similar entity charged with actually building affordable housing.” The amended motion passed after including language specifying middle- and lower-income housing as priorities for the use of those funds.
Some commissioners expressed skepticism that market-rate supply alone will lower costs. Commissioner Gina Houston said Austin has spent decades assuming prices would fall as more units were built and noted: “That’s a fallacy. The prices keep going up.”
Others, including Commissioner Phil Wiley, countered that constraining supply has contributed to making the 78701 ZIP code the most expensive in the city.
Pani told commissioners the Planning Department hopes to bring a narrow CBD-height amendment to Council next week to prevent an immediate loss of program participation, followed by a broader overhaul in 2026 as part of a new Central City District Plan. He cautioned against the 120-day delay requested by several stakeholders, including the Downtown Austin Alliance, saying a short-term fix is needed to preserve program participation before a full rewrite.
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