Adding a Second Unit in Austin: HOME Initiative Opportunities and Challenges

TL;DR

Austin’s HOME Initiative allows up to three units on a single-family lot and reduces lot sizes for more flexibility, but regulatory hurdles like landscaping rules, water meter costs, and infrastructure upgrades are slowing adoption. For homeowners and investors, the opportunity is real: adding a second unit can increase property value, rental income, and long-term wealth. Success depends on smart design, financial planning, and navigating approval processes.

Adding a Second Unit in Austin: Opportunity Meets Reality

Austin’s housing conversation has shifted dramatically in the last two years, thanks to the City’s HOME Initiative (Home Options for Mobility and Equity). The promise was simple: unlock more housing choices by allowing more units per lot, reducing lot sizes, and making Austin’s neighborhoods more flexible and affordable. But for forward-thinking homeowners and investors, the reality is more nuanced, and understanding the landscape is critical before you decide to build or buy.

The Potential of HOME 1 & 2

Phase 1 of HOME (adopted December 2023) made headlines by allowing up to three units on single-family lots. For many, that means a primary home with an accessory dwelling unit (ADU) or even a triplex.

Phase 2 (approved May 2024) goes further, reducing minimum lot sizes from 5,750 square feet down to as little as 1,800 square feet in some cases, while loosening design restrictions around driveways, setbacks, and compatibility rules. Translation: you have more options to build what fits your lifestyle or portfolio.

For high-earning professionals relocating to Austin or investors looking to build intergenerational wealth, this flexibility is a rare opening in a city where demand consistently outpaces supply.

The Barriers You Need to Know

While the code has opened doors, practical hurdles still stand in the way:

• Site Plan Landscaping Requirements: Adding a third unit often triggers commercial-level landscaping standards, which can inflate costs and delay approvals.

• Water Meter Rules: Current regulations require a separate water meter for each unit, sometimes adding tens of thousands of dollars to a project.

• Infrastructure Upgrades: Sewer, stormwater, or street improvements can tip a promising project into unfeasible territory.

• HOA & Deed Restrictions: Even if the city says “yes,” your HOA may say “no.” Always check for private covenants before planning.

These friction points are why, more than a year into HOME, the city has logged 400+ applications under HOME 1, but fewer than two dozen under HOME 2. The vision is bold, but execution has not yet matched the scale of Austin’s housing needs.

What It Means for You

If you are considering adding a second unit or investing under HOME, think strategically:

1. Run the Numbers: ADU construction costs in Austin average $250–$350 per square foot. Balance this against rental demand (strong in Travis and Williamson counties) or long-term resale value.

2. Design with Lifestyle in Mind: Today’s buyers and renters expect spaces that flex, such as home offices, gyms, meditation rooms, or guest suites. A thoughtfully designed ADU can command premium rent or resale pricing.

3. Factor in Timelines: Permitting for multi-unit projects can stretch months. If your relocation or investment horizon is short, plan accordingly.

4. Think Beyond Your Lot: If a triplex does not pencil out on your current property, smaller lot subdivisions under Phase 2 may open new paths to portfolio growth.

Why It’s Still Worth Considering

Austin faces a shortfall of 215,000 middle-income housing units. Demand is undeniable. By stepping in early, you not only add flexibility and value to your property, but you also position yourself ahead of the curve in a market that rewards innovators and early adopters.

The city has work to do by harmonizing codes, revisiting infrastructure policies, and streamlining approvals. But once aligned, HOME could unlock thousands of homes quickly. Being ready now means you will be first to benefit when the bottlenecks clear.

Let’s Talk

Have you tried adding a unit to your property? Are you considering investing under HOME but unsure where to start? I would love to hear your story and help you navigate the opportunities. Share your experience with me, or reach out directly if you are ready to explore Austin Proper or Greater Austin investment options.

Because when policy, design, and vision come together, your property can do more than house a family, it can build a legacy.

Share your story or contact me for guidance on investing under Austin’s HOME Initiative.