Big TAX problem for House Corps

[EE-BO]

Originally Posted by bejazd

Could someone describe the greek housing/neighborhood at U-Texas for me? and the method for determining property taxes? (Never been there, I know nothing about Austin.) Somebody once described the houses there to me as "lodges" but from the few pics I've seen, they look more like traditional houses or modified apt buildings. To me a lodge is a meeting room with a kitchen/bath, an office, and maybe a house dir's room.

Here at Texas there really are not any lodges per se. A couple of chapters have tried something like that but in today's market it does not work out.

Real estate is so expensive here that you have to house as many students as possible since chapter dues cannot possibly pay the costs for a house. Plus as time goes on there is more pressure (and I think this is a good thing) for fraternities to have more of their formally organized social functions offsite since it prevents damage and also- by virtue of a cleaner and less noisy environment- encourages more people to live in the house.

In 2004 a big chunk of West Campus- including most of the major Greek houses- was rezoned to allow for more skyward and dense development. This is a city-wide initiative targeted at several highly desireable areas close to downtown, not just West Campus. And in West Campus in particular it was important since the zoning was so outdated (meaning the # of residents per acre permitted was so low) that it was pretty much not worthwhile to build anything new.

The average Travis County property valuation up until 2004 for a UT fraternity house hovered around $800,000. As of 2006 the average is now just a few thousand dollars shy of $2.0 million. And SAE is the only property that underwent major improvements in that time. This increase is all about land value.

Property tax rates for the West Campus area were 2.5254% last year- so you can do the math from there and see just how bad property taxes are (prior to 2006 they ran around 2.75%.)

The bottom line is that most fraternity houses are located on land which is now zoned for 4-17 story high rise apartment buildings- and the value of the land reflects that potential development, not the fact that the land currently holds a single house making very inefficient use of the space.

In 2006, the most valuable fraternity house at UT was valued at $5.3 million. The lowest was about $663,000, and most fall in the $1.2-2.5 million range. In 2004, the most valuable fraternity house in West Campus came in at $1.26 million. It has changed that much that fast!

The larger chapters can afford this- but it has driven rent costs up strongly- plus it makes it harder for alumni to hold on to a house for future use if a chapter gets suspended or kicked off for a period of time.

Quite frankly, unless things change dramatically in the world of UT student housing- I think there is a good chance that fraternity houses as they exist today will be gone within 20 years. Already there are easily half as many of these houses as there were 15 years ago.

The future is more high-rise type chapter houses with individual apartments and a few common area rooms that can be readily coverted to rental use for the general student population if a chapter has trouble with numbers or probation for any period of time.

The basic costs to run these properties is just too high for alumni to cover the costs for a house to sit partially unoccupied when chapters go through natural low membership numbers at various times.

[bejazd]

Thanks for the background info. So it sounds like this was not a plan to rid the campus of greek housing, but an unintended consequence of re-zoning for higher density residential or mixed use commercial/res that would generate more tax dollars. is that more or less correct?

hmmm. sounds familiar! In Calif, your property tax is based on 1% of the assessed value at the time you purchased it. Prop 13 prevents your property taxes from being increased more than 2% per year, unless you make a major renovation/addition, in which case your property can be re-assessed to include the value of the improvements. But, I'm aware of at least one case where a public university, through its foundation, has been trying to get private property through eminent domain in order to build a hotel/conference center complex and mixed use commercial/residential. It's not necessarily intended to generate tax dollars or get rid of the greek housing (which just happens to be sitting in the area the univ mosts wants) but it would generate income for the university foundation.

so what happened to the fraternity houses at Texas that did close? were they able to sell? were the properties bulldozed for new construction?

[EE-BO]

Originally Posted by bejazd

Thanks for the background info. So it sounds like this was not a plan to rid the campus of greek housing, but an unintended consequence of re-zoning for higher density residential or mixed use commercial/res that would generate more tax dollars. is that more or less correct?

so what happened to the fraternity houses at Texas that did close? were they able to sell? were the properties bulldozed for new construction?

You are correct- it was not any kind of attempt to get rid of the Greeks. The fact is that if a building at UT has a name on it, that person was likely Greek here. So we are given our due accord in the end.

The real problem is that UT houses around 3% of its 50,000+ students on campus. And there has been incredible financial pressure on off-campus housing prices given a general boom in Austin real estate which is driven in the long term by city growth.

The city realized that it is important for West Campus to house a significant number of UT students- and the new zoning was created with the specific hope that the result would be room for 10,000 more students to live there. And West Campus- as defined by the rezoning- is about 9 blocks long and 6 blocks wide.

In the short term there are a lot of brand new complexes being built which are incredibly expensive ($700-800 per bedroom per month), but as those buildings age and more complexes are built the rent will come down.

As the rent comes down, the speculative value of undeveloped land in West Campus will come down- but for now it creates what I see as a 2-3 year squeeze on any fraternity or sorority that is renting or seeking to build a house.

That said, in the long run the land will be much more valuable than before in any market since you have a ready-made set of residents (UT students) and so Greek housing as we know it at UT is destined to change for all but those houses where the average member does not care what it costs to be a member or live in the house.

With respect to sororities- I think 7-8 houses fit that description. For fraternities- the number is closer to 5.

The rest will be in more condo-like settings within 10 years in my view.

Just about every fraternity or sorority house that has sold here in the past 2-3 years has been bulldozed. And right now there is just one in play and it is under contract pending a negotiation for new tenants vs redevelopment.

In case you are interested- the old Gamma Phi Beta house is being torn down right now. Gamma Phi left UT in the late 1980s and Lambda Chi took over that property after a brief hiatus from campus since the mid 1980s when they sold a prime location property next to SAE which is now House of Tutors.

Lambda Chi sold that house in 1992 to a local developer who was a Delta Upsilon at UT and bought his own fraternity house in the 1990s to turn into a dorm (which later became a second house for KA and is now the site of a huge new apartment complex near completion.)

From 1992 until recently the old Gamma Phi house was a women's dorm and when I was in West Campus 2 weeks ago I noticed they were tearing it down- and I assume that land will soon be a new high rise apartment complex.

Greek Life won't die here- but for all but a very few top houses a new reality is coming in how we exist. And I think that new reality is high rise condo-style houses on small plots of land which can be readily converted into rental property at times when a chapter has financial difficulties.

But any way you look at it- the number of traditional WASP Greek organizations living in large houses has dropped and will continue to do so.