High-occupancy Commercial Rental Houses
The proliferation of High-Occupancy Commercial Rental Houses throughout College Station has had a negative impact on the quality of life in our community, not only for the residents but also for the traditional renters. There have been a variety of negative effects.
One has been an extraordinary increase in property tax which is driving out current residents and making affected neighborhoods less attractive to new residents. Taxes in the neighborhoods have risen to reflect the cash flow developers can obtain from five renters in a high-occupancy house. Some neighborhoods have seen their property tax increase 200% to 300% in six years, while 100% is common within a two mile radius of the campus. These land valuations have not been driven by a healthy market for residential homes, but by commercial rental businesses being allowed to compete for land inside the neighborhoods. This has not historically been the case with traditional rental homes.
Traditional homes with 2-3 renters have similar value to what is created by a normal healthy residential market. Home owners can compete to buy and live in these homes. In contrast, five-bedroom, five-bath commercial homes can achieve much higher cash flow which allows them to pay far more for a property and still make a profit. Texas State law requires that all similar residential properties in the neighborhood be assessed at the same high values for taxation. For example, one neighborhood of 120 homes has seen its property taxes increase by 250% in six years, even though only 5 high-occupancy homes have been built in the neighborhood.
The graphic from an annual study by the Texas A&M Real Estate Center shows the degree to which property values exceed the values justified by the current business climate and residential market. College Station is the only city in Texas where the values exceed what is expected so greatly that the market is said to have exhibited “explosive behavior.” To be clear, this graphic is not simply saying that we are a desirable community; it’s saying that something is wrong with the land values. The demand for land to build a relatively small number of commercial rental homes is driving up the price of thousands of other residential properties in neighborhoods. This is what happens when you allow high cash flow commercial businesses (i.e., Stealth Dorms) to compete with residential property values.
Other impacts on the quality of life in our neighborhoods are obvious and well understood by the public. Entire blocks have been razed and the size of these homes does not allow room to save the existing trees. Front yards are half filled with concrete and cars, and streets are congested with overflow parking. While traditional two and three bedroom rentals are indistinguishable from other residential properties, the high-occupancy commercial rentals are entirely out of character with other homes.
Protecting our neighborhoods is not anti-student. The student population in the older neighborhoods ranges from 20-70%, and some are higher. Students are an integral part of the community and always have been. In traditional rental homes, student behavior tends to harmonize with that of the permanent residents. Walk the streets of College Park (70% rental) or Oakwood (30% rental) and you’ll have a sense of a healthy and comfortable neighborhood. The students themselves desire this environment and the great majority contribute to maintaining it.
The objection to High-Occupancy Commercial Rental Houses is not to students, but to the destruction of the character of the neighborhood itself. The proliferation of High-Occupancy Commercial Rentals Houses puts our neighborhoods on a path, and as the saying goes, “he who chooses a path, chooses the place it goes to.” If residents leave due to extraordinary increases in property taxes, or out of fear that the lot next door will be cleared for a high-occupancy rental, our older neighborhoods will cease to have permanent residents. The traditional neighborhoods of College Station will be lost if they if they become fully rental.
College Station must invest in older neighborhoods, and city policies and zoning decisions must seek to preserve these important parts of our community.