Taxing Density

Austin Contrarian
January 11, 2010


A density bonus is a tax on marginal increases in density. Don't be confused by the rhetoric. It is a tax. The plan raises the cost of that last square foot. The claim that it does not raise the price because no one is entitled to an increase in density is a bit of misdirection. The fact is that the city has an unwritten policy allowing increases in base square footage. A property owner who wants more square footage can reasonably expect to get it for the payment of a nominal amount. And it is expectations that determine property values, not the words written in the code. Raising that cost -- frustrating those expectations -- reduces the incentive to build that last square foot.

The density bonus program is a bad idea because extra space downtown is an unmitigated good. We shouldn't tax economic goods; we should tax economic bads.

More space means room for more people. And more is better, at least for downtown. More people means more demand for downtown businesses, a livelier streetscape, more eyes on the street. We should encourage the clustering of people downtown. Density bonuses shunt people elsewhere.

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